Kenya Commercial Bank (KCB) has secured the court's approval to auction seven residential units in Karen, Nairobi, after a real estate developer defaulted on a Sh446 million loan and raised claims of Sh60 million in excessive interest charges.

Justice Peter Mulwa ruled that KCB can go ahead with the planned sale of the properties owned by Mahugu Limited, located in Kerarapon, after determining that the developer did not provide sufficient grounds to halt the bank’s statutory power of sale.

The judge noted that the company had failed to prove it would suffer any harm that could not be compensated through monetary damages.

“It is a settled principle that once property is offered as security, it becomes a commodity for sale in the event of default. Once property is offered as security it by that very fact becomes a commodity for sale. And there is no commodity for sale whose loss cannot be compensated adequately in damages,” said Justice Mulwa.

He added that the court could not stop a lender from exercising its legal right to sell a property simply because the borrower disputes the outstanding loan amount.

The developer, through its director Makenna Wambui Nyammo, had moved to court seeking temporary orders to bar the bank and its agents from selling, transferring, leasing, or in any way interfering with the houses.

She also wanted the court to stop the bank from evicting the tenants or disrupting their stay in the premises.

KCB had advanced the company Sh446.2 million in 2013, followed by an additional Sh39.7 million in 2015.

The funds were meant to finance the completion of 20 villas on the contested property. The facility was secured through a charge on the land and a Sh50 million fixed deposit account.

The court’s decision now allows the bank to recover the loan by selling part of the property, as efforts by the company to block the sale have failed.