Nightmare of buying auctioned properties

Harold Ayodo

Purchasing property at public auctions may turn sour especially if clearance from Kenya Revenue Authority (KRA) is not obtained. Courts often order public sales when property owners default on payments thus incurring debts they can no longer pay.

Some investors regularly peruse newspapers to check out advertisements from auctioneers. Most of such properties are sold at throwaway prices and investors can thus acquire land, homes and cars among other items for less than a third of the market price.

However, celebrations by the new owner may soon turn into nightmares when it emerges that the Government also shares a large share of the claim on the property. Consequently, the prospective investor could end up spending years in court battles with KRA and incurring high legal fees in the process. Recent cases of such conflict show that KRA may strike on grounds of customs and excise duty.

Take the case of Caleb Ottichilo Kweya who recently bought a Toyota Corolla registration KAJ 372 at Sh54,000.

He was the highest bidder at a public auction in 2001. The Karatina Law Court resident magistrate had ordered that the property be forfeited to the State and auctioned following debts of Jeremiah Ndugire Mwaura, its original owner.

Providence Auctioneers conducted the public sale in Nyeri on June 19, 2001 following the court orders. Kweya, a teacher, saw the advertised auction in a local daily and dashed to the bank to withdraw money to buy the car. He owned it for less than one year before he received a notice of seizure from KRA claiming the property was not customed. The taxman proceeded to attach the property and towed it to their yard in line with Notice D No. 3087. This was the beginning of a protracted legal battle.

Registration fees

Kweya moved to court arguing he was an innocent buyer at a public auction unaware of the alleged import duty by KRA. Kweya demanded general damages, unconditional release of the motor vehicle and declarations that KRA’s conduct was irregular, unprocedural and unlawful. KRA argued that it seized the property in line with the Customs and Excise Act, which empowers the authority to seize suspected uncustomed goods. Kweya is yet to get back the car eight years on despite orders to that effect by Kisumu Law Court principal magistrate Ann Ong’injo recently.

The court ordered KRA to return the vehicle and also awarded Kweya Sh200,000 in general damages. The principal magistrate further ordered that Kweya only pays fees for purposes of registration of the property. The court said KRA delayed the procession of registration even after seizure of the car despite Kweya’s willingness to comply.

KRA should have quantified the registration fees — duty and warehouse rent including penalty and registration fees — and advised Kweya on the amount within three months.

The writer is a lawyer and journalist.