Kizito Jaoko t/a Jakreser Enterprises v Meru Central Coffee Co-Operative Union Limited [2021] KEBPRT 175 (KLR)

REPUBLIC OF KENYA

BUSINESS PREMISES RENT TRIBUNAL

VIEW PARK TOWERS 7TH & 8TH FLOOR

TRIBUNAL CASE NO. E171 OF 2021  (NAIROBI)

KIZITO JAOKO t/aJAKRESER ENTERPRISES.....................APPLICANT/TENANT

VERSUS

MERU CENTRAL COFFEE

CO-OPERATIVE UNION LIMITED............................... RESPONDENT/LANDLORD

RULING

1. Through a motion dated 28th May 2021, the Tenant/applicant is seeking under prayer 3 that pending hearing and determination of the Reference, the Landlord/Respondent be restrained, prohibited and/or stopped from evicting and/or terminating his tenancy, occupation, use and/or possession of the premises measuring 670 Square feet on 1st floor of Imenti House.

2. The application is supported by the affidavit of the Applicant sworn on 28th May 2021 and the grounds on the face of the application.

3. Through a lease agreement dated 3rd June 2008 between the Respondent and the Applicant, a tenancy relationship was created in respect of 670 square feet for a period of 5 years 3 months at a monthly rent of Kshs.35,000/- with effect from 1st March 2008. (see annexture KJL’).

4. On expiry of the lease agreement in 2013, the Landlord renewed the lease for a further period of 5 years 3 months effective 1st April 2014 at a monthly rent of Kshs.53,600/- plus V.A.T of Kshs.8,576/- all amounting to Kshs.62,176/- marked “KJ2”.

5. The second lease expired on 30th June 2019 and has not yet been renewed and/or extended through a formal lease but the Tenant has continued with the tenancy uninterrupted under the terms of the said lease and paid rent up to the date of filing the reference.

6. On 1st October 2019, that is 4 months from the expiry of the lease, the Landlord sent an offer to the Tenant for renewal of the lease for a period of 10 years subject to payment of Kshs.2,000,000/- as good will.  The letter of offer is annexed as “KJ3”.

7. On 18th October 2019, the Applicant communicated his acceptance of the offer on condition that he did not agree with the requirement of payment of goodwill.

8. His objection to payment of goodwill was premised upon the fact that it did not take his views on the financial status of his business and the general economic condition in the country.  As such it was untenable, unreasonable and without basis or justification whatsoever.

9. On 23rd December 2019, the Landlord responded to the conditional acceptance contained in annexture KJL4 and required the Tenant to pay the goodwill in two instalments of Kshs.1,000,000/- each (see annexture KJ5’).

10. On 10th July 2019, the Respondent sent a demand letter marked annexture “KJ6” for payment of goodwill and thereafter refused to engage any further with the tenant or consider his counter proposal and demanded vacant possession of the premises by 30th June 2021.

11. In so doing the Respondent is said not to have taken into consideration the fact that the Applicant had been its tenant for over 13 years and it also failed to take into account the views, patronage and profitability of the business before making the exorbitant demand for goodwill.

12. According to the tenant the said demand was unconscionable unlawful, unconstitutional and amounted to extortion and it was therefore in the interest of justice to stop  it.

13. The application is opposed through the replying affidavit of Fredrick Mburugu, the Respondent’s Chief Executive Officer.

14. It is admitted that the Applicant was the Respondent’s tenant in Imenti House, Nairobi   and that upon expiry of the 2nd lease, it offered a new lease of 2 years by a letter dated 29th June 2019 which extension lapsed on 20th June 2021 as per its annexture FM1.

15. It was a term of the lease extension that there would be no further extension as expressed in a letter dated 18th July 2019 marked ‘FM2’ as the intention of the parties was to extend the second lease for a cumulative period of 7 years 3 months.

16. As such the Respondent contends that the lease agreement is not a controlled tenancy within the definition of section 2 of Cap. 301, Laws of Kenya.

17. It is deposed that this Tribunal therefore lacks jurisdiction to hear and determine the dispute.

18. However, the Landlord admits to have subsequently offered the tenant a new lease for a 10 year period through a letter dated 1st October 2019 marked annexture ‘KJ3’.

