By Adroit Law
In recent years, commercial space lessees in Kenya have been caught in a precarious balancing act, often succumbing to overwhelming landlord dominance. A prevalent loophole exploited by these landlords involves bypassing tenancy laws in their favour. This majorly involves omitting termination clauses in lease agreements, hence, leaving tenants in a highly disadvantaged position.
Ideally, commercial spaces rented out for business should be governed by the Landlord and Tenants (Shops, Hotels and Catering Establishments) Act as controlled tenancies. According to the Act, a tenancy qualifies as a controlled tenancy if it involves a shop, hotel, or catering establishment and either has not been reduced into writing or, if written, is for a period not exceeding five years and contains a provision for termination otherwise than for a breach of covenant within those five years.
The Act is designed to protect tenants by restricting landlords from arbitrarily altering the terms and conditions of controlled tenancies. It also provides an avenue for tenants to seek a reassessment of rent or modification of tenancy terms via the Business Premises Rent Tribunal (BPRT). Moreover, the Act defines the grounds on which the termination of a controlled tenancy may be sought by landlords.
To circumvent these protections, landlords have devised a practice of drafting lease agreements for periods exceeding five years while deliberately excluding termination clauses. This allows landlords to impose oppressive terms without the tenant’s recourse under the controlled tenancy framework.
Under such agreements, tenants often face: an inability to exit agreements even when circumstances so-demand; limited recourse to challenge unfair provisions or rent escalations; and greater financial and operational vulnerabilities caused by inflexible lease terms.
This loophole has put many tenants in precarious positions, as courts previously upheld landlords’ rights in such scenarios. A notable case is Kenya Commercial Bank Ltd v Popatlal Madhavji & Another [2019] eKLR where the court of appeal ruled that the absence of a termination clause bound the tenant to occupy the premises for the entire lease period and pay the agreed rent.
Game Changing Ruling from the Supreme Court
However, a recent Supreme Court Judgement in Petition E001 of 2024 – Kwanza Estates Limited v Jomo Kenyatta University of Agriculture and Technology [2024] KESC 74 (KLR) brought to light the plight of tenants trapped in such arrangements. The Lease lacked a termination clause, which Kwanza Estate Limited rode on demanding that JKUAT pay the rent for the remainder of the years, which was a year and two months in the lease and also barred them from vacating the premises. Thereafter, they refused to take in new tenants, arguing that JKUAT was obligated to continue to occupy the suit premises for the entire lease period and pay the rent.