Shikely v Registered Trustees of Shree Mombasa Mahajan [2024] KEBPRT 368 (KLR)

Shikely v Registered Trustees of Shree Mombasa Mahajan (Tribunal Case 329 of 2020) [2024] KEBPRT 368 (KLR) (11 March 2024) (Ruling)

Neutral citation: [2024] KEBPRT 368 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Tribunal Case 329 of 2020

CN Mugambi, Chair & Joyce Murigi, Member

March 11, 2024

Between

Mohsin Shikely

Tenant

and

The Registered Trustees of Shree Mombasa Mahajan

Landlord

Ruling

1. The matter is brought to this court under a certificate of urgency dated 21st December, 2020. The motion sought;a.That pending the hearing and determination of this Application, the Landlord and/or its employees and/or its servants and/or its agents be ordered to cease and desist from harassing or threatening the Tenant, interfering with the quiet and peaceful possession of the Tenant, or proceeding with or initiating any legal levy of distress against the Tenant; and the OCS, Nakuru police station be ordered to enforce the order.b.That pending the hearing and determination of this complaint, the Landlord and/or its employees and/or its servants and/or its agents be ordered to cease and desist from harassing or threatening the Tenant, interfering with the quiet and peaceful possession of the Tenant, or proceeding with or initiating any illegal levy of distress against the Tenant, and the OCS Makupa police station be ordered to enforce the order.c.That the costs of this Application be granted to the Tenant

2. The grounds which the orders are sought can be highlighted as follows;-a.That the Applicant is a Tenant in respect of Business Premises situated on parcel of Land premises situated on parcel of Land of Mombasa/Block XVI/15 thereinafter “the subject premises.”b.That the rent payable in respect of the said subject premises is Kshs. 3,000/=.c.That the Landlord issued the Tenant with a notice dated the 28th June 2012 seeking to increase the rent payable to Kshs. 20,000/=.d.That the Tenant opposed the said notice by filing a Reference.e.That on the 9th of June 2015, the Honourable Tribunal proceeded to dismiss the Landlord’s notice and allowed the tenant’s Reference.f.That the effect is that the rent payable on the subject premises remained at Kshs. 3,000/= per month which is the rent the Tenant has been paying till to date.

3. The Tenant filed a supporting affidavit dated 21st December 2021 where he depones that he is the tenant of the Business Premises situated on parcel of land of Mombasa/Block XVI/15 (hereinafter “the subject premises”). He continues to make the same statements as highlighted under the grounds in the notice of motion highlighted above.

4. On 23rd December 2020, the court allowed prayers 9i) and (ii) of the application dated 21. 12. 2020 (save for the part of police assistance pending hearing inter partes and the matter was set for mention on 15. 1.2021 in Mombasa).

5. On 5th May 2021, the court adjourned the hearing of the Application to 20th May, 2021 and leave was granted to the Respondent to file and serve response within seven (7) days. Corresponding leave was granted to the Applicant to file Supplementary Affidavit if need be within seven (7) days of service. The court further extended the interim orders to BPRT Case No. 325/2020 (Mombasa) as their original file No. 202/2012.

6. On 20th May, 2021, the Tenant/Applicant said that he had not been served with a replying affidavit and prayed that his application be allowed. On his part, the landlord’s advocate said that the affidavit was ready but the system failed to allow them to file the same. The court granted prayers (ii) and (iii) highlighted from the Application and remarked that the Application was unopposed as the landlord had not served and filed any response to the tenant’s Application months down the line.

7. On 8th July 2021, the Tenant’s Advocate was present but there was no attendance by the landlord or his Advocate yet the matter was coming up for hearing of the Reference dated 21st December, 2020 and there was an affidavit of service on record. The court allowed the Tenant’s Reference as prayed as the same was unopposed and awarded costs to the Tenant of Kshs. 15,000/= to be offset against the rent.

8. On 10th August 2023, both the Tenant’s and Landlord’s Advocates were present in court. The Tenant was given leave to file the Reference out of time within the next seven (7) days. The court further ordered the parties to file their respective valuation reports in the next thirty (30) days. And in default of filing the valuation report by the Tenant, the notice to increase rent would take effect.

