Powen General Contractors Ltd v Pharmacy and Poisons Board [2021] KEBPRT 119 (KLR) | Controlled Tenancy | Esheria

Powen General Contractors Ltd v Pharmacy and Poisons Board [2021] KEBPRT 119 (KLR)

Full Case Text

REPUBLIC OF KENYA

BUSINESS PREMISES RENT TRIBUNAL AT NAIROBI

TRIBUNAL CASE NO. 741 OF 2020

POWEN GENERAL CONTRACTORS LTD................LANDLORD/APPLICANT

VERSUS

THE PHARMACY AND POISONS BOARD..................TENANT/RESPONDENT

RULING

A. Parties and Representatives

1. The Applicant Powen General Contractors Limited is the landlord and is registered as Proprietor Lessee from the Kenya Airports Authority for a term of 20 years over L.R No. 21919. (hereinafter known as the ‘Landlord’)

2. The firm of Gerivia Advocates LLP represent the Applicant/Landlord in this matter. legal@gerivia.co.ke

3. The Respondent The Pharmacy and Poisons Board is the Tenant and rented space for the business and is in possession of B1. 2,B1. 3, B1. 4 and B1. 5 which are on the 1st Floor of the suit property (hereinafter known as the ‘tenant’)

4. The firm of McKay & Co. Advocates represent the Respondent/Landlord in this matter. litigation@mckayadvocates.com

B. The Dispute Background

5. On 10th May 2019 through a letter of offer the Landlord and the Tenant entered into a tenancy agreement with respect to the suit premises.

6. On 13th June 2019 the Respondent/Tenant prepared and shared a lease with the Landlord/Applicant which contained all the terms as agreed by the parties in the letter of offer dated 10th May 2019.

7. In compliance with the terms of the agreement the Respondent/Tenant made payment of rent and service charge for the first quarter. Subsequently the Landlord alleges that the Tenant defaulted in making any further payments and is currently in arrears of Kshs. 3,189,600/- being rent and service charge.

8. On 3rd August 2020 the Landlord moved this Tribunal by way of reference and a notice of motion application dated 3rd August 2020 under section 12(4) of the Landlords and Tenants (Shops, Hotels and Catering) Establishments Act Cap 301. The Landlord was seeking amongst other orders that pending the hearing and determination of the reference that the Tribunal be pleased to give orders for the recovery of possession and payment of arrears of rent and service charge amounting to Kshs. 3,189,600/- owing from the Respondent/Tenant.

C. Jurisdiction

9. The jurisdiction of this Tribunal is not in dispute.

D. The Landlord’s Claim

10. The Landlord filed a reference and notice of motion application dated 3rd August 2020 which pleadings form the basis of this claim.

11. The Landlord filed two further affidavits dated 10th August 2021 and 23rd September 2021.

E. The Tenant’s Claim

12. The Tenant filed a preliminary objection dated 5th February 2021 which was dismissed by this Honourable Tribunal on 4th June 2021.

13. The Tenant has filed a replying affidavit dated 13th September 2021.

14. Parties have filed submissions and the matter was fixed for ruling on 2nd December 2021.

F. List of Issues for Determination

15. It is the contention of this Tribunal that the issues raised for determination are as follows;

Whether there are arrears of rent and service charge owed to the Landlord/Applicant?

G. Analysis and Findings

Whether there are arrears of rent and service charge owed to the Landlord/Applicant?

16. Before this Tribunal can determine whether there are any arrears owed to the Landlord, it is important that there was a controlled tenancy between the two parties.Section 2 of the Landlord and Tenant (Shops, Hotels and Catering Establishment) Act, a controlled tenancy is defined as:

“controlled tenancy” means a tenancy of a shop, hotel or catering establishment—

(a) which has not been reduced into writing; or

(b) which has been reduced into writing and which—

(i) is for a period not exceeding five years; or

(ii) contains provision for termination, otherwise than for breach of covenant, within five years from the commencement thereof.

17. The parties had intended to enter into a lease agreement as per the letter by the Landlord to the Tenant dated 10th May 2019, where the Landlord accepted the counter offer from the Tenant and instructed them to proceed and prepare a lease.

18. The Tenant proceeded to prepare and forward the lease to the landlord on 13th June 2019. The lease was however not executed by the Tenant. It is the contention of this Tribunal that despite the fact that the lease agreement between the Landlord and the Tenant was written the failure to execute the same by the Tenant rendered it non-binding on parties thus making the tenancy a controlled tenancy as defined in Section 2(a) of the Landlord and Tenant (Shops, Hotels and Catering Establishment) Act Cap.301 Laws of Kenya.

19. In the case of Kangatta Properties Co Ltd v Charity Njeri t/a Winacom Crossline Supplies & 4 others [2014] eKLR with regards to the enforceability of a contract that had not been executed by both parties, the court held that;

I would in the premises and in answer to the first issue hold that the agreement of tenancy between the parties ought to have complied with section 3(3) of the Law of Contract Act and there was no such compliance.

