How Property and Real Estate Auctions Work in Kenya: Land Act Compliance

1. The Statutory Power of Sale Under the Land Act (2012)

Real estate auctions in Kenya are among the most closely scrutinized legal procedures in commercial practice. When a borrower defaults on a property mortgage, the lender (chargee) cannot simply seize the title deed and dispose of the property. The lender must exercise its statutory power of sale in strict compliance with the Land Act (No. 6 of 2012).

Failure to follow statutory provisions meticulously exposes the sale to High Court injunctions, declarations of nullity, and substantial liability for damages. At Makuri Auctioneers, our real estate auction unit coordinates with instructing advocates to guarantee absolute statutory compliance.

2. Mandatory Timelines: The 90-Day & 40-Day Notices

The Land Act establishes rigid procedural prerequisites that must be satisfied sequentially before an auctioneer is instructed:

1. Section 90 Notice (90 Days): Once default persists for at least one month, the chargee must serve a formal 90-day statutory notice requiring the chargor to rectify default.
2. Section 96 Notice of Intention to Sell (40 Days): If default continues after 90 days, the lender must serve a 40-day notice of intention to sell upon the chargor, guarantors, spouses where matrimonial property is concerned, and any prior chargees.
3. Auctioneer's 45-Day Redemption Notice: Under the Auctioneers Rules, upon expiry of the bank's notices, the licensed auctioneer issues an additional notice giving the debtor a final window to redeem the property prior to advertisement.

3. The 75% Statutory Reserve Price Valuation Rule

One of the most consequential protections introduced by Section 97(1) of the Land Act is the chargee's statutory duty to take all reasonable steps to obtain the best price reasonably obtainable.

Critically, Section 97(2) specifies that an auction sale is unlawful if the reserve price is set below 75% of the prevailing open market value of the property. To satisfy this legal threshold, the auctioneer and lender must commission a comprehensive valuation by an accredited valuer registered under the Valuers Act (Cap. 532) conducted not more than six months prior to the date of sale.

4. Public Gazettement & National Newspaper Notices

At least 14 days prior to the auction, the licensed auctioneer must publish a comprehensive public advertisement in at least one circulating newspaper of nationwide coverage (such as the Daily Nation or The Standard).

The notice must disclose the land registration number, title tenure (freehold or leasehold with unexpired term), land area, physical address, built improvements, viewing arrangements at the site or our offices in Mombasa or Nairobi, and clear instructions regarding the refundable bidding deposit.

5. Bidding Day Protocols, Memorandum of Sale & Conveyancing

On auction day, bidding is conducted transparently. Upon the fall of the hammer:

• The highest bidder immediately executes the binding Memorandum of Sale.
• A non-refundable deposit of 25% of the purchase price is paid immediately by banker's cheque or direct RTGS.
• The 75% balance is payable within the stipulated period (typically 60 to 90 days).
• Upon complete financial receipt, the transfer of charge under the Land Registration Act is prepared and presented to the Ministry of Lands, granting the purchaser clean, unencumbered statutory title.