9. On 24th August, 2023, the Tenant filed a Reference to the notice of termination of tenancy dated 26th April 2019, which was served online by Shree Mombasa Lohana Community Registered Trustees in respect of Shop on Mombasa/Block XVI/15. The Landlord’s notice dated 26th April 2019 filed under Section 4(2) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act Cap 301. Sought to increase the Tenant’s monthly rent from Kshs. 3,000/= to Kshs. 50,000/=. The reason given was that the current rent payable is too low compared to other surrounding premises.

Issues for determination 10. The issue for determination is the correct monthly rent payable by the Tenant. The Landlord’s notice dated 28th June 2012 to increase rent from Kshs. 3,000/= to Kshs. 20,000/= per month has been superceded by the notice dated 26th April 2019 seeking to increase the Tenant’s rent from Kshs. 3,000/= per month to Kshs. 50,000/= per month.The grounds upon which the increase is sought are that the rent payable by the Tenant is too low compared to other surrounding premises. the tenant opposed the notice by a Reference dated 24th August, 2020.

11. The valuation reports can be analyzed as below;-Wyco Valuers who are for the Tenants describe the property/subject premises by its construction and condition. In the condition, the Valuer notes that the building is old with a generally sound structural condition except for widespread plaster leakages which have damaged plaster work and paid further exposing reinforcement steel bars in some positions of ceiling plaster and/or lower portions of the roof and canopy area which may result to total rust of the steel bars leading to eventual collapse of the roof slab.

12. He continues to say that the leakages eventually enter the electrical wiring system and may cause fire during the rainy season. He concludes that the entire property requires urgent both internal and external repairs and redecoration.

13. He also notes that some maintenance and repair works are done by the tenant but he does not specify which or type of repairs works.

14. For services, the valuer notes that main water and telephone are not available at the subject premises and that electricity was connected by the Tenant. Drainage disposal is to a septic tank and soakage pit of the County Government of Mombasa.

15. The valuer notes that the subject premises occupied by Maliki Diesel pays a rent of Kshs. 3,000/- per month for an area of 31. 03 square meters- main shop and 8. 30square meters for the store.

16. In arriving at a fair market rent, the Valuer considers the following comparables;i.Sweet Sweat General Equipment on plot No. 15/XVI- Gatundu road paying a rent of Kshs. 5,500/= per month for a main shop of 31. 03 square meter and a store of 8. 30 square meter. This analyses to Kshs. 139. 84/= per square meter per month.ii.Abkha Enterprises on plot No. 292/XVI- Gatundu road paying a rent of Kshs. 4,000/= per month for a shop with an area of 36. 3 square meters. This analyses to Kshs. 110. 20/= per square meter per month.iii.Mohamed & Bagdini Tyres on plot No. 1013/XVI – Gatundu road paying rent of Kshs. 3,000/= per month from 1. 1.2014. The shop area is 16. 81 square meters and a store of 7. 79 square meters. This analyses to 121. 95/= per square meter per month.iv.Dajeto Spares & Hardware on Plot No. 19/XXXVI – Gatundu road paying rent of Kshs. 11,000/= per month from 1. 5.2014 for an area of 125. 32 square meters. This analyses to Kshs. 87. 78/= per square meter per month.v.Abdallah Said store on plot No. 1061/XVI – Gatundu road paying rent of Kshs. 2,500/= per month from 1. 5.2013 for a shop area of 19. 0 square meter. This analyses to Kshs. 131. 57/= per square meter.

17. He takes an average rental rate from the five comparables and applies Kshs. 106. 31/= per square meter per month and says that the rate is adjusted accordingly for other areas. In his final assessment, he adds the store area to the main shop area to arrive at 39. 33 square meter and applies the rate of 106. 31/= per square meter per month to arrive at Kshs. 4,181. 17/= to which he adds VAT at 16% which comes to Kshs. 668. 99/= the total rent inclusive of VAT according to the Tenant’s Valuer as assessed at Kshs. 4,850/= per month.

