SBM Bank obtains priority in Cytonn’s Ruaka assets sale

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SBM Bank has won priority in the liquidation of a Cytonn-backed residential development project comprising 477 apartments to recover a Sh650 million loan that went into default six years ago.

The High Court upheld SBM’s right to enforce its security over The Alma in Ruaka, owned by Cytonn High Yield Solutions. This investment vehicle raised billions from investors for real-estate projects through special-purpose entities.

The court also protected buyers who will prove they had fully paid for their apartments before the bank registered its charge in August 2019.

The project sits on 4.67 acres of land, comprising nine blocks and 477 one-, two- and three-bedroom apartments. The project includes a commercial centre, swimming pool, gym, nursery, elevated playgrounds and more than 300 parking spaces.

The court’s ruling dealt a setback to more than 25,000 investors of the company and 110 homeowners who sought to join the liquidation case or stop the bank’s recovery efforts.

The legal dispute, currently ongoing at the Commercial Court in Nairobi, is part of Cytonn High Yield Solutions' collapse, which was placed under liquidation in January 2023 after its administration failed to produce a rescue plan.

The Court of Appeal upheld the liquidation in November 2025, allowing the Official Receiver to preserve and realise assets linked to Cytonn High Yield Solutions for the benefit of creditors.

The Alma, valued at about Sh1.43 billion, was among the Cytonn properties preserved for the liquidation process. Others include Kilimani valued at Sh1.73 billion, Amara Ridge at Sh502.8 million, Superior Homes at Sh383.9 million, RiverRun at Sh535.9 million, Ridge, Athi River, CySuites, Taraji Heights, Applewood Miotoni and Mystic Plains/Newtown.

The court had said the properties were linked to funds invested by creditors, whose claims exceeded Sh11 billion, and ordered them preserved while the liquidation proceeded.

In the latest ruling, the High Court ruled that buyers who fully paid for their units before August 23, 2019, can have those apartments excluded from the property available for sale in the liquidation process.

“I therefore hold that any homeowner who has proved full payment of the purchase price to the developer before August 23, 2019, to the required standard and places that evidence before SBM is entitled to have that unit excluded from the pool available for sale,” the court said.

But buyers who purchased after the charge was registered face a different position. The court said the bank’s charge was then a public record, and buyers were required to conduct reasonable checks before paying the developer.

“A purchaser who transacted after August 23, 2019 was buying land that was, by then, a matter of public record encumbered by a registered charge,” the court said.

It stated that a buyer who failed to search the Lands Registry could not claim protection as an innocent purchaser. Units bought after the charge therefore remain available to SBM for sale to recover the outstanding debt.

“These units purchased after August 23, 2019 remain available to SBM for sale in the exercise of its statutory power, to recover the sums outstanding under the defaulted facility.”

The ruling was a setback for Paul Opiyo, who sought to join the proceedings on behalf of 25,000 Cytonn High Yield Fund investors. The investors were said to have invested more than Sh300 million in developments affected by the preservation orders.

The court dismissed the joinder application after finding that the same question was already before the Court of Appeal.

Homeowners also failed to obtain protection because they did not prove that they had paid for their apartments. The court said sale agreements alone were insufficient evidence of payment. It held that a signed agreement alone could not establish their claim to a unit.

“Where a homeowner produces a sale agreement, evidence of payments due under it including bank statements or receipts reflecting payment of the purchase price, that burden is, in my view, discharged,” the court said.

It also dismissed applications by 121 homeowners and several individual buyers. Meanwhile, Cytonn Integrated Project LLP failed to overturn a consent between SBM Bank and the Official Receiver that gave effect to the lender’s secured recovery rights over The Alma, with the High Court adopting the agreement as a court order in November 2023.

The court held that the liquidator was entitled to enter the arrangement for creditors.

The insolvency process is still ongoing, with the Official Receiver pursuing creditors' claims and the recovery of assets.

Reporting originally appeared via Business Daily. Read the full source for additional context.