Mortgage lender Housing Finance Company (HF) #ticker:HFCK has lost a court bid to free the auction of 76 maisonettes after a developer defaulted on a Sh350 million loan.
In the preliminary objection, the lender wanted the dispute filed at the Environment and Land Court in Machakos struck out, arguing it was before the wrong judges. The mortgage firm reckoned the housing row should be heard by the High Court and not the Land Court because it was a commercial dispute.
Justice Oscar Angote said the dispute was not only commercial but also involved the title of the land. “Where a third party claims that he is entitled to land, which is charged to a bank, the issue ceases to be purely of a commercial in nature, but rather, the use, occupation and title to land,” said Justice Angote while dismissing HFC’s preliminary objection to the suit.
The court heard that Capital Realty Limited reneged on an agreement to clear the loan after the sale of 76 houses in Mavoko, Machakos, to the occupants.
Now, the lender is seeking to auction the property whose land was used as security to secure the Sh350 million loan, prompting the court action from the homeowners who bought the maisonettes from Capital Realty.
Justice Angote heard that the transactions between the homebuyers and the Capital Realty Ltd never received the HFC’s approval and that proceeds from the sale price were never deposited in the escrow account as agreed.
The developer is yet to release the lease agreement and title deeds to the home buyers.
The buyers insist they own the houses and are strangers to the HF deal with Capital Realty.
They demand a refund and damages of Sh146.7 million should HF have its way.