Polestar Automotive v Aberdare Agro Products Limited [2022] KEBPRT 1077 (KLR)

Polestar Automotive v Aberdare Agro Products Limited (Tribunal Case E862 of 2022) [2022] KEBPRT 1077 (KLR) (18 April 2022) (Ruling)

Neutral citation: [2022] KEBPRT 1077 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Tribunal Case E862 of 2022

Gakuhi Chege, Vice Chair

April 18, 2022

Between

Polestar Automotive

Tenant

and

Aberdare Agro Products Limited

Respondent

Ruling

1. The tenant herein filed a reference dated 28th September 2022 under Section 6 of Cap. 301, Laws of Kenya in opposition to the notice of termination of tenancy served by the landlord.

2. The tenant simultaneously filed a motion seeking restraining orders against the Landlord from entering into new lease agreement with a third party pending determination of the application and the main reference.

3. The tenant entered into a lease agreement for an open space on L.R No.12641/56 on 1st May 2022 for a period of two (2) years which is annexed to the supporting affidavit and marked “PA-01”. The agreed monthly rent was Kshs.90,000/-.

4. The tenant admits falling into rent arrears for two months on account of difficult financial times as a result of which it entered into a subsequent agreement with the landlord on an alternative payment plan to offset the same. The agreement is marked as annexure “PA-02” and is dated 21st July 2022. It was to continue paying and occupying the suit property until 15th November 2022.

5. The tenant’s director one Edward Nyaga Ndena deposes that owing to the state of disrepair of the suit property, the tenant was unable to utilize the suit premises despite paying rent. The tenant however made several developments valued at Kshs.591,000/- as evidenced by the quantity surveyor’s report marked “PA-04” and annexures marked “PA-05 & “PA-06”.

6. The foregoing notwithstanding, the tenant contends that the Respondent intended to terminate the lease agreement and evict it at the beginning of the month of October 2022 without indemnifying it for costs incurred in developing the property.

7. The tenant filed a witness statement by Edward Nyaga Ndena dated 28th September 2022 together with a list of witnesses and bundle of documents.

8. Interim orders were given on 30th September 2022 restraining the Landlord from evicting the tenant pending hearing of the application inter-partes on 25th October 2022.

9. The application is opposed through the replying affidavit of Simon Ngure Kihoi sworn on 24th October 2022 as a director of the Landlord. It is admitted that the tenant leased the suit property for two (2) years on 1st May 2022 at an agreed monthly rent of Kshs.90,000/- payable on or before 15th day of each calendar month.

10. The tenant in breach of the lease agreement failed to pay a sum of Kshs.238,000/- as at 11th July 2022 as a result of which a meeting was organized on 21st July 2022 to discuss the issue of late rent payment as evidenced by annexure ‘SNK-1’. At the said meeting, it was agreed to schedule payment of the rent arrears in terms of annexure marked “SNK-2”.

11. The tenant defaulted on the promise and it is the landlord’s contention that it had no right to occupy the suit property without paying rent up to 15th November 2022. The tenant was not physically in occupation of the suit property and the only alterations or additions made in the open space was a metal grill fence constructed on the perimeter, a sliding door, 25 tonnes of 3/8 ballast topped on the ground as evidenced by the bill of quantities and photographs marked “SWK3”.

12. Through an email dated 22nd August 2022, the tenant’s director one Edward Adam requested the landlord to let the tenant use the office space at no extra cost instead of duplicating by building the same. The landlord by an email dated 24th August 2022, gave permission to the tenant to use the office facility free of charge up to 30th April 2024 subject to adherence to terms and conditions of the commercial sub-lease contract. The emails are marked as annexure “SKN4”.

13. However, the tenant failed to operationalize its business and use facilities provided in the open space and defaulted in payment of rent as agreed on 21st July 2022 leaving the landlord with no option but to terminate the lease on 5th September 2022. A notice of one month was issued in terms of the lease. The landlord went ahead to lease the space to a new tenant who entered the suit premises on 17th September 2022.

14. The tenant is said not to have entered the leased premises and owed Kshs.404,660/- in rent arrears, security, electricity and cost of ballast used to construct the fence as per annexture marked “SKN5”. As such the landlord opposes the orders sought.

15. The tenant filed a further affidavit sworn by Edward Nyaga Ndena on 18th November 2022 wherein it is deposed that the total rent paid by it is Kshs.126,000/- and the accrued arrears as at the date of purported termination of lease was Kshs.144,000/-.

16. The tenant deposes that it used Kshs.750,398/- for repairs and in developing the open space in terms of annexure “ENM-2”.

17. According to the tenant, it only occupied the suit property from May to August 2022 with the total accrued rent being Kshs.360,000/- out of which it paid Kshs.126,000/- leaving an unpaid balance of Kshs.234,000/- and it is thus entitled to a reimbursement of Kshs.506,398/- after offsetting the rent arrears aforesaid from the cost of developments in the sum of Kshs.750,398/-.

18. The Respondent filed yet another replying affidavit sworn by Simon Ngure Kihoi on 23rd February 2023 wherein it is deposed that the total rent received from the tenant was Kshs.112,000/- and not Kshs.126,000/-. The tenant was no longer in occupation of the suit premises.

19. The respondent deposes that no approvals were exhibited for construction of the site office and toilet from the Nairobi City County. The Respondent deposes that it is the previous “plaintiff” who had erected a fence and cleared the grounds. It is further deposed that the previous “plaintiff” of the leased premises had his shop destroyed by fire and consequently, the landlord took possession of the leased premises and applied for approval of Nairobi Metropolitan services to renovate, repair the site and to construct a site office and toilet in terms of annexures marked “SKN1,2,4 & 5”.

