Legal Watch – Vol 4: A Bank Cannot Transfer the Full Mortgage Value Charged on a Parent Title to a Single Condominium Unit – High Court Declares

HCMA No. 1955 of 2025; Gebremeskel Taere Zigta vs Siddhi Properties Limited and 3 others.

OVERVIEW

Most condominium apartment blocks which are mushrooming everywhere in Uganda, are being driven by mortgage finance. However, the practice by some banks, of transferring the full mortgage charge from the parent title to each of the new condominium units has been a clog in the eye, which had to be removed.

The watershed moment arrived in the recent ruling delivered by the High Court in the above case, on the 2nd June, 2026. The case was argued by our founding partner Fred Muwema, who successfully moved court to discharge a UGX 5bn mortgage originally created on the developer’s parent title and illegally supplanted on the Applicant’s condominium title.

Consequently, the High Court in a land mark decision, declared the said mortgage to be illegal, ordered its immediate release and rectification of the unit title by the Registrar of Titles.

BACKGROUND

Siddhi Developers Ltd “Siddhi” established a mortgage in favour dfcu bank to secure a UGX 5bn loan to construct a 32-condominium apartment block on land comprised in Folio 2 LRV 4261/14 Plot 28, Upper Naguru East Road (the parent title).

Gebremeskel Teare Zigta “Zigta” purchased condominium unit No. 18 at US $200,000 and fully paid up in 2019. Siddhi did not avail the unit title to Zigta as promised, since it had not remitted full payments to the bank to discharge the mortgage and obtain a release of title.

Zigta’s previous lawyers filed Civil Suit No. 1021 of 2023 in High Court Land Division against Siddhi and the bank, seeking inter alia, an order for discharge of the bank’s mortgage and release of the title to him.

Zigta’s previous lawyers negotiated and entered a consent judgement on the terms inter alia recognizing that he had fully paid the developer for the unit, with the latter committing to pay the unpaid balance of US $ 60,000 to the bank.

The Consent judgement also recognized the existence of the bank’s Mortgage on the condominium unit and granted it liberty to enforce the mortgage and sell the unit, in case the developer did not pay up within 60 days.

Siddhi did not honour its commitment under the said consent judgement. It resultantly failed to obtain a release of the unit title from the bank. Zigta was aggrieved and he sought a second opinion from us.

We filed HCMA No. 1955 of 2025, seeking an order to review and set aside the above consent judgement/decree in part, on ground that it was procured upon the Applicant’s ignorance of the material fact of the bank’s UGX 5bn mortgage on the condominium unit title, a fact discovered after the consent had been entered.

The Applicant argued that the consent judgement was in effect entered under a mistake or error apparent on the record. The mistake or error was based on a contravention of S.5 Condominium Property Act Cap 234 requiring the mortgage interest previously registered on the parent title to be endorsed on each separate condominium title, only to the extent of the mortgage interest ascertained to attach to it.

In other words, a sub mortgage had to be created on each condominium unit title to the extent of the unit factor only. It was therefore illegal to supplant the whole original mortgage interest of UGX 5bn onto the Applicant’s condominium unit title.

Whereas the bank maintained that the Applicant was bound by the consent judgement it had signed, it did not deny or explain the existence of the UGX 5bn mortgage encumbrance on the condominium unit title. The bank pleaded that it had an undisputed and complete legal claim over condominium unit as an unpaid legal mortgagee, without success.

DECISION

On the 2nd June 2026, Christine Kaahwa J, delivered her ruling in favour of the Applicant and ordered that the consent judgement dated 18th December 2023 between the parties is set aside for illegality and misapprehension of facts.

Since the Applicant had paid the developer in full, the court also ordered that condominium unit 18 be discharged from the loan obligations as envisaged by S.13 Mortgage Act Cap 239, with a final order to the Registrar of Titles to rectify the title.

At page 14 of the ruling, the learned Judge concluded that;

“Therefore it is correct to argue as the applicant did, that section 5(l) of the Condominium Act, on creation of the     condominium register, the mortgage interest previously registered on the parent title is endorsed on each separate   unit title, only up to the extent of the mortgage interest attached to it.”

KEY TAKE AWAYS

• Once condominium titles are created under a new condominium register, the underlying parent register is closed.
• The mortgage previously registered on the parent title is endorsed on each unit title as a sub mortgage, only to the extent applicable to that unit.
• At this point, the original mortgage on the parent title stands extinguished and is not enforceable.
• Any sub mortgage created on the condominium unit is discharged and released upon full payment of the purchase price covering the sub mortgage value.
• A developer of a condominium property is an agent of the bank for purposes of receiving the proceeds of the condominium unit sales to repay the loan.

This article was prepared by:

• Fred Muwema – Founding Partner
• Thomas Taremwa – Research Assistant

This publication has been prepared as general information on matters which it concerns, and does not constitute professional advice.

Contact Us: Muwema & Co Advocates | Plot 40 Nakasero Road | P.O. Box 6074 Kampala, Uganda | email: info@madvocates.com