Housing Finance Bank has suffered a major court setback after the Commercial Court stopped the sale of a client’s house and ordered the restoration of ownership to the original borrowers.
The case involved a residential property on Kyadondo Block 219, Plot 1138 in Najjeera, Kira Municipality, Wakiso district. The house had been mortgaged by Barnabas Samuel Aliku and Christine Aliku to Housing Finance Bank after they obtained a loan to complete its purchase and construction.
Justice Susan Odongo ruled that the sale of the property to Speke Uganda Holidays Limited was unlawful, negligent and fraudulent. The court found that the property was sold for sh135 million, despite the borrowers arguing that it was worth sh235 million.
The ruling has drawn attention because it touches on mortgage enforcement, bank duties, borrower rights and the need for transparency when lenders sell mortgaged property.
Housing Finance Bank Sale Declared Unlawful
The court ordered the Registrar of Titles to cancel the registration of Speke Uganda Holidays Limited as owner of the property. It also directed that Barnabas Samuel Aliku and Christine Aliku be restored as the rightful owners.
Justice Odongo further ordered Speke Uganda Holidays Limited and any persons acting under its authority to vacate the property within 60 days.
However, the court made it clear that the ruling does not cancel the borrowers’ debt. The mortgage was reinstated as a valid encumbrance on the title, meaning Housing Finance Bank remains a secured creditor for the principal sum and legitimate interest.
The judge directed the bank to provide an updated and accurate loan statement to the borrowers.
How the Housing Finance Bank Dispute Began
The dispute dates back to 2009, when Aliku bought an incomplete house in Najjeera from Eriot Tumwine for sh115 million. To complete the purchase and finish construction, the Alikus obtained a sh119 million loan from Housing Finance Bank.
The loan was secured by a legal mortgage registered on September 7, 2009. It was to be repaid over 20 years at an initial annual interest rate of 16%. The monthly instalment was set at sh1,655,595.
After construction was completed, the Alikus rented out the house in July 2012 to Tony Lugayizi Mulinde. Financial difficulties later affected the borrowers’ ability to keep up with repayments. The bank also increased the interest rate to 18.5%, raising the monthly instalment to sh1,878,907.
The borrowers eventually fell into default, prompting Housing Finance Bank to begin foreclosure proceedings.
Court Questions Valuation and Sale Process
In January 2013, the bank valued the Najjeera property at sh150 million as market value and sh112 million as forced sale value. The property was later sold through Kamugasha Agencies Limited, which acted as the bank’s agent.
In February 2013, the house was sold for sh135 million to Speke Uganda Holidays Limited. The company was linked to the sitting tenant, Mulinde, who was described as a director and majority shareholder.
The Alikus challenged the sale in court, arguing that the process was improper and that the property had been sold below its true value.
The court agreed that the transaction was flawed. It found that the sale was not only negligent but also tainted by fraud. The judge said the property should not have been transferred to Speke Uganda Holidays Limited under the circumstances presented in court.
Housing Finance Bank Ordered to Pay Damages
In addition to cancelling the sale, the court awarded the Alikus several forms of compensation.
The plaintiffs were awarded sh3 million in special damages and sh20 million in general damages for mental anguish, loss of use of the property and breach of statutory duty. The court also ordered Housing Finance Bank to pay sh5 million in punitive damages.
The bank was further ordered to pay interest on the awards at 6% per year from the date of judgment until full payment is made.
These orders underline the court’s view that lenders must exercise mortgage powers carefully, fairly and in line with the law.
Why the Housing Finance Bank Ruling Matters
The Housing Finance Bank case is important for both borrowers and financial institutions. It shows that defaulting on a loan does not give a lender unlimited power to sell mortgaged property in any manner.
Banks have a right to recover unpaid loans. However, they must follow proper legal procedures, act in good faith and take reasonable steps to protect the borrower’s interest during a sale.
For borrowers, the ruling reinforces the importance of challenging questionable foreclosure processes through the courts. For banks, it is a reminder that mortgage recovery must be transparent, properly documented and commercially reasonable.
A Wider Lesson for Uganda’s Mortgage Market
Uganda’s mortgage market depends on trust between lenders and borrowers. When banks issue long-term loans, borrowers expect fair treatment if financial trouble arises. At the same time, banks need reliable repayment systems to protect deposits and support lending.
This ruling does not remove the Alikus’ obligation to repay what they lawfully owe. Instead, it draws a line between legitimate debt recovery and unlawful sale processes.
The Housing Finance Bank decision may therefore influence how lenders handle future mortgage enforcement. It may also encourage borrowers to pay closer attention to valuation reports, statutory notices, auction procedures and loan statements.
For now, the Commercial Court has sent a clear message: even where a borrower defaults, a bank must still follow the law before selling mortgaged property.
