High Court Warns Against Using Property ‘Sales’ To Secure Private Loans
A Harare High Court ruling has highlighted an important warning for people who borrow money using their property as security. The court found that an alleged US$80,000 (approximately R1.32 million) property sale was actually connected to a loan arrangement and could not be enforced as a genuine sale.
The case involved Stand 1507 Picnic Park in Waterfalls, Harare. Osias and Netsai Mutasa told the court that they had approached Alison Patience Mbauya for financial assistance and provided their property documents as security.
The dispute centred on whether the property had genuinely been sold or whether the “sale” was simply being used to secure the money advanced.
What The Waterfalls Property Dispute Means
In simple terms, a person can use property as security when borrowing money. However, that does not automatically mean the lender becomes the property’s owner if the borrower fails to repay.
In this case, the alleged sale price was US$80,000 (approximately R1.32 million). However, the respondents could not produce proof that the money had actually been paid as a purchase price.
Justice Joel Mambara said this was significant.
“The alleged purchase price is not a trivial detail; it is the core performance that breathes life into a true sale.”
The court also considered a US$600 (approximately R9,900) payment described as a “loan repayment”. The respondents argued it was rent, but the court found there was no supporting lease agreement.
Why The Judge Rejected The Property ‘Sale’
The judge found that the circumstances pointed towards a debt-security arrangement rather than an outright property sale.
The court explained that a lender cannot simply use a property transaction to take ownership of secured property after a borrower defaults.
Justice Mambara said:
“What they may not do is enforce an ostensible sale that is not genuine.”
The ruling does not mean lenders cannot recover money legally owed to them. The court said the respondents could still pursue any lawful monetary claim arising from the financial dealings.
The key lesson is that calling a loan-security arrangement a “sale” does not necessarily make it a genuine property sale in the eyes of the law.
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