19. A goodwill of Kshs.2,000,000/- was payable for the suit premises under the new offer and the tenant was to confirm unconditional acceptance of the terms by 11th October 2019.

20. The Tenant rejected the offer vide a letter dated 18th October 2019 upon refusal to pay the Kshs.2000,000/- goodwill.

21. On 23rd December 2019, the Landlord contends that it benevolently proposed that the tenant pays the goodwill in 2 instalments of 50% each by 15th January, 2020 and the balance in six months vide annexture ‘KJ5’.

22. The offer was again rejected through non-payment despite the extension of the grace period up to 10th July 2020 vide annexture ‘KJ6’.

23. Through annexture ‘KJ7’, the Landlord issued a notice of expiry of lease on 7th December 2020 and the tenant was required to vacate the premises by 30th June 2021.

24. It is the Respondent’s case that it was entitled to terminate their relationship by issuance of sufficient notice upon the tenant.

25. According to the Respondent, the parties were at liberty to negotiate, accept or decline the terms of a lease as they deemed fit and this being a long term lease, this Tribunal cannot exercise authority under Section 12 of Cap. 301, Laws of Kenya to vary the terms of a lease as they deemed fit and this being a long term lease, this Tribunal cannot exercise authority under section 12 of Cap 301, Laws of Kenya to vary the terms of the new lease.

26. It is the Respondent’s case that the tenant has been defaulting in rent payment and as at 15th June 2021, the rent in arrears was Kshs.344,766/- in breach of the lease in terms of rent account statement marked FM3.

27. As such, the Respondent contends that it was not willing to renew or extend the lease and wished to terminate the Landlord/Tenant relationship following expiry of the lease on 30th June 2021.

28. It is the Respondent’s case that the terms of lease are standard for all the tenants in the building and cannot be varied and/or selectively applied.

29. The Respondent argues that the demand for goodwill is not illegal and it reserved the right to include it as a term of any lease.  As such its decision to require the tenant to handover vacant possession of the suit premises is justified and does not warrant interference by the Tribunal.  It thus seeks dismissal of the application.

30. The application was on 14th July 2021 ordered to be canvassed by way of written submissions and both parties complied.

31. In view of the pleadings and submissions filed herein, the issues for determination are:-

(a) Whether the Landlord/Tenant relationship between the two parties is controlled.

(b) Whether the Tribunal has jurisdiction to determine the dispute.

(c) Whether the Applicant is entitled to the orders sought herein.

(d) Who is liable to pay costs of the suit?

32. It is not in dispute that the second lease expired on 30th June 2019.  The same was extended for a period of two (2) years which was expressed to be non -renewable.

33. However, it appears that the Respondent changed mind about non renewal and offered to extend the lease by a further 10 years vide annexture KJ3 subject to goodwill payment in the sum of Kshs.2,000,000/-.

34. By this time, the tenancy had been converted into a controlled tenancy by dint of acceptance of the two (2) years lease. It is therefore not correct to state that the Tribunal has no jurisdiction.

35. The tenant was not willing to pay the proposed goodwill of Kshs.2,000,000/- and the offer of 10 years was therefore not actualized.

36. It cannot be correct to argue that the addition of two (2) years to the second lease made it a lease of 7 years three (3) months and therefore makes the tenancy uncontrolled.

37. Under section 4(2) of Cap. 301, Laws of Kenya, a Landlord who wishes to terminate a controlled tenancy or alter to the detriment of the tenant any right or service under such tenancy is mandated to give notice to the Landlord in the prescribed form.

38. I have seen the letter marked ‘KJ7” addressed to the tenant and dated 7th December 2020 requiring the tenant to vacate the premises by 30th June 2020 and the same is not in the prescribed form.

39. In the case of Fredrick Mutua Mulinge t/a Kitui Uniform – vs- Kitui Teachers Housing Co-operative Society Limited (2017) eKLR at page 4/6, the superior court followed the case of Ann Mwaura & 9 others – vs- David Wagatua Gitau & 2 others (2010) eKLR wherein Maraga J (as he then was) stated as follows:-

“As regards the period of notice, I concur with the court of Appeal holding in the said case of Caledonia supermarket ltd – vs- Kenya National examinations council (2002) 2 EA 357 that “failure to comply with these mandatory requirements rendered the purported notice (s) null and void and incapable of enforcement”.

