Auctioneers have moved to court seeking to have banks compelled to cede to forceful sale of distressed property following the recent trend by lenders of warming up to private settlement.
Central to the auctioneers’ fury is that banks are denying them commissions earned from forceful sale of distressed property.
Banks have recently warmed up to private settlement where they afford distressed borrowers the time to hunt for the best available price for distressed property and selling them in order to pay their loans compared to letting the property fetch pedestrian prices at the behest of the auctioneer.
The move has given banks room to work around the Land Act 2012, which prohibits them from auctioning assets at below 75 percent of the prevailing market value in Kenya.
The National Association of Kenya Auctioneers (NAKA) in its court filings claims banks have been using unlicensed agents and sometimes directly advertise for sale attached and distressed goods.
This the auctioneers say has led to non-standard practices in their line of work including illegal fees payment and price undercutting.
“That at all material times relevant to this suit, Kenya Bankers Association’s members have illegally issued instructions, repossessed, advertised and sold loan securities without the involvement of the National Association of Kenya Auctioneers members, prescribed an illegal fees schedule and encouraged undercutting,” Naka secretary-general Darius Kimwele said in an affidavit.
The law gives auctioneers powers to repossess and advertise assets for sale upon storage in their secured yard.
The auctioneers are entitled to a commission of 10 percent if they sell property valued at less than Ksh100,000, five percent for its worth between Ksh100,000 and Ksh1 million, and two percent if it exceeds Ksh1 million.
The auctioneers want KCB, Cooperative Bank, Family Bank, NCBA and SBM Bank stopped from seizing, advertising, and selling vehicles repossesssed from defaulters.
High Court judge David Majanja, however, declined to issue an injunction saying the matter was not urgent and that banks have not been heard in the suit.
“Interim orders are granted where the court, in exercising its discretion is satisfied that they are necessary due to the urgency and nature of the circumstances. Interim orders are not suitable if by their grant, they finally determine the substantive dispute. The courts must be wary of prejudgment of the substantive merits,” Justice Majanja averred.
The auctioneers are wary that banks are taking over their roles and forcing them to accept lower fees for repossessing property that are eventually sold by the lenders through private settlement.
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