What is the Statutory Power of Sale in Kenya and When Can a Lender Use It?
The statutory power of sale is a legal right conferred on registered chargeholders by the Land Act 2012 to sell charged property when a borrower defaults on the underlying debt. It is "statutory" because it arises from the Act itself, not just from the charge instrument.
Understanding when this power can be exercised — and what procedural conditions must be met — is essential for both borrowers and lenders in Kenya.
When the Power of Sale Arises
Under Section 90 of the Land Act 2012, the statutory power of sale arises when:
- The charge has become legal (i.e., it has been properly executed and registered).
- The chargor (borrower) has defaulted on the obligations secured by the charge.
Common default events that trigger the power:
Failure to pay principal or interest when due. Breach of other covenants in the charge instrument (insurance obligations, development conditions, etc.).
When the Power of Sale Can Be Exercised
The power of sale arising is different from the power becoming exercisable.
Under Section 90(2), the power of sale becomes exercisable only after the chargeholder has served the required notice on the chargor and the notice period has expired without the default being remedied.
The required notice:
Written notice specifying the nature and extent of the default. A period of not less than 90 days for the chargor to remedy the default. The notice must be served in a manner demonstrating actual receipt by the chargor (registered post with acknowledgment, personal service, or similar).
If the chargor remedies the default within the 90-day period, the power of sale cannot be exercised for that default event.
Procedural Requirements Before Auction
Once the notice period expires unremedied, the chargeholder must still:
Obtain a current independent valuation. Advertise the auction in a widely circulating newspaper (minimum three advertisements). Conduct the auction publicly and genuinely seek to achieve fair market value.
Courts have voided auctions where these procedural requirements were not followed (Gitau v AFC: stale valuation; Muthoni v K-Unity SACCO: inadequate notice).
The Chargor's Rights
Even after default, the chargor retains certain rights:
Right to redeem. Until the sale is actually completed, the chargor can pay the outstanding debt (plus costs) and redeem the property. This right persists up to the moment of completion of the sale.
Right to receive proper notice. The chargor has a fundamental right to the required notice. Defective notice is a basis to challenge the enforcement.
Right to receive the surplus. After the sale, if the proceeds exceed the outstanding debt and costs, the surplus must be returned to the chargor.
What Buyers of Charged Properties Should Know
If you are buying a property that is being sold pursuant to the statutory power of sale:
Confirm the procedural requirements were met: notice was properly served, the notice period expired, and a current valuation was obtained. A buyer who purchases at an auction that is later voided by court does not necessarily get a clean title.
Investigate the underlying charge: confirm the charge was properly registered and that the enforcement procedures were correct.
Get legal advice before bidding at a property sale auction.
This article is for general information only. It does not constitute legal advice. Consult a qualified Kenya advocate for specific advice on mortgage enforcement or purchasing at auction.
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