40. The court went on to cite the decision in Manaver N. Alibhai t/a Diani Boutique – vs- South Coast fitness and Sports Centre Limited Civil Appeal no. 203 of 1994 as follows:-

“The Act lays down clearly and in detail, the procedure for the termination of a controlled tenancy.  Section 4(1) of the Act states in very clear language that a controlled  tenancy shall not terminate or be terminated and no term or condition in or right or service enjoyed by the tenant of, any such shall be altered, otherwise than in accordance with specified provisions of the Act.  These provisions include the giving of a notice in the prescribed form.  The notice shall not take effect earlier than 2 months from the date of receipt thereof by the tenant. The notice must also specify the ground upon which the termination is sought.  The prescribed notice in Form A also requires the landlord to ask the tenant to notify him in writing whether or not the tenant agrees to comply with the notice”

41. I have examined the six (6) months notice issued herein and I am convinced beyond any peradventure that it does not comply with the provisions of section 4 and 7 of Cap. 301 Laws of Kenya.

42. The tenancy being a controlled one, the Landlord/Respondent was enjoined to issue a proper notice under the said Act.  It could not ride on the initial lease agreements which in any event had expired and removed the tenancy from uncontrolled to a controlled one.

43. In the premises this Tribunal has jurisdiction to deal with the matter.

44. As to whether, the Applicant is entitled to a temporary injunction, I need only to consider the principles of granting an injunction espoused in the case of Giella vs- Cassman Brown & Co. Ltd (1973) EA 358 to wit:-

(i) An Applicant must show a prima facie case with a probability of success.

(ii) An injunction will not normally be granted unless the Applicant might otherwise suffer irreparable injury.

(iii) When the court is in doubt it will decide the application on the balance of convenience.

45. I have already held that the notice served upon the Applicant is null and void.  This helps to show that the Applicant has a prima facie case with a probability of success.

46. In regard to whether the Applicant might suffer irreparable injury, I only need to consider whether by enforcing the illegal notice, the Applicant will suffer any injustice in the pendency of the reference.

47. In the case of AIkman – vs- Muchoki (1982) eKLR at page 416, the Court of Appeal had the following to say while considering the effect of illegality and issuance of a temporary injunction:-

“The conditions for the grant of an interlocutory injunction were rightly understood but wrongly applied as follows………………….the appellants had shown a clear and overwhelming prima facie probability of success, the court ought never to condone and allow to continue a flouting of the law.  Those who flout the law by infringing the rightful title of others and brazenly admit it, ought to be restrained by injunction.  If I am adding a new dimension for the grant of an interlocutory injunction, be it so. Equity will not assist lawbreakers”.

48. I entirely subscribe to the foregoing views and the second ground for granting an interlocutory injunction is therefore met by the Applicants.

49. I need not consider the third principle as I am not in any  doubt in regard to the first two principles disclosed above.

50. In the premises, I make the following orders:-.

(a) The application dated 28th May 2021 is allowed in terms of prayer 3 thereof, pending the hearing and determination of the main reference.

(b) The Tenant shall continue paying rent under the current rates until the main Reference is heard and determined.

(c) The costs of the application are awarded to the Applicant.

(d) This ruling shall apply mutatis Mutandi in respect of Nairobi BPRT NO. 165 of 2021 and 172/2021 between Benson Mbaisi T/A Lunao Enterprises – vs- Meru Central Coffee Cooperative Union Limited and  Kizito Jaoko – vs- Meru Central Coffee Cooperative Union Ltd respectively whose issues are on all fours similar to  the present case.

It is so ordered.

DATED, SIGNED and DELIVERED THIS 14TH DAY OF OCTOBER 2021 VIRTUALLY.

HON. GAKUHI CHEGE

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

In the presence of:-

Achilla for the Applicant/Tenant

Miss Kiiru holding brief for Gichuhi for Landlord.