Auctions In Kenya : Industry & Prospects

Preamble

An auction is the offer of purchase of property through a bidding process. The highest bidder takes the day. subject to a “Reserve Price.”

An auction may also be requested by the actual owner (“Owner Auctions”), to forego the rigours of marketing, and where a reserve price may not apply, nor do the strict rules for court related matter. This is common for organizations in the disposal of assets, as few have a department to handle the demanding private sale processes, which may also take a considerable amount of time.

“Reserve Auctions” rules may apply in Owner Auctions, in which the the highest bid becomes an offer, not the the sale price. Actual decision makers reserve the right to either accept or reject the winning offer in a given time frame. . As the seller isn’t distressed, this type of auction doesn’t attract investors looking for a quick sale. I also may keep up buyers who may fee that it would waste their time.

In this article, we refer to court related auctions.

Legal Auction Processes

Auctioneers are representatives of the court (have to be registered with the court) and receive warrants for distress approved by court allowing them to pursue the party to be distressed. Auctioneers in Kenya are bound by the Auctioneer Act No. 5 (1996), which outlining legal requirements and regulations for the industry. Focus is on adherence to ethical practices, transparency, and fairness as essential elements in auction processes. .

The lender/claimant applies for the warrant, with the chosen auctioneer cited in the application.

Investigations & Proclamation

The auction process is initiated by a licenced Auctioneer after expiration of the repayment window for the debt following ruling by a court on the liability. The Auctioneer first identifies adequate assets owned by the debtor for the distress, which are listed in a “Proclamation of Attachment,” which also details the debt basis. This, naturally, requires investigative skills on the part of the Auctioneer in the identification of possible assets for attachment.

The Auctioneer then gives the debtor another window for payment, albeit now with additional costs relating to the auctioneer (but excluding transport and storage).

After the said window, now given by the Auctioneer, the movable identified assets are collected by the Auctioneer and the date of the planned auction announced.

Auction Execution

The reserve price is regularly dictated by law, and linked to reasonable values in relation to the highest possible price based on prevailing market values. This is to protect the debtor and facilitate their receiving some surplus, after the settlement of the debt claim and costs related to the auction, including court costs, other legal fees, auctioneers’ costs, transport and storage. It also helps avoid underhand deals between auctioneers and speculators who may purchase cheaply and quickly turn around for a private sale with a material profit.

Buyers need to be well versed in the values of assets in establishing their bidding strategy. This is facilitated by inspection of the offering prior to the actual occasion. Many auctions may require deposits to ensure that only serious bidders engage.

During the actual auction, the Auctioneer begins by calling out bids with the highest bidder, qualifying for purchase subject to meeting any reserve price requirements. This process continues until all items are sold.

Payment and Settlement

The winning bid regularly necessitates an immediate minimum deposit payment, often a percentage of the final bid amount, with the final balance also due within a specified timeframe. A defaulting buyer may lose the pre-auction deposit or the winning bid deposit for detault at any stage of the process.

Summary /Industry Prospects

With hard economic times, the auctioneering industry continues to grow, albeit with slower auctions given that potential buyers are operating in the same economic environments. However, the industry will be expected to command considerable demand now in the near future, given that financial transactions are core to any economy, with continuing expected defaults with an increasing number of the same as the population grows.