Court stops Housing Finance Bank from selling client’s house over fraud

_________________

The Commercial Court has stopped Housing Finance Bank Limited from selling a property belonging to its client after it was established that the process was tainted with fraud.

Justice Susan Odongo held that the bank fraudulently sold a house comprised in Kyadondo Block 219, Plot 1138, in Najjeera, within Wakiso district's Kira municipality, which had been mortgaged by Barnabas Samuel Aliku and Christine Aliku to the bank.

The court established that Housing Finance Bank breached the contract and fraudulently sold the property to Speke Uganda Holidays Limited. The court established that the house was sold at sh135 million, instead of sh235 million, which the Alikus said was the right value.

“The Court declares that the sale of the property comprised in Kyadondo Block 219 Plot 1138 to the third defendant (Speke Uganda Holidays Limited) was unlawful, negligent, and fraudulent. The Registrar of Titles is ordered to cancel the registration of the third defendant and restore the Plaintiffs as the rightful owners of the land,” Justice Odongo said.

The court further ordered that Speke Uganda Holidays Limited and all persons acting under its authority vacate the property within sixty days.

The court, however, noted that setting aside the sale does not relieve Aliku of the obligation to repay the debt, as the bank depends on such repayments for its operations.

In 2009, Aliku bought an incomplete house on Kyadondo Block 219 Plot 1138 in Najjeera from the registered owner, Eriot Tumwine, at sh115 million.

In a judgement that was delivered electronically on May 31, 2026, the court further awarded the plaintiffs (the Alikus) special damages of sh3 million. They were also awarded sh20 million in general damages for the mental anguish suffered, loss of use of the property, and breach of statutory duty. In addition, the court directed the bank to pay the Atikus sh5 million in punitive damages.

The bank was also ordered to pay interest on all the awards at a rate of 6% per annum from the date of judgment until full payment is made.

To complete the purchase and finish construction, the Atikus took a loan from Housing Finance Bank Limited, securing it with a legal mortgage registered on September 7, 2009. The loan amounted to sh119 million, to be repaid over 20 years at an initial interest rate of 16% per year, with monthly instalments of sh1,655,595.

After completing construction of the house, the Alikus rented it out in July 2012 to Tony Lugayizi Mulinde, who moved in as a tenant. However, Aliku later faced financial difficulties after an economic downturn, and Mulinde lost his job in the United Kingdom, making it difficult for them to keep up with loan repayments.

The bank later increased the interest rate to 18.5%, raising the monthly repayment to sh1,878,907, which further strained the borrowers' ability to pay back.

Due to continued default, Housing Finance Bank started foreclosure proceedings. In January 2013, the bank valued the property at sh150 million as market value and sh112 million as forced sale value. The property was then put up for sale through Kamugasha Agencies Limited, the bank’s agents.

In February 2013, the house was sold at sh135 million to the third defendant (Speke Uganda Holidays Limited), a company linked to the tenant (Mulinde), who is a director and majority shareholder. The dispute later arose from this sale, which the Alikus challenged in court.

“The mortgage executed on September 7, 2009, is hereby reinstated as a valid encumbrance on the plaintiffs’ title. The first defendant remains a secured creditor for the principal sum and legitimate interest, subject to the provision of an updated and accurate loan statement to the plaintiffs,” Justice Odongo declared.