100 homeowners at Greatwall Gardens estate in Athi River, Machakos County, risk losing their units after a developer lost a Sh1.9 billion loan case pitting it against KCB Bank Kenya.

The developer, Erdemann Properties Limited, failed to convince the Court of Appeal to stop KCB Bank from auctioning the 100 units to recover the loan balance owed by the company.

The court dismissed an argument by the beleaguered property developer that the 100 homeowners were innocent and that they had purchased the said units unknowingly.

Justices Gatimbu Kairu, Jessie Lesiit and Grace Macharia were informed that the units were charged to KCB but Edermann went ahead to sell them to their current unwary occupants.

Ederman Property Limited had rushed to the Court of Appeal seeking a temporary order against the sale of the housing units by the Tier 1 lender terming it illegal and unprocedural.

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The High Court dismissed an application for a similar relief with the Appellate Court ruling that the complainant did not meet the threshold needed to be granted the sought orders.

The three-judge bench of the Court of Appeal also indicated that there was no contention from both parties that the said 100 units at Greatwall Gardens were charged to KCB Bank.

“It has also not been suggested that KCB’s right to exercise its statutory power of sale over the suit property is not exercisable,” ruled the three judges.

They added: “We note, 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.”

The loan balance at the center of the court battle dates back to 2015 when Erdemann Property secured a Sh1.3 billion facility from KCB Bank when constructing 2,190 units.

The court learnt that a section of the agreement, as defined in a letter of offer from KCB Bank, outlined that Edermann Property Limited was to surrender 100 units as security.

Edermann went ahead to construct 600 housing units and handed over 100 of them to KCB Bank as had been outlined in the agreement signed by both parties for the loan processing.

But for unclear reasons, as captured in documents availed in court, Erdemann Property’s sales department incorporated the attached 100 units when selling the other 500 units.

Owing to the turn of events, the owners of the 100 units in contention are set to lose their homes after KCB Bank successfully challenged the move by the property developer in court.

According to documents availed in court by its lawyer Prof Tom Ojienda, Erdemann Property Limited said it ran into strong headwinds when the Covid-19 pandemic struck Kenya in 2020.

The firm told the court it was forced to take drastic steps including shutting down all its construction sites and reducing office employees as the uptake of the units slowed severely.

KCB issued Ederman with a letter dated December 15, 2021 demanding the outstanding balance within 30 days or face an auction after it failed to honour its loan obligations.

This said auction of the 100 housing units, which had already been sold to unsuspecting third parties, had been scheduled to take place on April 23, 2024 to settle the debt due.