Robert M. Wachira & Caroline Wangechi Wanjohi t/a Hypnotic Perfume v Dominic Kuria & Stephen Mboya [2021] KEBPRT 160 (KLR)

REPUBLIC OF KENYA

BUSINESS PREMISES RENT TRIBUNAL

TRIBUNAL CASE NO. E266 OF 2021 (NAIROBI)

ROBERT M. WACHIRA AND CAROLINE WANGECHI

WANJOHIT/A HYPNOTIC PERFUME............TENANTS

VERSUS

DOMINIC KURIA & STEPHEN MBOYA..LANDLORDS

RULING

Parties and Their Representative

1. The parties entered into an oral lease agreement in October 2019 for a shop premise located at pop in Mall Imenti House (herein after referred as the suit premises’), both commencement and termination periods are in dispute.

2. C.J Chirchir & Associates represent the Tenants in this reference.

3. The Landlords are the proprietor of the suit premise that is the subject matter of the instant suit.

4. Githaiga B. Ngari & Co. Advocates are on record for the landlords.

Dispute Background

5. On the 3rd day of October 2019, the Landlords and the tenants entered into an oral agreement for a shop premise located at pop in Mall Imenti House. The period for the said lease is contested. The landlord in his replying affidavit states that the period for the oral lease herein was for the period of 2 years while the tenants’ deponent is that the oral lease was meant for 3 years.

6. On 12th April 2021, the Landlords issued an oral notice to the tenants stating that the lease was set to expire on 30th June 2021.

7. On 30th April 2021, by way of a letter, the tenants wrote to the Landlords informing them that their lease was for 3 years, therefore, and rightfully so would expire after the aforementioned period.

8. That Landlords advanced their actions and initiatives which saw them deny the Tenants access to the premise in bid to demand for the payment of extra amount to fulfill the requirement of good will as stated in their pleadings.

9. The Tenants on 2nd July 2021 by way of Reference and notice of motion moved this honourable Court seeking inter alia orders that:

a. That this application be certified as urgent and service be dispensed with in the first instance.

b. That the Landlords be ordered to open and allow the Tenant access to continue with their business failure to which they be allowed to break and gain access with the assistance of the O.C.S Central police station.

c. That the Landlords and/or, servants and/or employees, agents be prohibited forthwith by this court from unlawfully intercepting/harassing, intimidating and/or evicting, closing or threatening/interfering/tampering, demolishing, disconnecting electricity power, water, disposing by and or in any manner whatsoever and/or howsoever with the applicant’s quiet occupation and lawful enjoyment of suit premises at pop in Mall shop no B1 pending hearing of the case.

d. That the Landlords be restrained from demanding further good will of KSh 1. 5 Million.

e. That O.C.S Central Police Station to assist in compliance of these orders.

The Tenants obtained orders issued on 7th July 2021, which Orders granted prayers a, b, c and e certifying the matter as urgent, ordering the Landlords to enable access of the suit premises, restraining the Landlords and/or their servants or agents from harassing the tenants and calling upon the O.C.S to ensure compliance with the said orders.

This Application is the subject matter of this ruling and parties have filed responses and their submissions.

The Tenant’s Case

10. The tenants contend that, they duly paid good will of KSh 1 Million, two months’ rent deposit on diverse dates in October 2019 at the commencement of the tenancy and that they have diligently continued with rent payment as and when it falls due, therefore vehemently state that they are not in any rent arrears.

11. They deponed that the landlords without consideration of the relevant provisions of law and any justifiable reasons, unlawfully issued an illegal notice and closed the suit premises consequently denying them access.

12. It is their deponent that the sole intention for demanding of the further good will liquidated at KSh 1. 5 Million is to evict the tenants.

13. It is also their case that the lease was meant to subsist for a period of 3 years and therefore they are protected tenants.

The Landlord’s Case

14. The Landlords in their Replying Affidavit opposing the Tenants’ application strongly deponed that the lease was entered between the Landlords and the Tenants, which lease was meant to last for a period of 2 years.

15. That the Landlords upon expiry of the said tenancy was to give an additional (8) years lease on condition that the Tenants would pay a further goodwill of KSh 1. 5 Million.

16. They contend that upon expiry of the lease, they issued the Tenants with an oral notice seeking the Tenants to pay further good will of KSh 1. 5 Million as a pre-condition to the extension of their tenancy.

17. They strongly denied the position that they interfered, closed, denied access and/or threatened to evict the Tenants from the suit premises, stating that they have always embraced and appreciated diligence in their symbiotic dealings with the Tenants.

18. They further deponed that the Tenants have not been paying them rent since July 2021 and August 2021 rendering them into arrears totaling to KSh 140,000. 00.

Jurisdiction

19. This Honourable Court’s jurisdiction has not been protested by either party and therefore it is not in dispute.

The Tenant’s Submission.

20. The Tenants filed written Submissions dated 13th September 2021 in support of their case. They submitted on two issues; when is the lease agreement between tenants and landlords herein deemed to have expired and, whether the landlords are entitled to additional goodwill upon renewal of the lease.

Landlord’s Submissions.

21. The Landlord filled written submissions dated 24th September 2021in support of their case. They submitted on two issues; what is the duration of the lease agreement between the landlords and the tenants; and, will good will due to the landlords on the renewal of the lease agreement between the landlords and the tenants.

