Sompec Oil Company Ltd v Francis Mutua Kiilu [2022] KEBPRT 21 (KLR)

REPUBLIC OF KENYA

BUSINESS PREMISES RENT TRIBUNAL

AT NAIROBI

TRIBUNAL CASE NO. E022 OF 2021

SOMPEC OIL COMPANY LTD………………..…..……TENANT/APPLICANT

VERSUS

FRANCIS MUTUA KIILU…………………………..LANDLORD/RESPONDENT

RULING

A. Parties and Representatives

1. The applicant Sompec Oil Company is the Tenant and rented space for the business in the suit property Mulango/Wikililye 1771 (hereinafter known as the ‘Tenant’).

2. The firm of Sheila Mugo & Co. Advocates  represent the Applicant/Tenant in this matter.sheilamugoadvocates@gmail.com

3. The Respondent Francis Mutua Kiilu is the Landlord and rented out space to the Tenant for the business in the suit property (hereinafter known as the ‘Landlord’)

4. The firm of J. W. Wanjohi Co. Advocates represent the Respondent/Tenant in this matter. wanjohi402@gmail.com

B. The Dispute Background

5. The Landlord and the Tenant entered into a tenancy agreement dated 1st November 2016 where the tenant was supposed to pay rent in lump sum after a period of four years at the agreed rates.

6. The Landlord issued the Tenant with a notice to terminate tenancy on the grounds that the Tenant was in breach of the terms of the agreement by failing to pay the rent as and when it fell due.

7. The Tenant/Applicant has since moved this Tribunal by way of reference and a notice of motion application dated 31st March 2021 under section 12(4) of the Landlords and Tenants (Shops, Hotels and Catering) Establishments Act Cap 301. The Tenant was seeking that pending the hearing and determination of the suit the Landlord be restrained from issuing an illegal eviction notice, harassing the tenant as well as increasing the rent.

8. The Landlord filed a preliminary objection claiming that the Tribunal did not have jurisdiction to alter the terms of the lease agreement since the Tenant was seeking to have the rent rates reviewed by the Tribunal which was dismissed.

9. The Tenant filed a reference and notice of motion application dated 31st March 2021and acquired injunctory orders

10. The Tenant has filed a supplementary affidavit dated 5th October 2021 and a further supplementary affidavit dated 29th January 2022.

11. The Landlord has filed a replying affidavit dated 13th August 2021 and a further replying affidavit dated 29th January 2022.

12. Parties have filed submissions and the matter was fixed for ruling on 15th March 2022.

C. List of Issues for Determination

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

a) Has the lease as drawn been frustrated?

b) If so what would be the current rental value of the premises?

D. Analysis and Findings

14. Section 12 (4) of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act Chapter 301 Laws of Kenyaprovides that;

“In addition to any other powers specifically conferred on it by or under this Act, a Tribunal may investigate any complaint relating to a controlled tenancy made to it by the landlord or the Tenant, and may make such order thereon as it deems fit”

15. The above provision allows the Business Premises and Rent Tribunal to in addition to the powers conferred upon it by the Act investigate on any other matters that may be raised in relation to a controlled tenancy.

16. The Landlord and Tenant (Shops, Hotels and Catering Establishments) Act Chapter 301 Laws of Kenya Act at section 2defines a controlled tenancyas;

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 Tribunal has analyzed the lease agreement provided by the Landlord. The lease agreement clearly stipulates that the lease agreement is for a period of fifteen years with effect from 1st November 2016. However, the lease under the termination clause provides that “the lessee shall be at liberty to terminate the lease upon giving notice the lessor sixty days in advance”Based on the above the Tribunal contends that the agreement falls within the scope of Section 2 of Cap 301 and as such the Tribunal has Jurisdiction.

18. The Tribunal has observed that as per the lease agreement the rent is payable in lump sum after a period of four years.

19. After the period of the first four years, the Tenant has averred that they received a notice from the Kenya National Highways Authority stating that the premises was on a road reserve and as such needed to be demolished. The Landlord among other petitioners filed a petition in court and acquired conservatory orders halting the demolitions. The Tenant has attached to their supplementary affidavit the ELC Petition No. 5 of 2019 which is still pending before court.

20. The Landlord has averred that the Tenant is in rental arrears from the month of February 2021. The Tenant has argued that the reason for their failure to pay the rent is the fact that they are unsure of the outcome of the above stated petition.

21. The Tribunal acknowledges that the recent happenings had not been anticipated by either party at the time of entering into the lease agreement. As such the declaration by KENHA that the petrol station is on a road reserve falls under Force Majeure. In light of this the Tribunal has the authority to intervene and secure the interests of the parties since it is not interfering with any of the existent clauses of the lease agreement which appears to have been frustrated by new developments not within the know of the parties when they entered into the same.

22. In reference to the above the Tribunal is persuaded to alter the agreement to a month to month tenancy where the Tenant shall pay the rent on a monthly basis as opposed to paying in lump sum after a period of four years. This is due to the fact that it is against the principles of justice to require the Tenant to pay for a period of four years yet the ELC Petition is still ongoing in Court which result is likely to end the lease prematurely what would the Tenant do if he had paid rent in advance?  Pending the determination of the said case, the landlord shall receive rent on a monthly basis.

23. Further the Tribunal observes that the tenant has sought to have the monthly rent payable reduced from Kshs. 80,000/- to Kshs. 40,000/. The Tribunal has not found any evidence attached by the Tenant to warrant the reduction from Kshs. 80,000/-. The tenant has not attached any valuation report to show that the current rental value should be assessed at Kshs. 40,000/-. In addition, from the inspection carried out the report stated that the Tenant is still in operation at the premises.

E. Orders

a) Lease is frustrated partially as such the tenancy shall convert to a month to month tenancy and tenant will pay rent on or before the 5thof Each month;

b) Parties shall each file rent valuation reports within 30 days to enable tribunal assess the current rent payable.

c) The Tenant shall keep paying rent at the rate of Kshs. 80,000/- per month as and when it falls due.

d) The Tenant shall have leave to file a reference before this Tribunal which shall be fixed for hearing within the next 60 days.

e) Mention on 27th June, 2022 for compliance and to take a hearing date.

f) Costs shall follow the cause.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

Ruling dated, signed and delivered virtually by Hon A. Muma this 15thday ofMarch, 2022 in the presence of Wanjohifor the Landlordand Sheila Mugo for the Tenant.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL