Ngaruiya v Kariuki [2024] KEBPRT 80 (KLR)

Ngaruiya v Kariuki (Tribunal Case E006 of 2023) [2024] KEBPRT 80 (KLR) (2 February 2024) (Ruling)

Neutral citation: [2024] KEBPRT 80 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Tribunal Case E006 of 2023

Gakuhi Chege, Chair & J Osodo, Member

February 2, 2024

Between

Amos Kariuki Ngaruiya

Tenant

and

John Mwangi Kariuki

Landlord

Ruling

1. The tenant moved this Tribunal vide an application dated 25th May 2023 seeking for orders: -i.That this Honorable Tribunal hears and determines the Reference herein filed even upon expiry of the lease between the Tenant and the Landlord.ii.That the Landlord be compelled to compensate the Tenant any and all losses incurred by the Tenant upon the expiry of the lease.iii.That costs of the application be borne by the Defendant/Respondent.

2. The application is based on the following grounds: -a.That the Applicant is a Tenant at Besawi Complex located within section 58 of Nakuru Town.b.That the Applicant is a Tenant on the basis of the Tenancy Agreement executed on 25th August 2021. c.That the lease between the Tenant and the Landlord is a two year’s lease effective 25th August, 2021 and run up and until 25th August, 2023. d.That the said agreement among other things provides that the Tenant is to pay 50% of the rent until he recoups his construction costs.e.That the said construction costs and improvement costs far exceed the amount the Tenant is set to recoup if he pays 50% of the rent until the expiry of his term at the end of August,2023. f.That upon expiry of the lease, the landlord-tenant relationship ceases.g.That upon the cessation of the landlord-tenant relationship, this Honorable Tribunal has no jurisdiction to entertain the matter.h.That this tribunal is however empowered under section 12 (1) (i) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act to make orders of compensation on improvements carried out by the tenant with the Landlord's consent.i.That no prejudice will be suffered by the Landlord should this Application be allowed.j.That the Tenant/ Applicant will suffer irreparable loss unless this matter is heard and orders sought granted.

3. The application is supported by the affidavit of Amos Kariuki Ngaruiya sworn on 23rd may 2023 wherein it is deposed that the two parties signed an agreement on the 25th August,2021 marked “AKN1”. The lease was for a period of two years effective from 25th August, 2021 until 25th August, 2023.

4. The said lease agreement among other things provides that the tenant was to pay 50% of the rent until he recoups his construction costs. The said construction and improvement costs far exceeded the amount the Tenant was set to recoup if he paid 50% of the rent until the expiry of the term at the end of August,2023.

5. According to the Tenant, this tribunal is empowered under section 12 (1) (i) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act to make orders of compensation in respect of improvements carried out by the tenant with the Landlord's consent.

6. The Landlord/Respondent admits having signed the tenancy agreement dated 25th August 2021 with the Tenant. The Tenant was to set up a hotel but the space was small and he opted to run a butchery as stated in the second paragraph of the tenancy agreement. The Tenant was to construct a butchery stall and pay 50% of the rent until he recovered the construction costs. He was to pay Ksh 10,000 being half rent as he recovered the costs of construction which was assessed and agreed at Ksh 140,000.

7. One Samuel Ngotho who is the Landlord’s appointed agent and who was not a party to the tenancy agreement was solely collecting rent and directing claims for rent arrears citing obligations set out in the agreement.

8. The landlord deposes that he engaged a mason by name Hosea Maina Kamau who did the roofing works of the Tenant's butchery stall and that he met the Tenant and discussed and agreed on the pricing of the stall at a price of Ksh 140,000/= for reconstructing the premises. The pricing was reduced into writing but the Tenant refused to sign the same. Paragraph 2(a) of the Tenancy Agreement stated that “The labor costs will be agreed separately between the tenant and landlord".

9. The landlord states in response to paragraph 9 of the Tenant's affidavit that the Tenant has ignored other covenants of the said agreement and decided to misrepresent the facts contained therein and the Tenant should be made to appear before court to be cross-examined on the content of his affidavit.

10. The landlord deposes that the Tenant claims for loss of Ksh 961,150 together with improvements he estimates at Ksh 949,105 all totaling to Ksh 1,910,255 which have no supporting receipts and are far from the truth because it is doubtful the small butchery can generate as much business in a month and no audit reports or accounts have been attached to support the claim. The bill of costs attached to his Affidavit is farfetched when the initial quotation of the butchery stall was Ksh 140,000 yet the structure remains as it was from the beginning.

