KCB Bank has put up for sale 78 two-bedroom apartments at Greatwall Gardens in Athi River over a Sh1.9 billion loan borrowed by the property developer Erdemann Property Ltd.
In an advertisement on May 6, the lender through auctioneer Garam Investments put up the units for sale, even as the homeowners made frantic efforts to save the flats from the looming sale.
The auctioneer said the sale would be conducted on May 21 at its offices in Westlands.
“The units will be sold individually (gross area: typical two-bedroom unit 94 sq. m). The title is a leasehold interest,” the notice read, adding that the estate has secure parking facilities for the residents and their visitors.
The units are part of the 100 homes eyed by KCB for sale after the developer failed to convince the Court of Appeal last month, to temporarily stop the intended auction.
Erdemann Property had argued that the homeowners were innocent purchasers and that the units were sold to them by mistake.
Innocent buyers
Justices Gatembu Kairu, Jessie Lesiit and Grace Nyenye Macharia ruled that there was no suggestion that the lender would not be able to compensate the property developer.
“Ultimately, we find that the application is unmeritorious. We hereby dismiss it with costs to the respondent (KCB),” said the judge.
The homeowners have filed separate cases before the High Court and the Environment and Land Court, seeking to stop the intended auction.
“The applicants innocently purchased the units without notice of the second respondent’s (KCB) interest or the first defendant’s (Erdemann) default and their interests cannot be disregarded against the second respondent’s intended exercise of its statutory power of sale and the 1st defendant ought to be stopped against proceeding as such,” the application to be heard on May 15 reads.
“We innocently purchased the suit units without notice and our interests should not be disregarded against the 2nd defendant’s (KCB’s) intended exercise of its statutory right to which we pray it to be temporarily restrained,” one of the homeowners said in an affidavit.
The homeowners revealed that they purchased the units between December 2019 and January 2020 and the agreement they signed stipulated that upon payment of the purchase price together with the incidental costs, they would be discharged and the developer’s advocates were to procure the registration of the purchased units in their favour within 360 days from the date of signing the agreements.
While declining to stop the sale, the judges noted that the terms were to the effect that Erdemann would enter into various tenancy agreements with the tenants of the subject 100 units and the rental income channelled to an escrow account.
The auctioneer further put up for sale another property in Ngara, where the developer is proposing to construct another housing unit.
Erdemann’s managing director Zeyun Yang revealed in court documents that it commenced the construction of the Greatwall Gardens 1 Project, consisting of 2190 units, in October 2015.
It then borrowed a loan of Sh1.3 billion on August 28, 2017, for the construction of the houses.
The property was charged as security together with another property known as River Estate Project in Ngara, which is partially developed and estimated to be worth Sh5 billion.
The bank later amalgamated all the existing loans which culminated in the creation of a charge over 100 unsold units for Sh425.7 million.
In 2019, Erdemann said it advertised for sale some units on the property where the 100 units were charged but allegedly later realised that its sales department erroneously sold the charged units alongside 500 others it had placed on offer.
It contended that it informed the bank through a letter on June 14, 2021.
The property developer then offered an alternative security to KCB, being retention of the suit property valued at Sh3.5 billion or in the alternative, substitution of the 100 apartment units with another one in Shanzu Mombasa whose market value was more than Sh500 million.
Unable to meet its loan obligations, KCB then issued a demand on December 15, 2021 recalling a balance of Sh1.9 billion and put up for sale the 100 housing units.
KCB opposed the application arguing that the sale was deliberate and intended to defeat its interest.
The application was dismissed by High Court judge Dora Chepkwony in December forcing the developer to rush to the Court of Appeal.
The developer argued that the judge erred in failing to find that the purchasers of the 100 units and another 281 units of the Ngara property sold off plan were innocent and that the intended sale was illegal and unprocedural.
