The current auction procedure has a gap that is often exploited through excessive devaluation of property at the expense of the owners, and should be revised for justice purposes, Ombudsman Madeleine Nirere has said. She made the observation on Monday, January 6, during a session in which the Lower House’s Committee on Governance Affairs and Gender was analysing the report of the Office of Ombudsman for the fiscal year 2023/2024, and action plan for 2024/2025. The report highlighted public concerns about significant losses incurred during property auctions held to recover debts owed to financial institutions. While auctions are now conducted electronically, Nirere noted that issues persist, particularly around undervaluation of assets. She called for legal safeguards to ensure owners are protected from major losses, including the introduction of a mandatory minimum price for auctioned properties. ALSO READ: Can change in auction law address property devaluing? She said that, sometimes, it is not only the property owner who incurs losses resulting from properties undervalued at auction, but also banks that lent money to them, giving an example where a house of Rwf10 million can be sold at Rwf1.5 million.. “We propose that the auction be carried out when the value of a property is set at a minimum of 75 per cent,” she said, adding that bids under such a rate should not be accepted. She suggested that the Ministry of Justice should look at ways to address such an issue through legal consideration. ALSO READ: Top cases of injustice in property auctioning Regarding auction modalities, the current law relating to the civil, commercial, labour and administrative procedure, stipulates that an auction is conducted electronically, and the bailiff – who seized the property in question – publishes in appropriate electronic system a reference price that is equivalent to the value indicated by the valuation done by an expert. An eligible bidder fills in the appropriate electronic system the price he or she intends to offer for the property. His or her names and the price he or she offers are kept secret until the prescribed time for publication of prices. The owner of the property or the distrainee (a person whose property was seized), the distrainer or the creditor have the right to decline the highest price offered at the first round and the second round [of auction] in case no price reaches 75 per cent of the reference value. However, the law provides, at the third round, the property to be auctioned is given to the bidder who offered the price that is higher than other prices offered during all the rounds of the auction. Anastase Nabahire, Chairperson of the Committee on Governance Affairs and Gender held that it is the third auction round that inflicts loss to the debtor, as well as the banks that lent them money as they try to recover it for its shareholders. “This is a relevant issue that MPs will discuss with the Ministry of Justice so that it considers a solution to it,” he said, suggesting the amendment of the legal provision in question. Ideally, Nabahire said, people who owe money should not wait for payment to be made upon auction of their property, but rather settle up willingly to avoid losses that may stem from a forced sale.
