KCB discloses Sh1.2bn loan in Weston Hotel land dispute

KCB Group #ticker:KCB has joined the fight over the ownership of the land hosting Weston Hotel in Nairobi on grounds that the lender gave the Sh1.2 billion loan used to build the facility associated with Deputy President William Ruto.

In the application filed before the Environment and Land Court, KCB said that it had done due diligence and confirmed that Weston Hotel was the registered proprietor of the land before advancing more than Sh1.2 billion to the hotel four years ago.

The bank is now locked in a court battle where the Kenya Civil Aviation Authority (KCAA) is claiming ownership of the land and wants the hotel demolished and the property handed back to it.

The bank argues that it risks losing the Sh1.2 billion plus interest on loan if the court grants the aviation regulator its wish since the title property was used as security for the loan.

“At the time of registration, the interested party (KCB) did a due diligence and fulfilled all prerequisites to registration of the charge in land as required by law,” the bank said in documents filed in court.

According to KCB, an order declaring the title illegal would prejudice the lender as it would lose the only security it has over the loan, which the hotel is still repaying.

The bank wants the court to dismiss the KCAA petition. “I am further advised by the Interested party’s advocates that the import of such an order is that the interested party would lose the only security it has over the loan facilities advanced to the 2nd respondent (Weston Hotel),” said Bonnie Okumu, director of legal services at KCB.

The bank said that the first loan of Sh350 million and US $1,500,000 (Sh152.2 million) was advanced to the hotel in October 2014 and a charge registered, pushing the total debt to Sh1.2 billion, The bank said that in July 2015, the hotel took a further loan of Sh700 million and charged the property.

And on both occasions, the bank said that it did a search with the Registrar of Land, who assured them that Weston Hotel was the registered proprietor of the land and that the title it held was genuine.

KCAA is seeking to reclaim the land and has opposed a deal between Weston and the National Land Commission (NLC) for the hotel to compensate the authority so that it can continue occupying the land.

In the case filed in June, KCAA said the NLC did not have the jurisdiction to preside over the complaint on compensation for the land, and wants the hotel demolished. But the management of Weston Hotel has maintained that it was an innocent purchaser of the land and that it acquired the plot procedurally.

The hotel said the case by KCAA had been filed with ulterior motives, especially after the NLC made a finding that the title was acquired legally.

Through Michael Nzile, the hotel said it had purchased the property from Priority Ltd and Monene Investment Ltd and they cannot be asked to compensate KCAA having voluntarily vacated a site near Wilson Airport for the agency.

The disputed land had been acquired by the defunct Directorate of Civil Aviation (DCA) in the early 1990s for the construction of its headquarters.

The agency stated that Weston Hotel embarked on rapid construction without obtaining mandatory development approvals from relevant State regulatory agencies.

“They procured registration as owners of the land through illegality, fraud and corruption and forcibly evicted the DCA and its employees. They forcibly removed the DCA’s costly air navigation equipment and spares and dumped them at sites in Industrial Area and Athi River, causing their degradation from harsh exposure to the elements,” the petition states.

The agency further said that Weston Hotel had deliberately failed to comply with its orders to stop construction, despite clear indications that the development along Langata Road posed a threat to air navigation at the adjacent Wilson Airport, the agency said.

KCAA has faulted the NLC saying instead of ordering restitution back to it and revoke the title, the commission had purported to give effect to the unlawfully acquired title.