Frequently Asked Questions
Hire purchase is a transaction where goods are purchased and sold in regular installments while the buyer keeps possession of the goods and makes use of
The Hire Purchase Act 507 of the Laws of Kenya. The law seeks to regulates hire-purchase agreements and the issuance of hire purchase business licenses .
The HPA targets hire-purchase agreements entered into by vulnerable individuals, either for small-scale business purposes or as consumers. It does not apply to corporate hirers or agreements whose hire purchase price exceeded 4 million shillings.
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As part of the protection that the Act provides for the implication of conditions and warranties and the avoidance of contractual provisions relating to enforcement. This protection is extended to vulnerable hirers by allowing extrajudicial enforcement by repossession of the asset, but only until the hirer repaid two-thirds of the hire-purchase price, after which, if an owner repossessed without a court order, the hirer can recover all the sums paid and obtain a release from any liability under the agreement.
If, however, the hire-purchase price of the object exceeded the statutory threshold, the hirer cannot invoke the protection of the HPA and on default, the owner can only enforce using any remedies provided for in the agreement.
- A person who carries on a hire purchase business may only do so under and in accordance with the terms of a current license issued by a licensing officer at Business Registration Service.
- A business conducting a hire purchase business must have an annual license.
- The holder of a licence shall ensure that the licence or a copy thereof is at all times conspicuously displayed in or on every premises in which he carries on hire-purchase business, and if he fails to do so he shall be guilty of an offence and liable to a fine not exceeding one thousand shillings.
This is an agreement for the bailment of goods under which the bailee may buy the goods or the property in the goods will or may pass to the bailee. The goods, therefore, remain in the ownership of the supplier throughout the tenure agreement until the full price is paid and, in some cases, until the bailee opts to purchase the goods.
The agreement must identify the cash price and hire-purchase price, and provide a description of goods sufficient to identify them. But the agreement does not need to be labelled as a hire-purchase agreement or require the hirer to purchase the object in the end.
NO. The Hire Purchase Act established a registry of hire-purchase agreements however provisions relating to registration of hire purchase agreements at the registry under the Act were repealed the Movable Property Security Rights Act, 2017. This is because MPSR is treats rights of owners under hire-purchase agreements as security rights.
- For purposes of ensuring that the owner’s rights in the property are secure, the owner must register their security rights/interest (created under the hire purchase agreement) under the MPSR Registry by way of filing an initial notice. This is to ensure that the security right created under a hire-purchase agreement is effective against third parties, including in insolvency or in case of default.
- For purposes of enforceability of the agreement as against the hirer, parties must ensure that they include a contract of guarantee statement related to a hire-purchase agreement as provided for under section 6 of the HPA, failure to which the agreement may become unenforceable for the failure of the agreement satisfying the formal requirements set out therein.
- If two thirds of the hire purchase price have been paid, the creditor may recover the goods only by recourse to the courts. The intent of this provision under the Act is to protect individuals and small enterprises that purchased goods under hire-purchase agreements against aggressive enforcement actions of owners of those goods upon default.
A business conducting hire purchase activities without a valid license is in contravention of the Act as this is liable to a fine not exceeding Kshs, 20,000/- or imprisonment for a term not exceeding 1 year or to a fine of both.
Service Rendered | Requirements | Documents issued | Fees | Time lines |
Licensing of Hire Purchase business | Make the application through the ecitizen platform https://manual.brs.go.ke/services
· Form HP 10 License · Application letter · Copy of memorandum and articles of association. · Copy of the registration certificate · Bank statement of Hire –purchase conducted for the three years/introduction letter form the bank | Hire purchase license (HP 11) | Kshs 50,000 | 1 day |
Renewal of a hire purchase business license | Make the application through the ecitizen platform https://manual.brs.go.ke/services · Application letter
| Hire purchase license (HP 11) | Kshs 50,000 | 1 day |