20. It is deposed that the tenant leased an open space with developed approved site office made of timber and iron sheets. The tenant believed that the existing fence on the leased premises obscured the view of vehicles for sale and requested for an alternative fence which was granted subject to obtaining relevant County Government approvals but no evidence of compliance has been exhibited.

21. According to clause 4. 3 of the lease agreement, the Respondent was not bound to compensate the tenant for any additions, improvements or alterations to the site. However, the landlord/Respondent had in good faith offered to compensate the tenant in the sum of Kshs.227,164/- if the dispute was settled strictly under clause 9. 12. 1 subject to approval by the Nairobi City Council on all new developments on the leased open space but the offer was withdrawn when no approvals were forthcoming.

22. The bills of quantities marked ‘ENN-02 attached to the tenant’s further affidavit is not supported by approvals of the County Government according to the Respondent contrary to the lease agreement.

23. According to the Respondent, the tenant only paid Kshs.112,000/- out of accrued rent of Kshs.378,000/- leaving a balance of Kshs.266,000/- as at 7th September 2022 after termination of tenancy as evidenced by the statement of account marked “SN6”.

24. I am now required to determine the following issues:-a.Whether the tenant/applicant is entitled to the reliefs claimed in the reference and application dated 28th September 2022. b.Whether the tenant is entitled to compensation claimed for developments effected on the suit property.c.whether the tenant owes rent arrears or not.d.Who is liable to pay costs of the suit?

25. It is not in dispute that the tenant/applicant is no longer in possession of the suit premises having failed to adhere to the agreement reached on 21st July 2022 marked annexure “PA-02”. It was to occupy the said premises until 15th November 2022 which is now past. As a consequence, the application dated 28th September 2022 has been overtaken by events. As such the application is a candidate for dismissal.

26. Although the tenant/applicant filed a reference under Section 6(1) of Cap. 301, Laws of Kenya, I have not seen any notice of termination of tenancy under Section 4(2) of Cap. 301, was sought to be challenged and I am in a total loss of which notice the reference is about. It is thus a candidate for dismissal since no valid termination notice under Section 4(2) of the Act that was served to warrant a reference under Section 6(1) of Ca.p 301, Laws of Kenya. The letter dated 7th August 2022 being not in the prescribed form could not be challenged by way of a reference as it was incapable of terminating the tenancy. Instead the tenancy was terminated through the agreement and minutes dated 21st July 2022 which are not in dispute.

27. As regards the claim for compensation for improvements effected on the suit premises by the applicant, the applicant relies on the bill of quantities dated May 2022 which is not signed or whose author is unknown. It gives a figure of Kshs.750,398/-.

28. The applicant attaches another copy of bill of quantities to his further affidavit sworn on 18th November 2022 marked as annexure “ENN2” which relates to “proposed construction of steel Bar Boundary wall and marking on plot L.R. No.12641/56”. It is dated May 2022. It is not signed neither is it on an official letter head. There is however a witness statement by Wendy Kamwatan who alleges to be a quantity surveyor but no qualifications, licences or certificates are attached to authenticate the report. The report does not pass the test of an expert report under Section 48 of the Evidence Act in absence of the said authentication.

29. The Respondent in the affidavit of Simon Ngure Kihoi sworn on 23rd February 2023 states as follows at paragraph 17:-“17. That in response to paragraph 7, the defendant had in good faith offered to compensate the plaintiff Kshs.227,164/- if the dispute were settled strictly under the terms of clause 9-12. 1{{^}} subject to the Nairobi City County approval of all new developments on the leased open space”.

30. This is a clear admission that the tenant had effected improvements on the suit premises whose value appear to have been agreed or admitted by the landlord to be Kshs.227,164/-. The alleged lease agreement stipulating that the new developments had to have approval of the County Government of Nairobi is not executed by the parties and is thus not valid as to give a defence to the Respondent in regard to the applicant’s claim of the admitted sum. I shall thus enter judgment on admission for the said amount.

31. The Respondent claims a sum of Kshs.266,000/- against the Applicant in rent arrears after deducting a sum of Kshs.112,000/- paid by the latter out of accrued rent of Kshs.378,000/- for a period of 4 months and 6 days prior to the termination of the lease. If the said amount is offset against the admitted claim of improvements effected by the tenant, the balance due to the landlord will be Kshs.38,836/-.

32. In the premises, I shall order that the tenant pays Kshs.38,836/- to the Respondent after offsetting the claim of compensation admitted by the latter with each party paying own costs of the case under Section 12(1) (k) of Cap. 301, Laws of Kenya.

33. Consequently and in line with Section 12(4) of Cap. 301, Laws of Kenya, the following orders commend to me in this matter;-a. The applicant’s/Tenant’s reference and application dated 28th September 2022 are dismissed with no orders as to costs.b. The tenant’s claim for compensation in respect of improvements effected on the suit property is allowed in the sum of Kshs.227,164/- admitted by the Respondent in line with Section 12(1) (L) of Cap. 301, Laws of Kenya.c. The compensation award shall be offset against the sum of Kshs.266,000/- owing to the landlord in rent arrears and the tenant shall pay the difference of Kshs.38,836/- to the Respondent within the next Thirty (30) days hereof failing which execution shall issue in terms of Section 14(1) of Cap. 301, Laws of Kenya.d. Each party shall bear own costs of the case.

It is so ordered.

RULING DATED, SIGNED & VIRTUALLY DELIVERED THIS 18TH DAY OF APRIL 2023. HON. GAKUHI CHEGEVICE CHAIRBUSINESS PREMISES RENT TRIBUNALRuling delivered in the presence of:Amollo for the TenantMunene for the Landlord