The owners of a Syokimau-based hotel in Machakos County have been directed to pay Housing Finance Corporation Sh10 million within two weeks to forestall the transfer of the establishment to a new proprietor who bought it in an auction last year.
Justice Alfred Mabeya further directed Sema Health Products Ltd and HF to open a joint interest-earning account within 21 days, where the proprietor of Marcia Hotel will deposit monthly instalments of the loan of Sh65.5 million borrowed in 2016.
The court said an order blocking the transfer will be discharged if the proprietor failed to comply with the directive.
The hotel was auctioned in August last year for Sh120 million and Yuanxiang Zhang emerged as the highest bidder and paid a deposit of Sh12.1 million.
The sale has, however, been contested by the owners, saying the auction was illegal as the family was not notified as required and that the facility was grossly undervalued.
Justice Mabeya said claims of fraud or misrepresentation have been raised, which might lead to the invalidation of the sale.
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“As such, it is imperative that the suit property is preserved, pending the determination of those issues,” the judge said.
The proprietor moved to court to restrain HF from evicting them from the premises, collecting rent and transferring the hotel to Mr Zhang.
The court heard that the lender failed to conduct a valuation of the property and undervalued the hotel. Further, the family accused the lender of frustrating plans to repay the loan.
The lender opposed the application, saying a valuation was conducted and an advertisement published seeking to auction the property.
The bank defended the sale, stating the owners were notified of the auction a few days after the sale but filed the application three months later.
Mr Zhang said he saw the advertisement, attended the auction and made a successful bid of Sh121 million.
He said the auction could not be set aside unless there was proof of fraud, misrepresentation or improper conduct on the part of the lender, which he was not aware of.
Justice Mabeya rejected the claim, saying the owners were to blame because they failed to comply with court orders by filing multiple applications.
The respondent’s consent was heavily dependent on the applicant’s compliance in the absence of which the respondent withheld consent on merit.
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“The applicant had already been given an opportunity to make good its debt in HC No. E209 of 2019 wherein a consent dated 8/10/2020 was recorded allowing the applicant a 6 months payment moratorium. However, the applicant failed to settle the debt,” the judge said.
The court said litigation must end and Marcia Hotel cannot continue taking the HF in circles, entering into consent knowing it shall not comply with the terms.