When the auctioneer’s hammer fell on 5 June 2024, a KSh 1.125 billion property in Mavoko had found a buyer, Credit Bank, the same institution that had put it up for sale.
- •The suit property sits in Mavoko Municipality and was charged to Credit Bank to secure financing that has since ballooned to KSh 817.8 million.
- •After several failed attempts to auction the land, the bank finally proceeded with a June 2024 sale to itself.
- •This month, the Court of Appeal raised sharp questions about how the bank acquired the prime parcel, freezing any further transfer and fast-tracking a high-stakes appeal filed by the borrower, Erdemann Property Ltd.
What should have been a routine enforcement of a lender’s statutory power of sale has now morphed into a full-blown legal dispute with potentially industry-wide implications. At issue is not just whether the borrower defaulted but whether the bank’s acquisition of the collateral was conducted transparently, lawfully, and at fair value.
Erdemann had run caveat emptor announcements in newspapers, warning prospective bidders and accusing the bank of impropriety, a tactic Credit Bank says was meant to sabotage the auction. The lender, instead purchased the property, arguing later that Erdemann’s caveat emptor adverts scared away independent bidders.
The Court of Appeal noted glaring information gaps raising questions on whether there were other bidders, what the highest bid is, and how exactly the auction was conducted.
None of these questions were answered in the bank’s affidavit, creating what the judges diplomatically described as “an arguable issue” surrounding compliance with sections of the Land Act, which governs chargee self-purchases.
Valuation, and a Freeze Order
The property was knocked down at KSh 1.125 billion at auction, the forced-sale value from a December 2023 valuation commissioned by the bank. Erdemann now pegs the open-market value at KSh 2 billion, claiming an undervaluation of nearly KSh 900 million. While undervaluation claims are common in Kenyan auction disputes, what elevates this case is Credit Bank’s dual role as both seller and buyer.
If the sale is ultimately found irregular or unlawful, damages become the remedy under the law. Credit Bank is leaning heavily on this provision, arguing that Erdemann’s complaints, even if true, can be compensated monetarily.
But Erdemann has flipped the argument by questioning whether Credit Bank can afford such compensation. The developer pointed to the lender’s KSh 32.4 million net profit in 2023, arguing that a KSh 2 billion liability would be crippling.
The bench gave a freeze order, blocking any onward sale, transfer or disposal until the dispute is fully resolved.
