Bill to tame auctioneers runs into opposition

For the two decades he has been in the real estate business, Dan has found auctioneers indispensable.

The estate agency department of his expansive firm manages hundreds of middle- and high-income residential properties in various parts of Nairobi and Mombasa.

Over the years, business has generally been good, except for one thing: collecting rent has become a real headache owing to a high default rate.

He says that out of every 10 tenants, only six pay promptly — and in full.

Of the four remaining, two usually default for up to four months and the other two pay after a lot of reminders, pushing, cajoling and threats.

This puts the default rate among the tenants he deals with at 40 per cent.

“We are facing a rent payment crisis in the middle- and high-income neighbourhoods,” he says, noting that most of those who default sometimes insist they know their rights and use “flimsy reasons” not to pay rent.

And so, in any given month, Dan’s company has to hire auctioneers to recover rent arrears from one or two households renting the properties they manage. The use of auctioneers, he says, has made the situation a little bit manageable.

But a new development in Kenya’s jurisprudence is giving estate agents like Dan sleepless nights.

The Land Bill 2012, which is due for parliamentary debate, has proposed the abolition of the use of auctioneers by property owners to recover rent arrears in cases of default.

Instead, the Bill requires property owners to obtain a court order to terminate the lease agreement upon failure to pay rent by the tenant.

If the Bill passes in its current form, that will be the end of the Distress for Rent Act, Cap 293, which allows landlords to auction the possessions of tenants for compensation.

Under the Act, a landlord can seize a tenant’s possessions if the tenant is unable to pay rent. The tenant must pay within 14 days, failure to which the possessions are auctioned to compensate the landlord.

Understandably, resident associations are celebrating the planned removal of the provision, saying that the move is in accordance with the Bill of Rights as provided for in Chapter Four of Kenya’s Constitution.

Stephen Mutoro, the chief executive of Kenya Alliance of Resident Associations (Kara), says auctioneers have been trampling on the rights of “innocent” Kenyans through harassment, brutality and destroying tenants’ belongings.

“It is a very welcome move,” say Mr Mutoro. “Currently, auctioneers behave no different from thugs. That cannot be allowed to continue under the new constitution.”

The proposal is sending shockwaves in the property sector, with many arguing that it will discourage investment in rental property in the country.

Dan agrees, saying the move is punitive and would make the default rate worse.