Analysis of Law and Determination

22. I have carefully analyzed all the Pleadings before this honorable Tribunal, all Submissions by parties herein and relevant evidence adduced before this Tribunal. There being no dispute as to the Jurisdiction of this Court, I shall then proceed to the merit of the applications before me.

23. I considerately find that two main issues fall for determination: Whether the Notice issued by the Landlords on 12th April to the Tenant is valid; and, whether the landlords are entitled to further goodwill upon renewal of the lease agreement.

a) Whether the Notice issued by the Landlords on 12th April to the Tenant is valid.

24. Is it trite law that the termination of an agreement, can be by a way of a notice. It is however more important to note that, the said notice must be made properly.

25. The Court of Appeal in Dhirajlal J. Shah & another v Vijay Amritlal Shethia [2018] eKLR,in affirming that Notices by parties in tenancy relationship can suffices states as follows:

“Where a landlord has served a notice in accordance with section 4 of this Act, on a tenant, and the tenant; fails within the appropriate time to notify the land lord of his unwillingness to comply with such a notice, or to refer the matter to a tribunal, then subject to section 6 of this Act, such notice shall have effect from the date therein as specified to terminate the tenancy, or terminate or alter the terms and conditions thereof or the rights or services enjoyed thereunder.”

26. The Act in reference above is the Landlord and Tenant (Shops, Hotels & Catering Establishments) Act (CAP 301 of laws of Kenya).Section 4 stipulates:

4. Termination of, and alteration of terms and conditions in, controlled tenancy

(1) Notwithstanding the provisions of any other written law or anything contained in the terms and conditions of a controlled tenancy, no such tenancy shall terminate or be terminated, and no term or condition in, or right or service enjoyed by the tenant of, any such tenancy shall be altered, otherwise than in accordance with the following provisions of this Act.

(2) A landlord who wishes to terminate a controlled tenancy, or to alter, to the detriment of the tenant, any term or condition in, or right or service enjoyed by the tenant under, such a tenancy, shall give notice in that behalf to the tenant in the prescribed form.

(4)No tenancy notice shall take effect until such date, not being less than two months after the receipt thereof by the receiving party, as shall be specified therein:

Provided that— (4) (i) where notice is given of the termination of a controlled tenancy, the date of termination shall not be earlier than the earliest date on which, but for the provisions of this Act, the tenancy would have, or could have been, terminated;

(i)where notice is given of the termination of a controlled tenancy, the date of termination shall not be earlier than the earliest date on which, but for the provisions of this Act, the tenancy would have, or could have been, terminated;

27. Cap 301 of Kenya laws define who a controlled tenancy is. Section 2 provides:

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

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

28. Both parties agree that the agreement between the tenants and the landlords was entered into in the month of October 2019. Notwithstanding the period for the said lease, being 2 years and 3 years as contested by the Landlords and the Tenants respectively, it my consideration and finding that the tenant was a protected tenant for there existed a controlled tenancy.

29. Further, it is in the same vein I find that, the lease was meant to expire in the Month of October. Either October 2021 or October 2022 as both parties contend. Having executed an oral agreement and without scintilla of evidence on record as to when the lease was meant to expire, I shall place my reliance on logical calculations, which I strongly find sufficient.

30. That the period commenced in the Month of October, therefore it was by default set to expire in October in whichever year that is correct.

31. Therefore, I shall proceed to assess the validity of the impugned Notice to the tenant that was issued on 12th April 2021.

32. It would be deemed to be a valid Notice and in accordance with the enabling laws if it was issued at least 2 Months before the intended expiry date, then be effective on expiry of the aforesaid period. The notice having been issued in the month of April, I find it premature, improper and not in the format prescribed by the law.

b)  whether the landlords are entitled to further goodwill upon renewal of the lease agreement.

33. It is not in dispute that the Tenant paid good will at the commencement of the tenancy. This was for the reasons that the suit premise was established, with a reputation and highly attracting customers. Which is the reason for payment of good will to landlords by any tenant.

34. The issue to grapple with is how many times good will should be paid. The tenants herein were instructed by the landlords as a pre-contractual condition to pay a good will valued at KSh 1 Million. The tenants duly settled the said amount and the same has not been contested by the Landlords.

35. In reaffirming the meaning and rationale of a good will in business, it is in need true that, good will is a premiered reputation, patronage and other intangible assets considered in appraising business and in view of the foregoing issue pending determination before me, I find that, good will can only be paid once.

36. Tenants having duly paid the same to the landlords at the start of tenancy, are not in any arrears, neither do they fall due for Tenants to settle upon renewal of the lease.

37. For reasons stated above,

a.  I allow Orders sought by the Tenant in their Notice of Motion dated 2nd July 2021 in its entirety.

b. The reference stands compromised under the same terms.

c. Tenant shall have costs assessed at 50,000/- which shall be offset as against the rent.

d. Tenant to clear all outstanding rent arrears accrued during the pendency of this reference within the next 60 days.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

RULING DATED, SIGNED AND DELIVERED VIRTUALLY BY HON A. MUMA THIS 3RD DAY OF NOVEMBER, 2021 IN THE PRESENCE OF SIMIYU HOLDING BRIEF FOR CHIRCHIR FOR THE TENANT AND GITHAIGA FOR THE LANDLORD.

HON. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL