Risks of hire purchase agreements

Harold Ayodo

Payment in installments has enabled many people own property that they would otherwise not have been able to afford. Due to the pressure to be in vogue, newly employed young people rush to commit their present and future incomes to hire purchase.

Buying a car on hire purchase is like taking a mortgage. It allows one to posses the property after paying a deposit, often 10 per cent of the total price and spread the rest over several months or even years, depending on the agreement.

Ownership of the property, however, does not pass to the hirer (purchaser) until payment of the last installment and interest.

The law gives the hirer the option but not the obligation to buy the hired property.

Hire purchase enables one to acquire expensive items like a double-door fridge, washing machine and leather seats at once with a little money as deposit as long as an agreement with the retailer is reached. The agreements should be registered within 30 days and a certificate issued by the Registrar.

Defaulters

The catch, however, is that the law forbids hirers (purchasers) from removing the goods from their houses without informing the sellers. Hirers can be sued for shifting or changing their postal address without informing the retailers.

Some of the transactions, just like mortgages, however, turn sour when the hirer defaults on installments. Cases of retailers moving in to take back their goods from defaulting clients are not new in estates and apartments. The Hire Purchase Act allows for sellers to repossess property towards recovery of arrears. Some, however, are not lucky as purchasers may get wind of the raid and move overnight.

Hirers also have an opportunity to terminate the transaction trough a notice in writing to the retailer if they experience hardships in payment. The goods must, however, be as good as new because returning them in a poor condition may attract a suit by the retailer seeking damages.

There are cases in court of purchasers seeking to stop retailers from repossessing property over breach of agreements. It is up to the courts to decide whether a penalty has been incurred where the hirer breaches the agreement with the retailer.

The writer is a lawyer and journalist.