Kenya Commercial Bank (KCB) is set to auction properties within Greatwall Gardens development in Athi River, affecting about 100 residents.
This move came as part of the bank’s efforts to recover a substantial loan amounting to Ksh1.9 billion, owed by the developer, Erdermann Property Ltd.
Despite Erdermann’s efforts to halt the auction, the Court of Appeal ruled against them, leaving homeowners facing uncertainty.
Court Dismisses Petition by Greatwall Gardens
Erdermann Property Ltd’s attempts to stop KCB Bank from auctioning off the houses were met with dismissal by a panel of three judges comprising Justices Gatembu Kairu, Jessie Lesiit, and Grace Nyenye Macharia.
The court further dismissed Erdermann’s plea, citing absence of any indication that KCB would be unable to compensate the property developer.
The genesis of the dispute traces back to the financing agreement between Erdermann Property Ltd and KCB Bank.
In 2015, Erdermann secured a loan of Ksh1.3 billion from KCB Bank to facilitate the construction of 2,190 units within the Greatwall Gardens project.
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As part of the loan agreement, Erdermann committed to relinquishing 100 units as security.
Irregular Sale of Housing Units
However, challenges arose when Erdermann purportedly sold the charged units alongside 500 others, inadvertently including them in offers made to prospective buyers.
Despite attempts to rectify the error by informing KCB Bank of the oversight in June 2021, the situation escalated when KCB issued a demand in December 2021 for the repayment of an outstanding balance amounting to Ksh1.9 billion.
With Erdermann unable to meet its loan obligations, KCB proceeded with plans to auction the 100 housing units.
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Erdermann’s subsequent legal tussles, including appeals to both the High Court and the Court of Appeal, aimed to halt the auction on the grounds of illegality and procedural irregularities.
However, these efforts were unsuccessful, as the courts upheld KCB’s right to exercise its statutory power of sale over the charged property.
KCB Right to Pursue Auction
The Court of Appeal judges in their ruling, indicated that there was no dispute regarding the property being charged to KCB, nor was there any contention over KCB’s right to pursue the auction.
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Furthermore, the judges noted that third-party buyers of the units were not party to the dispute and that the responsibility to inform them of the units’ status as loan securities rested with Erdermann.
“We consider, as the learned Judge of the High Court did, that the said third parties are not parties to this dispute. The burden to inform them that the 100 units were securities to a loan facility, lay with Ederman.” said the Judges.
Consequently, the application was dismissed, with costs awarded to KCB.
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