Whereas it may be difficult to know every particular, detail about a property being sold at auction sales, it is important to focus on the most important factors that impact the validity of the sale by auction.
There are instances where as a purchaser through an auction sale could lose the legal protection more-so if it is it was proved that there was an improper or irregular exercise of the statutory power of sale for example, of which a purchaser had notice of.
One is expected to exercise due diligence which requires the buyer to collect information about the particular property that one intends to buy. Being an intended purchaser, you will be expected to do as much due diligence as possible prior to attending an auction. To note, is that, the type of auction being conducted and the auctioneer handling the sale will have a bearing on the due diligence information outwardly provided to the buyer.
What therefore should you be on the lookout for when opting to make a purchase under an auction sale?
License Requirements
1). Is the auctioneer registered?
It would be prudent for you as an intended purchaser to confirm whether the said auctioneer conducting the auction sale is a qualified individual holding a valid auctioneering license issued by the Auctioneers Licensing Board pursuant to the provisions of the Auctioneers Act No. 5 of 1996 Laws of Kenya. An auctioneer’s license is strictly issued to an individual and it is not transferable.
2). Has the Auctioneer been authorized sell the Said Property?
The Authority to sell by way of auction may vary depending on the type of auction sale. The authority may be through a letter of instruction to recover addressed to the auctioneer or through a court warrant/order. This would be determined by whether the said sale is a Statutory auction sale or an auction sale on behalf of owner of the property.
3). Statutory Sale
Take for example the property was previously subject to a charge. Section 96 of the Land Act, 2012 stipulates that where a chargor is in default of the obligations under a charge and remains in default at the expiry of the time provided for the rectification of that default in the notice served on the charger, a chargee bank may exercise the power to sell the charged land.
Before exercising the power to sell the charged land, the chargee is required serve on the chargor a notice to sell in the prescribed form and shall not proceed to complete any contract for the sale of the charged land until at least forty (40) days have elapsed from the date of the service of that notice to sell.
Section 96 (1) of the Land Act provides that these forty (40) days would be in addition to the three (3) months’ notice and different from the mandatory notice of forty five days (45 days) under the Auctioneers Rules, 1997. Rule 15(d) of the Auctioneers Rules, 1997 is mandatory and creates statutory obligation on the auctioneer in executing the court warrants or letter of instruction.
Due diligence in the circumstance maybe by way of conducting an official search on the property to establish ownership and registration of charge.
4). When an auctioneer is selling a property for the owner
Unlike instances when the auctioneer is exercising statutory power of sale on behalf of a charge bank, when an auctioneer is selling a property for the owner, one would be expected as part of due diligence of course to get to find out whether there is a letter authorizing the said sale. A lot of information regarding the properties being sold by way of auction may be available and readily provided to buyers in the circumstance.
What are the elements of the Advertisement regarding the Auction Sale?
Guided by the provisions of Rule16 of the Auctioneers Rules, 1997. The elements contained in an advertisement regarding the auction sale are very important in establishing the date, time and place of the proposed sale; the conditions of sale or where they may be obtained; the time for viewing the property to be sold; an accurate description of the goods to be sold and a statement as to whether or not, the properties are to be sold subject to a reserve price and all the information required to be contained in the court warrant or letter of instruction.
The Concept of a Reserve
1). Is the sale subject to a Reserve Price?
The buyer needs to confirm whether the property being sold is subject to a reserve price or not or whether a right to bid is reserved on the part of the seller. A reserve price means the minimum price that a seller would be willing to accept from a buyer.
2). What not to do in an Auction Sale
The buyer should not only rely on the information provided by the auctioneers but also take part in exercising due diligence in order to obtain information about the sale property in detail. Buyers should not ignore the terms and conditions of the auction sale normally spelt out in the advertisement and prior to an auction being conducted.
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