Landlord’s valuation 18. The Landlord’s Valuer, Fairlane Valuers Ltd gives the subject premises general description and highlights the construction. On the condition of the premises, he notes that the building appeared structurally sound but in poor decorative condition. He further notes that the Landlords are willing to carry out the required repairs, but are unable to do so on account of the very low rental income from the property.

19. The Valuer notes that all essential urban services are connected to the property but he does not specify them.

20. The Valuer states that Mohsin Shikely occupies shop No. 3 with an area of 30. 0 square meters for the shop and 9. 0 square meters for the store. He states that the rent payable is Kshs. 3,000/= per month. He uses the following comparables for the rental assessment; -i.Plot 1067/XVI- Gatundu road; Tenant: Lela shop occupying an area of 20. 00 square meters at a rent of Kshs. 25,000/= per month, from 1. 1.2023. This analyses to 1250/00 per square meter per month (exclusive of services and VAT).ii.Plot 1179/XVI – Gatundu road- the tenant is Dedan Stores- occupying an area of 23. 00 square meters paying a rent of kshs. 25,000/= per month from 1. 1.2023 and this analyses to 1087/00 square meters per month (exclusive of services and VAT).iii.Plot 104/XVI- Gatundu road; Tenant is Armaan Pharmaceuticals occupying an area of Kshs. 25. 00 square meter paying a present rent of Kshs. 30,000/= per month from 1. 1.2023 which analyses to 1200/00 per square meter per month (exclusive of services and VAT).iv.Plot 15/XVI- Gatundu road: Tenant is Francis Mwangi t/a Kenya Engineering Works Union occupying an area of 30. 00 square meters for the shop and a store area of 9. 00 square meters. He pays a present rent of Kshs. 30,000/= per month from 1. 1.2023. (BPRT/325/2020). This analyses to Kshs. 870. 00/= per square meter per month.v.Plot 483/XVI- Gatundu road: Tenant is Kabila Store occupying an area of 15. 00 square meters for the shop and paying a present rent of Kshs. 15,000/= per month which analyses to 1000/00 per square meter per month.

21. He assesses the rent at the average of his comparables which comes to 1083/00 per square meter per month. He applies this to the subject premises as follows;-a.Shop – 30. 0 square meters at Kshs. 1,082. 00 per square meters per month = Kshs. 32,460/= per monthb.Store – 9. 0 square meter at Kshs. 541. 00 per square meters per month = Kshs. 4,869. 00 per monthTotal = Kshs. 37,329/= per month which he rounds off toKshs. 37,300/= per month.

Tenant’s submissions 22. These can be summarized as follows;-(The lettable area by the Landlord is stated at 30 square meters for the shop and 95 square meters for the store- the tenant on the other hand is 31. 03 square meters for the shop and 8. 30 for the store. The tenant agrees to go by the landlord’s stated area of 30. 0 square meters for the shop and 9. 0 square meters for the store.

23. The submissions go on the cite an authority in the case of; Careenas Holdings t/a Digitel Cyber vs Nawab Mohamed Haji Mirdor [2021] eKLR where the court enumerated several factors for the Tribunal to consider when determining the rent payable as follows;-“Matters such as the state and condition of the building, the facilities in the building, the age of the building, what is paid by other tenants in the same building, and what is paid in other buildings within the vicinity of that in issue, may be relevant, and need to be taken into account.”

24. The tenant submits that the condition of the subject premises is detailed on page 3 of the tenant’s valuation report. He further states that this is confirmed by the Landlord’s valuation report on page 2.

25. On this, the tenant concludes that due to the condition of the building which is uncontroverted fact, it can be seen that due to the condition of the subject premises, it cannot be expected to fetch similar or normal rent in accordance with the market rent of the premises of a standard condition. Or rather, the same can only be measured with comparables of premises which are of a similar condition, but not better condition.

26. On the comparables, the tenant takes issue with the sizes of the comparables used which he states that the only comparable that could be considered is comparable Number 4 as all the others are not good comparables due to their sizes. That they are smaller than the subject premises and that they give higher rental analysis.

