Auctioneers lock horns with banks in turf war

Justice David Majanja during a past court session. PHOTO | KANYIRI WAHITO | NMG

Auctioneers have accused banks of illegally taking over their business of seizing and selling assets of loan defaulters, denying them revenue and flouting the law. They also complain that when banks engage them, they are under pressure to charge less than what is provided for in the Auctioneers Act.

The row emerged in a case which was filed before Nairobi’s High Court by the auctioneers and which sought orders to permanently stop banks from using parties not licensed to practice as auctioneers.

Justice David Majanja dismissed the application, saying the orders sought to restate the law.

The judge noted that the auctioneers can file criminal complaints if they have evidence of price undercutting in their industry and banks seizing and disposing of property without using the recognised professionals.

The row comes after a sharp increase in the inventory of repossessed assets including motor vehicles and properties in the wake of the economic fallout from the Covid-19 pandemic and which pushed some borrowers into default.

Banks that have been bypassing auctioneers are likely motivated by cutting costs of enforcing the collection of the amounts due to them.

Auctioneers can charge up to two percent on the proceeds realised from the sale of multi-million-shilling properties.

Darius Kimwele was the plaintiff in the case in which scores of banks and microfinance institutions were sued alongside Kenya Bankers Association (KBA).

“According to the plaintiff, the first defendant’s (KBA) members have illegally issued instructions, repossessed, advertised and sold loan securities without the involvement of the plaintiff’s members, prescribed an illegal fees schedule and encouraged undercutting,” the case reads in part.

A person carrying on the business of an auctioneer without a valid licence commits an offence and is liable to pay a fine of Sh100,000 or two years’ imprisonment or both in the event of conviction.

The financial institutions had argued that other laws allow them to bypass auctioneers when enforcing their commercial rights.

The judge rejected the argument, saying other parties are not allowed to wade into auctioneers’ business.

“While the security holder has the right to repossess or sell or do all the acts necessary to realise the rights, the process of doing the things enumerated in section 2 of the Act is the preserve of auctioneers,” the judge said.

Other than banks, the association had sued Kenya Landlord & Tenant Association and Association of Kenya Insurers among others, claiming that they have been giving instructions to persons who have not been licensed to practice.

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Note: The results are not exact but very close to the actual.