Challenging a Mortgagee’s Statutory Power of Sale in Kenya

When a borrower falls behind on loan repayments secured by land in Kenya, the lender, known in law as the chargee, does not need to go to court before selling the property. The Land Act, 2012 gives every chargee a statutory power of sale exercisable without judicial process, provided a strict sequence of notices and duties has first been observed. For chargors, that same Act is the source of real protection: a sale carried out irregularly, at an undervalue, or in disregard of the chargor’s right to redeem can be challenged and, in the right circumstances, stopped by injunction. This article sets out the legal basis for the power of sale, the notice steps a chargee must follow, the main grounds for resisting a sale, and how Kenyan courts have applied these rules.

The Chargee’s Statutory Power of Sale Under the Land Act

Part VII of the Land Act, 2012 (No. 6 of 2012) governs charges over land, the statutory term for what is commonly called a mortgage. Section 89 abolishes any right of a chargee to foreclose the chargor’s equity of redemption; a chargee cannot simply keep the land in satisfaction of the debt. Section 90(1) instead sets out the remedies available once a chargor is in default of a payment obligation or a covenant and remains in default for one month: the chargee may sue for the money owed, appoint a receiver, lease the land, take possession, or sell it. These remedies may be exercised concurrently or in succession, but each carries its own notice requirements, and the power of sale cannot be exercised in isolation from the notice regime described below.

Notice and Procedural Requirements Before a Sale

Before any remedy under section 90(1) can be used, the chargee must serve a written default notice under section 90(2), stating the default, the sum or act needed to cure it, a cure period of not less than three months for a monetary default or two months for breach of covenant, the consequence of non-compliance, and the chargor’s right to apply to court for relief. Following the Land Laws (Amendment) Act, 2016, if the chargor does not comply within ninety days of service, the chargee may proceed to any section 90(1) remedy, including sale.

Reaching the end of that notice period does not, on its own, allow a sale to proceed. Section 96 requires a further, separate Notice to Sell, in the prescribed form, and the chargee may not complete any sale contract until at least forty days have elapsed from its service. Copies must also go to a defined list of interested parties, among them any consenting spouse, co-owners, lessees and guarantors, other chargees with actual notice, and, where relevant, the National Land Commission, plus a copy posted at the property. A public auction attracts separate Auctioneers Act notices afterwards, not instead of the section 96 notice. Section 97 further requires a forced sale valuation by a registered valuer before any sale, and reasonable steps to obtain the best price reasonably obtainable.

Challenging a Sale for Irregular Notice

The most common ground for resisting a sale is a defect in one of these notices. A chargor can challenge a sale where the section 90 default notice was never served, where it understated the cure period, where the separate section 96 notice to sell was never issued, or where the forty day period had not yet run when the sale was concluded. Because service is a precondition to a valid sale, Kenyan courts have placed the burden of proving proper service squarely on the chargee, not the chargor. A lender that cannot produce evidence such as a certificate of posting, and relies only on an internal file copy, risks having the entire sale process declared invalid and being required to start the notice process afresh.

Challenging a Sale for Undervaluation or Denial of Redemption

A second major ground is undervaluation. Section 97 imposes a statutory duty of care on the chargee to obtain the best price reasonably obtainable, owed not only to the chargor but to guarantors and subsequent chargees. Where the sale price is twenty five per cent or more below the market value of comparable land, the Act creates a rebuttable presumption that the chargee breached that duty, and the chargor may apply to court to have the sale declared void. Courts have also been willing, before a sale even takes place, to restrain a chargee from selling below the floor set by its own forced sale valuation.

The third ground concerns redemption. Section 89 protects the equity of redemption except strictly in accordance with the Act, and section 102 entitles a chargor to discharge the charge at any time before a sale is completed by paying all money then due, plus the chargee’s costs and expenses. A chargee that refuses a genuine tender of the full redemption sum, or completes a sale after such a tender, acts outside its statutory powers. Section 103 allows the chargor, a spouse, a co-chargor, a lessee, or a trustee in bankruptcy to apply for relief against any remedy, and section 104 gives the court wide powers to cancel, suspend, vary, or substitute the remedy sought, though it will weigh whether any defect actually caused injustice before intervening on purely technical grounds.

What Kenyan Courts Have Said

Kenyan case law has fleshed out each of these grounds. In Muga Developers Limited v Equity Bank of Kenya Limited & 4 others [2020] KEHC 1065 (KLR), the High Court’s Commercial and Tax Division held that a chargee bears the burden of proving its statutory notice was actually served; where the bank produced only a file copy with no proof of posting, the court found service unproven, declared the sale process invalid, and required a fresh, compliant notice. In Cordeiro & another v Shamji [2015] KEHC 6977 (KLR), the High Court held that the power of sale cannot be exercised at all in the absence of a proper Notice to Sell under section 96(2), even where other notices had been issued, since the notice to sell and any later Auctioneers Act notifications belong to distinct regimes that must be followed strictly in sequence; the court granted an injunction conditional on a compliant notice being issued first. More recently, in KCB Bank Kenya Limited v La’Paz Holding Limited [2024] KEELC 6827 (KLR), the Environment and Land Court refused to sanction a sale below the chargee’s own forced sale valuation, holding that the valuation sets the floor below which a sale cannot lawfully proceed under section 97.