27. As for the tenant’s comparables, the tenant in his submissions states that the comparables used are close in size to the lettable area of the subject premises. He further says that the comparables employed are for premises of similar condition to the subject premises.

28. The tenant considers the Landlord’s comparable Number 4 and his comparables 1, 2, 3, 4, and 5 and gets a total of Kshs. 1,461. 34/=. He divides this into 6 and gets an average of Kshs. 243. 56/= which he applies on 31. 03 square meters to get Kshs. 7,557. 67/= and 123. 28 on 8. 30 square meters which comes to Kshs. 1,023. 22/=. He adds these two figures to get Kshs. 8,580. 89/= and says that this is reflective of the market value.

Landlord’s submissions 29. In his submissions, he states the tenant’s area as 30. 0 square meters for the shop and 9. 0 square meters for the store. He analyses all the comparables with an emphasis on the 4th comparable being a shop on plot 15/XVI belonging to the Landlord on this matter paying a rent of Kshs. 30,000/= per month. It is in the same building and the same size with the subject premises.

30. The Landlord’s submissions take issue with the tenant’s first comparable on plot No. 15/XVI which is a shop in the same building registered in the name of the same Landlord in this matter which is indicated as paying Kshs. 5,500/= on the landlord’s report. The Landlord’s submissions state that the tenant Mbarak Pit Contractors pays a monthly rent of Kshs. 30,000/=. The landlord states that the comparables used by the tenant are not realistic and therefore cannot be used as they give a monthly rent that is not practicable within Mombasa Island and currently even a kiosk of the same size in Mombasa Island cannot cost or be rented out at such rent. He concludes that the current rent payable by the tenant should be Kshs. 40,000/= per month.

Analysis and determination 31. Under Section (2) of Cap 301, it is provided without prejudice to the generality of this Section, a Tribunal may, upon any reference;-i.“Determine or vary the rent to be payable in respect of the controlled tenancy, having regard to the terms thereof and to the rent at which the premises concerned might reasonably be expected to be let in the open market….”

32. Under Section 12(1)(b) of Cap 301, the Tribunal has power to determine or vary the rent to be payable in respect of any controlled tenancy having regard to all the circumstances thereof.

33. The Act does require the Tribunal to have regard to the terms of the tenancy and the rent which the premises would fetch in the open market. The Act further requires the Tribunal to regard to all the circumstances of the tenancy.

34. The Act does not define what amounts to “all circumstances” and neither does it provide a formula for arriving at the rent at which the premises may be let in the open market. The Tribunal therefore exercises a discretion over these matters and this discretion must be exercised judicially having regard to the evidence before the Tribunal (see the case of “Nairobi HC Civil Appeal No. 61A of 1976 – Shah & Shah vs Francis Titus Kigundu).

35. In Nyeri ELCA Case No. 31 of 2015, Margaret Wanjugu Nduma & 3 Others vs James Gichuki Gathara [2020] eKLR, the court while dealing with the applicable principles governing assessment of rent stated at paragraph 37 “on the first issue for determination as to whether the chairperson properly applies the principles governing the assessment of rent are found in form “G” of the Regulations as follows:-i.Ascertaining the original cost of construction of the building.ii.The market value of the land on which the premises are built.iii.The improvement and cost of such improvements.iv.Amenities or services provided for by the landlord.v.The rent at which the premises were let for the past three years.

36. At paragraph 42 of the same judgment, the judge proceeded to state;-“There was so much exphasis on comparable at the expense of all the other principles herein mentioned. For instance, there was no mention about the age of the building, the market value of the land on which the suit premises is built and the improvements and etc even when both valuers attempted to remark on the deplorable condition of the premises.”

37. In Cleaners Limited vs Barclays Bank & Co. [1973] EA 188” the court of Appeal held that;“It is the reasonableness of the rent that must be in the forefront of the tribunal’s investigation and determination. It must be the concern of this court too. The average rates per square foot or meter of a number of nearby buildings on ground floor premises in which similar trades are exercised are among other things relevant to assessing the rent that would reasonably be expected in the open market.”

