Universal Reliance Emporium Limited v Gloria Management [2022] KEBPRT 32 (KLR) | Controlled Tenancy | Esheria

Universal Reliance Emporium Limited v Gloria Management [2022] KEBPRT 32 (KLR)

Full Case Text

REPUBLIC OF KENYA

BUSINESS PREMISES RENT TRIBUNAL

VIEW PARK TOWERS 7TH & 8TH FLOOR

TRIBUNAL CASE NO. 800 OF 2018 (NAIROBI)

UNIVERSAL RELIANCE EMPORIUM LIMITED.....TENANT/APPLICANT

VERSUS

GLORIA MANAGEMENT.....................................LANDLORD/RESPONDENT

JUDGEMENT

1. The Tenant’s reference to the Tribunal dated 1st October 2018 has been brought under section 12(4) of Cap 301 of the Laws of Kenya.  The complaint concerns the Landlord in that;

a. The Landlord through a Mr Kihoro has verbally ordered the Tenant through Mr Charles Kihagi one of its directors to vacate the premises.

b. The Tenant’s tenancy is a controlled tenancy because currently there does not exist any written tenancy agreement between the parties.  Consequently, the tenancy cannot terminate or be terminated without following the due process of the law as set out in Cap 301 of the Laws of Kenya.

c. The reason why the Landlord wants the Tenant out of the tenancy premises is that it has verbally through the said Mr Kihoro demanded to be paid Kshs 6,00,000/- on goodwill as a consideration for entering into a lease agreement with the Tenant and to accept a rent increase from Kshs 130,000/- to Kshs 200,000/- (exclusive of VAT) but the Tenant has refused to accept the unreasonable demands.

d. The Tenant prays for appropriate orders to be issued to stop the Landlord by itself, its servants and/or agents from evicting or in any other manner whatsoever interfering with the Tenant’s quiet possession and enjoyment of the tenancy premises pending the hearing and determination of this complaint.

2. On 23rd August 2021, the counsel for the parties agreed to proceed with the reference by way of submissions and the affidavits on record.  I also note that the Tenant had earlier on testified and closed its case and the Landlord had called one witness.  Both witnesses gave sworn testimony.  I will therefore consider the oral evidence sworn by the parties who testified alongside the affidavits on record and the submissions filed by counsel for the respective parties in making my determination herein.

3. The affidavit in support of the Landlord’s notice of motion dated 29th October 2018 may be summarized as follows;

a. That the Tenant had a lease with the Landlord for a period of five years and three months and as such therefore, there is no controlled tenancy between the parties herein.

b. That at the expiry of the lease, the Landlord approached the Tenant for negotiated new terms of renewal of the lease.

c. That the Landlord has not accepted any lease from the Tenant after the expiry of the lease and if any rent has been deposited in the back, it is without the Landlord’s consent.

d. That this Tribunal has no jurisdiction to entertain this case.

4. The Tenant’s replying affidavit sworn by Charles Kihagi on 16th November 2018may be summarized as follows;

a. That the Tenant has been in occupation of the suit premises since 1969.

b. That on 1st January 2013, the Tenant and the Landlord entered into an agreement for five years and three months (5 years, 3 months) expiring on 31st March 2018.

c. That it was a term of the agreement that the Tenant could pay the rent in cash or by cheque to Hotel Gloria.

d. That in July 2017, on the instruction of Mr Kihoro, cheques in payment of rent were issued in joint names of F.K. Githaiga, G.K. Gathima and E.M. Mwaniki.

e. That Mr Kiharo did not collect the rent cheques for the months of December 2017, Januaryand February 2018.

f. That in March 2018, Mr Kiharo advised the deponent to start depositing rent in account No. 131471001, Trans National Bank, Sheikh Karume Branch, Nairobi.

g. That the rent for the three months together with the March rent amounting to Kshs 603,000/- was deposited in the aforesaid account on 5th March 2018.

h. That in June 2018, Mr Kihoro approached the Tenant to discuss the terms of a new lease.

i. The Landlord later demanded the sum of Kshs 6,000,000/- as goodwill and sought to increase the rent to Kshs 200,000/-.

j. That the Tenant was not agreeable to this demand and therefore sought the protection of the Tribunal.

k. That the averment that any rent payments made to the bank after the expiry of the lease was without the Landlord’s consent is dishonest and untrue.

l. That the Tenant has paid rent into the said bank account up to and including the month of November 2018.

5. The Landlord’s further affidavit sworn by George Kirubi Gathima on 27th November 2018may be summarized as follows;

a. That the Landlord’s rent card (GKG 12) shows that no rent has been received at all from the Tenant since the expiry of the lease.

b. That the deponent has been informed by Mr Kihoro that Mr Kihoro did not instruct the Tenant to deposit any cash or cheques in the Landlord’s account.

c. That clause 5 of the lease agreement between the parties stipulated that all communication between the Tenant and the Landlord must be in writing.

d. That in any case, the Landlord, on 20th March 2018 issued the Tenant with a notice to vacate after the lease had expired.

e. That the Landlord has never accepted any rent from the Tenant since the expiry of the lease.

6. The Tenant’s witness, Charles Kihagi testified on5th August 2019.  His sworn testimony may be summarized as follows;

a. That he is a director of the Tenant’s company.

b. That a written agreement between the parties herein was entered into on 1st January 2013 and expired on 31st March 2018.

c. That the letter from the Landlord’s counsel dated 20th March 2018 was not received by the Tenant.

d. That the Landlord used to come to the shop to collect the rent.

7. On cross-examination the witness stated;

a. The Landlord did not come to collect the cheque after the expiry of the lease.

b. That the Tenant did not receive the letter dated 20th March 2018.

c. That there was a verbal agreement that the Tenant would stay in the premises until it was unable to pay the rent.

d. That the Landlord is entitled to negotiate new terms of the lease upon expiry of the lease.

e. That the terms of the renewal must be mutually agreed.

8. The Landlord’s witness, George Kirubi Gathima adopted as his evidence, his affidavits sworn on 29th October 2018 and 27th November 2018.  I have already summarized the contents of the said affidavits in the preceding paragraphs of this ruling.

9. Upon Cross-examination, the witness stated as follows;

a. That he personally approached the Tenant for the renewal of the lease after the same had expired.

b. The lease agreement is between the Tenant and Gloria Building.

c. Francis Kihoro Githaiga is a director of the Landlord.

d. The Landlord has not received rent from the time the lease expired on 31st March 2018, before then, the Tenant brought rent to the Landlord’s offices.

e. When the lease expired, the Tenant was not in any rent arrears.

f. That the Landlord has records of rent payment up to 31st March 2018.

g. The Landlord has not authorized the Tenant to deposit rent in the account and did not give the account number to the Tenant.

h. That the witness gave the Tenant new terms if he wished to renew the lease, the terms included rent increment to Kshs 200,000/- and goodwill of Kshs 10,000,000/- reduced to Kshs 6,000,000/-.

10. The main issue for determination in this case is whether there exists a controlled tenancy between the parties herein and whether this court has the jurisdiction to hear and determine this dispute.

11. The lease agreement between the parties is the one dated 1st January 2013 and was to run for a period of five years and three months from 1st January 2018.  It is common ground that the lease expired on or about 31st March 2018.  It is also common ground that the lease was not renewed as the parties were unable to agree on the new terms proposed by the Landlord.  It is also not disputed that the terms of the said lease clearly put the relationship between the parties outside the definition of a controlled tenancy under section 2 of Cap 301, the same being for a period beyond five years and containing no clause for termination of the same other than for breach of covenants contained therein.

12. The Tenant’s position is that the Landlord continued receiving rent after the expiry of the lease and therefore the relationship between the parties was converted into a periodic tenancy.  There is evidence in the Tenant’s affidavit sworn on 16th November 2018 at paragraph 9 thereof that the Landlord did not collect rent for the months of December 2017, January and February 2018.

13. At paragraph 11 of the said affidavit, the Tenant states that on 5th March 2018, he deposited Kshs 603,200/- in the Landlord’s account at Trans-National Bank.  That same represented the rent for the months of December 2017, January, Februaryand March 2018.  There is further evidence that the Tenant continued to deposit rent in the Landlord’s account up to November 2018 (see paragraph 12 of the affidavit).  the Landlord has denied receiving any rent from the Tenant after the expiry of the lease on 31st March 2018.  This position is not supported by the rent deposits in the Landlord’s account at Trans-National Bank as clearly money was deposited in the said account long after the lease had expired.

14. The only question that then needs to be determined is whether the Landlord had consented to the deposit of rent money in its account or whether the Tenant merely took it upon itself to so deposit the rent money.  The Landlord has expressly denied instructing the Tenant to pay rent into its account.  It is instructive to note at this point that before the lease expired, the Tenant always paid rent to the Landlord’s representative who would collect the rent cheques at the Tenant’s premises and sign the rent card.  (see paragraph 7 and 9 of the Tenant’s replying affidavit).

15. Why did the Landlord not continue collecting cheques if it had consented to the Tenant continuing paying rent after the expiry of the lease?  My guess is that this only happened because the Landlord had declined the rent.  The Tenant seems to be forcing a relationship by the deposit of rent in the Landlord’s account.  Under clause c of the recitals.

“Rent shall be payable in cash or by cheque drawn in the names of Hotel Gloria and shall be forwarded to him or such other persons as he may be (sic) appointed in writing.”

16. It is clear from the above clause that rent whether paid by cash or by cheque was to be forwarded to the Landlord or his appointed agents.  If there was to be a change in the mode of payment, then one would have expected the Tenant to be so notified as per clause 5 of the lease agreement which provides as follows;

“Any notice under this lease shall be in writing and shall be deemed sufficiently served if addressed and sent by registered post to the party’s postal address indicated hereinabove and shall be deemed to have been served four (4) days following the day in which it is posted.”

17. I do therefore find that the mode of payment of the rent was not altered and the suggestion that the Landlord authorized a different mode of payment after the expiry of the lease does not find support in the lease or by way of evidence.

18. By a letter dated 20th March 2018, the Landlord notified the Tenant that its lease had expired and the Tenant did not exercise its right of renewal as per the lease agreement.  The Landlord’s counsel’s letter aforesaid further demanded vacant possession of the premises by 1st April 2018.

19. Needless to say, the lease was not renewed.  There is further evidence that the Landlord proposed new terms which were not agreeable to the Tenant.  the conduct of the Landlord in demanding vacant possession of the premises and further demanding new terms clearly points to a Landlord who was determined to get new terms favourable to itself or vacant possession of the premises, such a Landlord cannot be said to have consented to a tenancy which basically continued on the same terms as the expired lease.

20. The Landlord cannot in the circumstances of this case therefore be said to “have accepted” rent in the manner set forth under section 60 (2) of the Land Act.  The mere depositing of rent in a Landlord’s account without the express consent of the Landlord cannot be the basis of a binding legal tenancy relationship between the parties herein.  If that were to be the case, Landlord’s would find themselves forever bound in relationships they have no intention of creating in the first place.

21. In the case of National Oil Corporation of Kenya Vs Robert Ongegi Ongera and Vivo Energy Kenya Ltd (Kisii ELC Case No. 94 of 2014) at page 14 thereof, the court observed;

“To be able to establish a periodic tenancy, the Plaintiff had to prove that upon the expiry of the lease that they had with the 1st Defendant on 1st January 2014, the Plaintiff remained in occupation of the suit property with the consent of the 1st Defendant.  Consent can be express or implied.  The Plaintiff has not placed any material before the court in proof of the fact that the Plaintiff remained in occupation of the suit property after 1st January 2014 with the consent of the 1st Defendant.  The correspondences that were exchanged between the Plaintiff and the 1st Defendant prior to the expiry of the lease that have been exhibited by both parties were all concerned with the negotiations of the terms for the renewal of the lease.  The negotiations ended before 1st January 2014 and as at that date, the parties had not agreed on the terms of the new lease as I will show hereunder.”

22. The demand that the Tenant vacates the suit premises after the expiry of the lease negates the Landlord’s alleged consent to the Tenants occupation of the suit premises.  I therefore do find that no periodic tenancy was created between the parties herein after the expiry of the lease.  The Tenant herein is therefore not in a controlled tenancy relationship with the Landlord/Respondent.  The Tribunal therefore lacks jurisdiction to hear and determine this dispute and consequently, the Tenant’s reference to the Tribunal dated 1st October 2018 is dismissed with costs to the Landlord/Respondent.

HON. CYPRIAN MUGAMBI NGUTHARI

CHAIRMAN

BUSINESS PREMISES RENT TRIBUNAL

Judgement dated, signed and delivered virtually by Hon P. May (Vice Chair) this18thday of February, 2022in the presence of Kangattafor theTenantand Kinyuafor theLandlord.

HON. CYPRIAN MUGAMBI NGUTHARI

CHAIRMAN

BUSINESS PREMISES RENT TRIBUNAL