Once an individual takes a loan from any establishment, they have a responsibility to repay the debt.

If unable to meet the obligations of repaying the loan, the best route is reaching out to the creditor, be it a Sacco, bank, or others.

In cases where a borrower is unable to service the loan, creditors have avenues for addressing the situation. These may include offering restructuring options such as extending the repayment period, implementing a moratorium on principal, interest or both and providing waivers on restructuring fees.

With auctions allowed by the law, it is advisable to discuss with your creditor to seek a resolution before the matter escalates to the point of auctioning. In the context of recovering a debt, an auction is a public sale of the debtor’s property to the highest bidder. This process, often overseen by a court or relevant authority, aims to convert the seized assets into funds to repay the outstanding debt.

Courts have repeatedly emphasized that an auction is an extreme measure as it entails depriving one of their rights to property. Therefore, auctions must be conducted with utmost integrity and in strict adherence to the law.

How does an auction happen?

An auction starts with instructions from the court, advocate, or a principal party with interest in the property, for example, a real estate agent.

Experts say the debtor must demand identification from the auctioneer as the first step to stopping the illegal handling of one’s property. Auctioneers are also required by law to identify themselves when serving an auction notice.

According to Koya & Company Advocates, a secured creditor may legally pursue the avenue of using a debt collection agency without first going to court. A secured creditor is a lender that holds collateral or security interest in a borrower’s property. This provides the creditor with the legal right to seize or sell the collateral if the borrower defaults, ensuring repayment of the loan.

If a creditor is not secure, they need to obtain a court order before seeking to attach a debtor’s or the defaulter’s assets in execution of a court order in favour of the creditor.

Using an auctioneer to Enforce Security Rights under the Movable Property Security Rights Act

Kenya has provisions for debt collection agencies whose operations are governed by the Auctioneers Act and Auctioneers Rules.

After completing the standard debt collection procedures, including efforts to reach a payment agreement, a secured creditor has the option to enlist the services of a licensed auctioneer as a debt collector.

This occurs when the secured creditor and the debtor fail to reach an agreement on repayment of the outstanding debt, even after following the issuance of a statutory notice of default as mandated by law.

Suppose a debtor fails to cooperate in achieving an amicable settlement. In that case, the initial debt recovery option available to a secured creditor involves the seizure and subsequent sale of the secured property by a licensed auctioneer. This process is undertaken to recover the outstanding debt.

It is key to ensure that only a licensed auctioneer is used; otherwise, the debtor can have valid grounds to pursue court action against the secured creditor for wrongful disposal of the security property, as the conduct of seizure and sale of security assets falls under auctioneers’ business as stipulated under Kenya’s Auctioneers Act and Auctioneers Rules. It is unlawful for a person other than a licensed auctioneer to engage in the auctioneering business.

The secured creditor has the option to engage the services of a licensed auctioneer, whether the auctioneer operates independently or within an auctioneering firm, and offers specialized assistance to secured creditors. Once the secured creditor has made a selection, they are required to issue a Letter of Instruction to the auctioneer in the statutory form as stipulated by the Auctioneers Act.

In the pursuit of recovering the loan, the secured creditor can choose to either sell or lease the security property, such as a vehicle. The same procedure applies whether the secured creditor opts for the auctioneer to seize and lease the security property for debt recovery or to seize and sell the security property.

Conduct of the sale by the secured creditor and the auctioneer

Before proceeding with the seizure and sale of the security property, the auctioneer has the option to engage in negotiations to recover the debt. The generated proceeds from the sale of the security will be utilized to settle the outstanding loan principal, including interest and any associated costs.

Upon the collateral’s seizure following a default, the auctioneer and the secured creditor collaborate in determining the value of the security property. It is important to note that the debtor retains the right to seek court intervention, allowing for the appointment of an independent valuer to assess the security property in cases where disagreement arises with the proposed sale value presented by the auctioneer or secured creditor.

Some few days before the sale of the security property, the creditor shall send to the debtor a notice of the secured creditor’s intention to dispose of the security property, and the notice needs to stipulate the following information:

  1. identify the grantor of the security (who is often the debtor) and the secured creditor;
  2. contain a description of the collateral.
  3. provide a statement of the amount required to satisfy the secured obligation, including interest and a reasonable estimate of the cost of enforcement.
  4. identify the manner of the intended disposition and
  5. provide a statement of the date after which the collateral will be sold or otherwise disposed of, leased or licensed, or the time and place of a public disposition.

If there is another secured creditor related to the collateral, notice of the impending sale must be forwarded to that creditor several days before being sent to the debtor. The sale, conducted through a public auction, will be advertised in a widely circulated daily publication.

Once the outstanding debt and the auctioneer’s charges are settled, the remaining balance of the sale proceeds will be returned to the debtor, with deductions for any applicable charges.

In cases where the sale proceeds fall short of fully satisfying the outstanding loan, the secured creditor has the option to pursue legal action against the debtor for debt recovery. This involves instructing a lawyer to prepare the necessary documents, such as the plaint and accompanying written statement of witnesses, and subsequently file a lawsuit for the recovery of the debt in court.


The law recognizes auctions as a remedy for creditors when debtors fail to keep their end of the bargain.

While there is no surefire way to avoid being auctioned off, it is recommended for debtors and creditors, in the spirit of utmost good faith, to continually engage and find ways of handling the debt without subjecting each other to avoidable inconveniences.

Creditors are attentive to the business environment and are generally open to communication with debtors when managing challenging debts.