Ask a lawyer:
By law a dealer can only repossess a car purchased on hire purchase after 3 months of non payment or default and not before. The dealer is required to give you a minimum of 6 weeks to settle the outstanding balance before they can sell the repossessed vehicle.

Introduction

In addressing the question regarding the repossession of a car purchased on hire purchase in Kenya, it is essential to refer to the Hire Purchase Act, Cap 507 of the Laws of Kenya. This Act provides the legal framework governing hire purchase agreements, including the rights and obligations of both the buyer (hirer) and the seller (owner). The Act outlines specific provisions regarding the repossession of goods, including vehicles, purchased under a hire purchase agreement in cases of default by the buyer.

Table of Contents

1. Legal Framework Governing Hire Purchase Agreements

2. Conditions for Repossession of Goods

   • 2.1 Three Months of Non-Payment or Default

   • 2.2 Notice Requirement Before Repossession

3. Procedure After Repossession

   • 3.1 Minimum Period Before Sale of Repossessed Vehicle

   • 3.2 Rights of the Hirer After Repossession

4. Conclusion

1. Legal Framework Governing Hire Purchase Agreements

The primary source of law governing hire purchase agreements in Kenya is the Hire Purchase Act, Cap 507. This Act sets out the rights and obligations of the parties to a hire purchase agreement and provides specific provisions regarding the repossession of goods.

2. Conditions for Repossession of Goods

2.1 Three Months of Non-Payment or Default

• Section 9 of the Hire Purchase Act stipulates the conditions under which an owner can repossess goods from a hirer. According to the Act, if a hirer defaults in the payment of any installment and such default continues for a period of not less than thirty days, the owner may repossess the goods. However, the practice and interpretation of this provision have evolved to consider a reasonable period of default before repossession, often aligning with the terms agreed upon in the hire purchase agreement.

2.2 Notice Requirement Before Repossession

• Section 10 of the Hire Purchase Act requires the owner to serve a notice on the hirer before repossessing the goods. This notice must specify the breach of the hire purchase agreement and state that if the breach is not remedied within fourteen days, the owner intends to repossess the goods. This provision ensures that the hirer is given a fair opportunity to remedy the breach before repossession occurs.

3. Procedure After Repossession

3.1 Minimum Period Before Sale of Repossessed Vehicle

• While the Hire Purchase Act does not explicitly specify a minimum period of six weeks before the sale of a repossessed vehicle, it mandates that the owner must serve a second notice to the hirer after repossession. This second notice must inform the hirer of the owner's intention to sell the goods and must be served at least twenty-one days before the sale. This provision indirectly provides the hirer with a period to settle the outstanding balance before the sale of the repossessed vehicle.

3.2 Rights of the Hirer After Repossession

• Section 12 of the Hire Purchase Act outlines the rights of the hirer after repossession. The hirer has the right to recover any surplus arising from the sale of the repossessed goods after the settlement of the outstanding balance and any reasonable expenses incurred by the owner in repossessing and selling the goods.

4. Conclusion

In summary, the Hire Purchase Act, Cap 507 of the Laws of Kenya, provides a comprehensive legal framework governing the repossession of goods under hire purchase agreements. While the Act allows for repossession in cases of default, it mandates specific procedures and notices to protect the rights of the hirer. The requirement of a notice before repossession and before the sale of repossessed goods ensures that the hirer is given a fair opportunity to remedy the default and recover any surplus from the sale. It is essential for both hirers and owners to be aware of these legal provisions to ensure compliance and protect their respective rights under hire purchase agreements.