38. Further in Tala Investments Ltd vs Green Spot Limited, Civil Appeal No. 269 of 1993, Justice Shah stated;-“in dealing with the principles upon which a Tribunal should act in assessing rent, its duty is to consider all the reports properly before it. The Tribunal must go into individual comparables to decide which is better report rather than merely arrive at a mean figure that is the mean of the landlord’s and Tenant’s valuers report. That is not proper criteria.”

39. The property upon which the valuation herein is being carried out is on title No. Mombasa/Block XVI/15 along Gatundu road in Majengo Tanganyika area of Mombasa Island. The comparables used by Wyco Valuers Co. who are the valuers of the Tenant are all along Gatundu road. It is therefore safe to assume that the comparables are near to or on the same street/road with the subject property/premises.“The rent payable per square meter for these comparables range from Kshs. 87. 78/= per square meter per month to Kshs. 139. 84 per square meter per month. The average rent of the five (5) comparables is Kshs. 106. 31 per square meter per month which is the rent recommended by the valuer of the Tenant M/S Wyco Valuers Co.”

40. The five (5) comparables used by the Valuer for the Landlord “Fairlane Valuers Ltd” are located along Gatundu road as well. Their current rent range between Kshs. 870. 00/ per square meter per month to Kshs. 1,250. 00/= per square meter per month. The average rent payable by the said comparables is Kshs. 1,082. 00/= per square meter per month which in the recommended rate by the Valuer of the Landlord M/S Fairlane Valuers Ltd. The comparables are derived from the same street/road with the subject property/premises.

41. I do note that all the comparables used by both Valuers are around the same location. One comparable in each of the reports is actually in the same building with the subject premises. In the Tenant’s report, comparable No. 1 is on plot No. XVI/15 reportedly paying Kshs. 5,500/= per month at a rate of Kshs. 139. 84/= per square meter per month. In the landlord’s report comparable No. 4 on XVI/15 paying a monthly rent of Kshs. 30,000/= at a rate of Kshs. 870. 00/= per square meter per month.

42. I also do note that the other than stating the rent payable by the Tenants of the comparables, the valuers have not indicated other variables in regard to the comparables. For example, how do the comparables compare to the subject premises in terms of the age of the buildings, the improvements on the buildings, amenities and services provided in those other buildings. The lack of these details leaves the Tribunal with only the figures reflected in the valuation reports.

43. I have also considered the submissions from both the Tenant and the Landlord. In the Tenant’s submissions, I note that the Tenant settles for the same area with the Landlord of 30 square meters for the shop and 9 square meters for the store but he goes ON to calculate the market rent he deems fair on 31. 03 square meters for the shop and 8. 30 square meter for the store. He arrives at Kshs. 8,580. 89/= being the rent reflective of the market rent based on the condition of the subject premises. To arrive at this figure, he uses an average rate of Kshs. 246. 56/= per square meter per month for the shop and Kshs. 123. 28/= per square meter per month.

44. The tenant’s submissions take issue on the size of the landlord’s comparables saying that they are smaller than the size of the subject premises. On the comparables of the landlord he states that the only apt comparable is comparable Number 4 which is from the same building.

45. On the Tenant’s comparables, the Tenant’s submissions conclude that the comparables used are the same size except comparable No. 4 which is of a bigger shop.

46. I find the arguments in the Tenant’s submissions conflicting in as far as the sizes are concerned as four of the Tenant’s Valuer’s comparables are either bigger or smaller than the subject premises. So the argument of the Landlord’s Valuer’s comparables being of smaller sizes than the subject premises does not hold. The opposite could also be true for the Tenant’s comparables which are higher than the subject premises.

47. On the Landlord’s submissions, the landlord notes that shop No. 3 which is the subject premises occupies an area of 30. 0square meters with a store occupying 9. 0 square meters. He continues to analyze his valuer’s comparables and notes that the comparable No. 4 is in the same building with the subject premises. He takes issue with the Tenant’s Valuer’s comparable No. 1 which is in the same building with the suit premises and observes that Tenant’s the Valuer has reported the rent payable as Kshs. 5,500/= but the Landlord states that the rent payable is Kshs. 30,000/= per month.