11. The Tenant is accused of not paying rent due to the agent since October 2022 but continued to enjoy the use of the premises unhindered. According to the landlord, the Tenant seems to have elected not to renew the terms of his agreement with him but was seeking for orders of compensation against him for items which he has clearly not substantiated in detail and that the Tenant should clearly declare his intentions and outline whether he wanted to opt out of the agreement or not. He is accused of being in gross breach of the said agreement.

12. The landlord contends that upon the lapse of the tenancy agreement, unless either party elects to renew this tenancy, the existence of any Landlord-Tenant relationship ceases to exist and the jurisdiction of this Tribunal is ousted.

13. It is therefore the position of the landlord that the tenant ought to institute his claims in a civil court as it deals with post-tenancy disputes relating to non-subsisting tenancies and as such the tenant’s application lacks any relevant substance to merit the orders sought but is an abuse of the process of this Tribunal.

14. The application was directed to be canvassed by way of written submissions and both parties complied. We shall consider the submissions together with the issues for determination set out hereunder.

15. The following issues arise for determination in regard to the application under consideration: -a.Whether this Tribunal has jurisdiction to hear and determine the tenant’s claim for compensation.b.Who is liable to pay costs of the application?

16. There is no dispute that the parties herein entered into a lease agreement in respect of the suit premises which was to last for two years. Under the said agreement, the tenant was to construct a butchery stall which would comprise a foundation, walls, door, glass window and roofing in terms of clause 2(b) of the agreement. The cost was to be recouped through deduction of 50% of the monthly rent payable to the Landlord until the total construction cost was fully recovered. The labor costs were to be agreed upon separately between the parties. The interpretation of the said agreement and the amount of compensation is the source of the current dispute.

17. The landlord at one point submits that this Tribunal lacks the requisite jurisdiction to deal with the post-tenancy disputes since the lease expired on 25th August 2023 and that the tenant should file his claim in a Civil Court. On another breath, the landlord submits that the continued occupation of the suit premises by the tenant created a controlled tenancy under section 2 of cap 301 Laws of Kenya and therefore the Tribunal has jurisdiction.

18. According to the landlord, the bill of quantities submitted by the tenant is not final as not all the materials quoted therein may have been used and the same is required to be subjected to verification. The total cost of construction claimed by the tenant is Kshs 949,105/= which according to the tenant ought to be proved by way of receipts, audit reports or photographs.

19. On the other hand, the tenant submits that he made improvements valued at over Kshs 2,000,000/= which the landlord was not willing to compensate. The tenant relies on Section 12(1)(g) to base his claim for compensation.

20. Section 12(1)(i) of cap 301 gives the Tribunal power to award compensation for any loss incurred by a tenant on termination of a controlled tenancy inter-alia in respect of improvements carried out by the tenant with the landlord’s consent. This provision therefore empowers this Tribunal to proceed to determine the dispute in regard to the amount of compensation claimed by the tenant even after termination of the tenancy.

21. The said dispute can only be heard and determined by this tribunal on the merit pursuant to the provisions section 12(4) of cap 301, Laws of Kenya. There is already a reference pending before this Tribunal in which the tenant is claiming compensation for improvements carried out in the suit premises. All the other emerging issues including the claim for rent arrears will be heard together with the issue of compensation.

22. In regard to the issue of costs, it is our view that the same should abide the outcome of the reference in line with section 12(1)(k) of cap 301, Laws of Kenya.

23. In conclusion, the following orders commend to us: -a.The tenant’s application dated 25th May 2023 is allowed in terms of prayer 1 thereof.b.Prayer 2 thereof shall be determined together with the reference dated 19th January 2023 and any other issues between the parties herein.c.Costs of the application shall abide the outcome of the reference.

RULING DATED, SIGNED & VIRTUALLY DELIVERED THIS 2ND DAY OF FEBRUARY 2024. HON. GAKUHI CHEGEPANEL CHAIRPERSONHON. JOYCE OSODOPANEL MEMBERIn the presence of:-Wamugu for TenantMiss Morara holding brief for Mbeche for Landlord