As regard issue NO.(2) having held that the agreement between the parties did not comply with section 3(3) of the Law of contract Act it follows that contract is unenforceable and in the premises the defendants would in my view be controlled tenants to whom the provisions of Cap 301 of the Laws of Kenya would be applicable. The plaintiff would therefore be obligated to deal with the defendants as controlled tenants in compliance with the Landlord and Tenant Act Cap 301 Laws of Kenya.

20. Based on the above, it suffices to state that the relationship between the Landlord and the Tenant qualifies as a controlled tenancy that was not reduced into writing due to failure by the tenant to execute the lease.

21. Another key issue that the Tribunal is required to determine before assessing whether there are any arrears owed, having established that there was a controlled tenancy is whether the tenant actually took possession of the premises.

22. The Tenant in their replying affidavit alleges that they do not owe any arrears to the Landlord based on the fact that they never materially occupied and utilized the premises. They in relation to the same claim that they are counterclaiming against the Landlord for the amount they paid as deposit since it was never utilized.

23. In the case of Rogan-Kamper v Robert Grosvenor No. 2 [1977] eKLRit was stated that

“The actual tenancy created by possession and payment of rent is an unwritten tenancy, and is therefore controlled, because the definition of tenancy includes “tenancy agreements” and tenancies created by “operation of law”.

24. From the above case it can be construed that an unwritten tenancy, which we have qualified the current case as, kicks off as soon as there is possession and payment of rent.

25. In this case the Landlord has averred in their application that on 29th May 2019 after a meeting of minds between the parties a handing/taking over took place where the Landlord presented the Tenant with a handing over certificate in the format prescribed by he Ministry of Transport. Further on 28th June 2019 the Tenant proceeded to pay rent and service charge of Kshs. 1,233,312/-. This constitutes a contract offer, acceptance and consideration.

26. The Tenant in opposition of the above has stated that despite the fact that the handing over was done, the Respondent did not occupy the same and it remained vacant with access to the Landlord. The Tenant states that the reason that they did not occupy the premise is that they received a circular from the Head of Public Service directing that they operate from outside the port unless they were sanctioned by the relevant authorities.

27. The Respondent claims that they promptly informed the Landlord of the above but have failed to attach proof of the same communication.

28. It is my considered observation that based on the actions of the Tenant, that possession did take place. The conduct of the parties of receiving the handing over certificate as well as paying rent for the first quarter met the requirements to give rise to a tenancy created by operation of law. Further the Landlord’s acceptance of the said amount also signifies the same.

29. This Tribunal does not disregard the probative value of the circular from the Head of Public Service dated 4th June as to being the main reason for the Tenant not occupying the premises. However, the Tribunal is not convinced that the tenant has discharged the burden of proving their allegation that they shared the same with the Landlord. In their replying affidavit, they have annexed various correspondences between themselves and the Landlord, this particular one is however not included.

30. From the foregoing, it is the contention of this Tribunal that the Tenant’s actions created a tenancy and failure by them to communicate to the Landlord about their inability to physically occupy the premises is what gave rise to the Landlord reasonably expecting them to meet their contractual obligations as per their agreement.

31. In addition, the Tenant in their replying affidavit claims that the amount they paid was a deposit to show commitment and not rent and service charge for the first quarter and as such since the same was not utilized they are entitled to a refund. However, the landlord has disproved this by quoting the words of the Tenant in their counteroffer letter dated 8th May 2019 where the Tenant stated as follows;

Rent interest on delays

“It is a government policy not to pay both deposits and penalties on delayed payments.”

32. From the above, this Tribunal agrees with the Landlord that the amount paid by the tenant did not amount to a deposit but suffices as rent and service charge payment and as such the Tenant is not warranted to claim a refund of the same.

33. Having established that there was a controlled tenancy between the parties and that the Tenant’s actions portrayed taking up of possession this Tribunal, in the interest of justice finds that the Tenant due to their own fault failed to meet rental obligations owed to the Landlord and as a result accrued arrears for the premises.

H. Orders

a) The upshot is that the Landlord’s reference and application dated 3rd August 2020are hereby upheld in the following terms;

a.The Tenant shall pay the arrears owed to the Landlord as per the statement of accounts prepared by the Landlord dated 10th August 2021 from the quarter beginning September 2019 and ending November 2019 to the quarter beginning June 2020 and ending in August 2020 within 60 days.

b.The Landlord shall recover vacant possession of the premises immediately.

c.Each party shall bear their own costs

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

Ruling dated, signed and delivered virtually by Hon A. Muma this 2ndday ofDecember, 2021 in the presence of Munene for the Landlord and Kwaga for the Tenant.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL