Tens of home owners at the Greatwall Gardens Apartments in Athi River may soon be rendered homeless. This is after the Court of Appeal allowed KCB Bank Kenya to put the houses under the hammer. The houses have been the subject of a court case between KCB Bank and property developer Edermann Property Limited over a Sh. 1.9 billion loan balance.
This loan balance dates back to 2015 when Erdemann Property Limited secured a loan of Sh. 1.3 billion from KCB Bank Kenya during the construction of some 2,190 units. According to a court affidavit that was sworn by Edermann’s Managing Director Zeyun Yang, the construction of these houses started in October 2015.
The property developer then borrowed Sh. 1.3 billion from KCB in August 2018 to fund the construction on L.R. 27317/2 in Athi River.
According to an agreement between the bank and the developer, Edermann Property Limited would relinquish 100 houses as security for the loan. The developer went ahead and constructed some 600 units. The developer then handed over the 100 houses to the bank.
In 2019, Erdemann Property Limited advertised for the sale of some units on L.R. 27317/2 in Athi River, which is the same estate where the 100 units charged as security are.
However, according to court documents, when selling the remaining 500 units, the 100 homes that had been allocated to KCB were included in the sales. These are the homes that the bank has been claiming. While trying to stop the bank from taking over the houses, Edermann Property Limited has been claiming in court that the buyers were innocent and that the houses had been sold by a mistake.
Edermann claimed in court that this sale being a mistake, it made an offer to KCB Bank to substitute the 100 apartment units on L.R. No 27317/2 Athi River with L.R.Number MN/1/1515 Shanzu, Mombasa, whose value was in excess of Sh. 500 million. In July 2019, KCB Bank amalgamated all the existing terms of the loan with Erdemann Property Limited.
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The court heard that on December 15, 2021, KCB Bank issued a demand letter after Edermann failed to honour its loan obligations. This saw KCB recall the Sh. 1.9 billion balance as well as place the 100 units up for sale.
The claims made by Edermann in court have now been dismissed by a Court of Appeal bench of three judges including Justices Gatembu Kairu, Jessie Lesiit and Grace Nyenye Macharia.
The judges ruled that there was no suggestion that KCB Bank would not be able to compensate the property developer. “Ultimately, we find that the application is without merit. We hereby dismiss it,” the Court of Appeal ruled. On its part, KCB had argued that the sale by Edermann was deliberate and intended to jump the loan.