48. On these submissions, I wish to go by the area stated by the Landlord as the building belongs to the landlord and therefore he knows the extent of his property. Furthermore, the total area of both the shop and the store is slightly smaller than the Tenant’s. for the purposes of determining this matter, I will go by the landlord’s area which is 30. 0 square meter for the shop and 9. 0 square meter for the store.

49. In conclusion and going back to the two valuation reports before the Tribunal, and having gone into the individual comparables, I find that the Tenant’s report has provided comparables which are dated 2013-2014 for three of them and no dates against the first two comparables but being at the same rates with the dated comparables. I would therefore assume they would have the same rate.

50. On the other hand, the landlord’s Valuer’s report provides comparables dated 2022 for the first comparable and 2023 for the other four (4) comparables. In my opinion therefore, I am satisfied that the report by Fairlane Valuers Limited for the Landlord presents the more reasonable rent estimates.

51. I also note that the first notice to alter the terms of tenancy was given on 28th June 2012 and the rent was still at Kshs. 3,000/=. This means that the rent has remained the same for at least 11 years. In view of my findings, I therefore assess the rent payable in BPRT Case No. 329 of 2020 to be Kshs. 37,300/= calculated as follows:-Shop – 30. 0 square meters at Kshs. 1,082. 00/= per month = Kshs. 32,460/= per monthStore- 9. 0 square meter at Kshs. 541. 00/= per month = Kshs. 4,869. 00/= per monthTotal = Kshs. 37,329. 00/= per monthRounded off to Kshs. 37,300/= per month.

52. What then should be the effective date for the payment of the new rent?In dealing with the effective date, Justice Shah in the Tala Investments Case (supra) stated as follows:-“The ration decidendi of all the appeals is that the normal order for effective date, would be that the date specified in the tenancy notice would be proper but the Tribunal has in proper circumstances discretion to alter the effective date and that such discretion must be exercised judicially.”

53. In Nakuru ELC Civil Appeal No. 68 of 2016, Sup Duka Makuru Ltd vs Baringo United Co. Ltd, the court (Munyao J) stated as follows;-“In my view, the reason why the Tribunal was of the opinion that the rent needed to be back dated ought to have been given and failure to do that was an error on the part of the Tribunal.Further:21:I hold the view that a cautious approach is needed before an order for back pay on rent is made, for the simple reason that this is a cost that was never budgeted for by the Tenant and was never taken into account by the Tenant when operating his business. It can be a huge burden which can lead to the crippling of ones business especially because it now has to be paid in one lump sum, covering a significant span of years.24:There needs to be justification reasons as to why rent should be back paid which was not given in this case. Both cited decisions leave the Tribunal with the discretion to determine when the assessed new rent ought to commence being paid. The only requirement is that the discretion must be exercised judicially and a justification for the discretion given.

54. I am guided by the reasoning of the Honourable Judge at paragraph (21) above and for the reasons given therein. The new assessed rent shall commence from the date of this ruling.

55. Both valuation reports also made a comment on the condition of the subject premises which I have considered in my orders.

Orders 56. That new assessed rent is Kshs. 37,300/= calculated at kshs. 1,082. 00/= per square meters per month for the shop measuring 30. 0 square meters and Kshs. 541. 00/= per square meters per month for the store measuring 9. 0 square meters.

57. The effective date for the new assessed rent shall be the date of this ruling.

58. On the condition of the building, the landlord is hereby ordered to repair the areas requiring repairs and maintain the building in a tenable condition.

59. Each party to bear their own costs.

60. The matter is concluded and marked as closed.It is so ordered.

RULING DATED, SIGNED AND DELIVERED THIS 11TH DAY OF MARCH, 2024HON. CYPRIAN MUGAMBI - CHAIRPERSONBUSINESS PREMISES RENT TRIBUNALHON. JOYCE MURIGI - MEMBERBUSINESS PREMISES RENT TRIBUNALIn the presence of;Hassan for the TenantPrakash Radia for the Landlord