The auction process is a legal process for debt recovery in Kenya, allowing creditors to recover outstanding amounts through the sale of property.
A legal framework outlines how auctioneers operate, the rights of debtors, and the timelines that must be followed before any sale takes place.
The government of Kenya has stipulated rules governing the process, including The Auctioneer Act 1996 and Auctioneers Rules 1997, which regulate the conduct of auctioneers and the procedures leading up to an auction.
Legal Framework Governing Auctions
Speaking in an interview on NTV on March 24, Anthony Nga’nga, a High Court advocate in Kenya, stated that many people in Kenya face auction without knowing the rules governing the process, and that people should know the laws governing the process.
“To avoid a scenario where your property is being auctioned but you’re not even aware. So that requirement protects the owner of the property that is being auctioned,” stated Nga’nga.
The Auctioneers Act, 1996, establishes the legal foundation for auctioneering in Kenya, including the licensing and regulation of practitioners.
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Under the law, no individual may operate as an auctioneer without a valid license issued by the Auctioneers Licensing Board, and violations may result in fines or imprisonment.
The Act also defines the responsibilities and accountability of auctioneers, ensuring they operate within a structured, regulated system.
Auctioneers in Kenya are governed by an established Board known as the Auctioneers Licensing Board, which consists of:
- Chairperson of the board who is a judge of the High Court or the Court appointed by the Chief Justice
- Principal Secretary in the Office of the President
- One Chief Magistrate appointed by the Chief Justice
- Two advocates of not less than ten years’ standing, nominated by the Council of the Law Society
- Four auctioneers of not less than five years’ standing, nominated by the Chief Justice
- One person nominated by the National Chamber of Commerce and Industry
- One person nominated by the Kenya Bankers Association to represent financial institutions
Procedure and Timelines Before Sale
The Auctioneers Rules set out strict timelines and steps that must be followed before property is sold.
Once an auctioneer receives a court warrant, they must prepare a proclamation listing the items to be seized and issue a notice to the debtor.
A debtor receives two notices, one from the person owing and the other from the auctioneer.
For movable property, such as household goods, the debtor must be given at least seven days’ notice to settle the debt before the goods can be removed and sold.
In the case of immovable property, such as land or buildings, the rules are more stringent. The law requires that the owner be issued a notice of at least 45 days, within which they may redeem the property by paying the outstanding amount.
Additionally, auctions must be publicly advertised, usually in newspapers, and the sale cannot take place until a specified period has elapsed after the advertisement.
These timelines are legally binding, and auctioneers must adhere to them before proceeding with any sale.
Anthony Nga’nga has also stated that the auction process cannot take place after 6 PM and that items such as bedding cannot be auctioned.
Bidding Process in Kenya
The actual auction is conducted through a public bidding process as prescribed under the Auctioneers Rules, 1997.
On the appointed day, interested buyers gather at the specified location, and the auctioneer invites bids for the listed property.
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Bidding is competitive, with the property awarded to the highest bidder once the auctioneer accepts the final offer, commonly marked by the fall of the hammer.
The Rules require that auctions be conducted openly and fairly, without manipulation or private arrangements, ensuring equal opportunity for all participants.
At the same time, the law provides important safeguards for debtors. A key protection is the right of redemption, which allows the debtor to recover their property by paying the full outstanding debt, including costs, at any time before the auction is concluded.
Auctioneers are also required to handle seized property responsibly and maintain proper records of the sale.
Nganga has also explained that the property cannot be sold for less than 75% of the market price, and that, in the event it is sold, the bidder must prove why it was not sold at that price.
Once it is sold, the bidder takes the balance owed by the person, and the balance of the sale proceeds is submitted to the auctioneers’ board, which must be returned to the owner after deductions, including auction fees and taxes, if applicable.
Rights of Debtors in Kenya During Auction
The owner of the property is also eligible to participate in the bidding process.
One of the most critical safeguards is the right of redemption, which allows a debtor to reclaim their property at any time before it is sold by paying the full amount owed.
The Rules also allow a debtor to apply for an independent valuation of seized property before sale, ensuring that assets are not undervalued.
Auctioneers are further required to ensure safe custody of seized goods and may seek police assistance where there is a risk of conflict during repossession.
