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Welcome to Kenyan Lawyer blog, an informative and educative blogs that is meant to educate and inform you on legal development in Kenya and on business issues. You can reach me via mainacy@gmail.com

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Monday, February 13, 2012

Controlled Tenancies under the Kenyan Law


Controlled tenancies are tenancy defined under the Landlord and Tenant Act (Shops, Hotels and Catering Establishments Act), (Cap 301) of the Laws of Kenya (The “Act”).    The preamble to this Act states that it is “an Act of Parliament intended to protect the tenants from the exploitation and eviction from business premises by the landlords”.   The supremacy of the Act when compared  with other statutes applicable on tenancies  stems from section 2(3) thereof which provides as follows:
Notwithstanding anything contained in any other written law requiring registration of tenancies, evidence of the tenancy may, for the purposes of this Act, be given in any proceedings, whether such tenancy is registered or not.
This section means and implies that, where there is a controlled tenancy, all other statutes relating to the matter, and in conflict with the Act, should be disregarded.
Under subsection (2) of the Act, where there tenancy agreement is not in the prescribed form, the terms and conditions set forth in the Schedule to Act will be deemed to be incorporated in the Act.
A “shop”, under the Act is defined to means: premises occupied wholly or mainly for purposes of retail or wholesale trade or business or for purposes of rendering services for money or money’s worth.
Under section 2 a “tenancy” is defined as:
a tenancy created by a lease or underlease, by an agreement of lease or underlease, by a tenancy agreement or by operation of the law, and includes a sub-tenancy but does not include a relationship between a mortgagor and mortgagee as such.
A “controlled tenancy”  is defined as:
2(1) a tenancy for 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
(ii)                contain provision for termination, otherwise than for breach of covenant, within five years from commencement thereof; or
(iii)               relates to premises specified by the Minister in a Gazette Notice to be a controlled tenancy….
Despite the above provision, a controlled tenancy cannot arise where one of the parties is government department or agency or a local authority.
Under section 4 of the Act, a controlled tenancy cannot be terminated except as provided for in the Act and for grounds specified in section 7 thereof.  Subsection (1) of this section states clearly that section 4 will take precedence over all other written laws, and even overrides the agreement of the parties.  Subsection (2) of section 4 goes on to provide that termination of a controlled tenancy or alteration of the agreed terms and conditions.   This subsection must be read together within section 7 of the Act, which provided for the grounds which may be invoked by the landlord to terminate a controlled tenancy.   It is important to note that the Act does not provide for grounds on which a tenant can terminate a controlled tenancy, and accordingly if the tenancy wishes to terminate a controlled tenancy he must be do in accordance with the mandatory provisions of the Act, and specifically sections 4 and 5 thereof.
Where the landlord intends to terminate a controlled tenant, he must give him a termination notice in the prescribed form (that is, FORM A in the Schedule to the Act), and come within the ambit of the specified grounds in section 7 aforesaid.   Under section 4(4) of the Act, the minimum prescribed notice period that should be given to a tenant by the landlord should not be less than two (2) months from the date of receipt thereof.  The termination notice must, inter alia, inform the tenant of his right within one (1) months from the date of the notice to communicate to the landlord of whether or not he intends to comply with the notice or oppose it. If after receiving the termination notice, the tenant does not notify the landlord of its/his willingness to comply with the notice or to refer the matter to the Tribunal in accordance with section 6, then the notice will have the effect stated in section 10 of the Act. That is, ‘from the date therein specified to terminate the tenancy....’
As stated above, the landlord must rely on one or more grounds stated under section 7 of the Act. However, a landlord should not seek to terminate the tenancy and at the same time alter terms and conditions of the tenancy. The reason for this is that; section 4 uses a disjunctive “or” implying that a notice should not have double-barreled effect.  For instance, the landlord cannot seek to terminate the tenancy as well as increase the rent.  It must be one or the other but not both.
If the tenant does not wish to vacate, it/he must submit the matter to the Tribunal within the prescribed time in accordance with section 6 of the Act.  Where the matter is referred to the Tribunal, then the tenancy will not be terminated until after a decision of the Tribunal to that effect.  However, despite such an action by the tenant, where the objection to the notice is unmeritorious, the Tribunal may make an order for possession in favour of the Landlord and order the tenant to pay rent arrears or mesne profits.
Where the tenant does not refer the matter to the Tribunal and the tenancy is terminated in accordance with section 10 discussed above, the tenant will automatically lose his ‘protected’ status at the expiry of the notice period.  Moreover, in case of such a termination, the Tribunal is debarred by law from having any legal jurisdiction in the matter. Thus, the landlord can take the possession of the premises from the tenant, if this can be done peacefully. But if the tenancy refuses to give him possession of the leased premises, the landlord will be obliged to seek eviction orders from the court.
Moreover, where the landlord permits the tenant to continue hold over after the termination of the original protected tenancy and continue to accept rent, the tenancy between the parties will resume being a protected tenancy.
Under section 4(3), where a tenant intends to give a notice to terminate or to alter terms and conditions of a controlled tenancy, the legal effect of such a notice is different from that of landlord’s notice.   Nevertheless, like the landlord’s notice, a tenant’s notice should comply with the requirements of the law.  Therefore, where a valid notice is not given, the tenancy will continue to run, even if the premises is vacated, until the giving of such notice or until the landlord re-enters the vacated premises.
Moreover, where the tenant gives the notice to terminate, he must vacate the premises at the expiry of the notice period. Failure to vacate as such would make such a tenant liable to pay double rent for the period of holding over as provided for in section 14 of the Distress of Rent Act (Cap. 293). However, it should be noted that unlike section 17 of the Distress for Rent Act of 1737 (of UK),  the Kenyan Act does not  does not provides for payment of double rent if a tenant  were to fail to vacate the premises at the determination of the lease. Double rent will therefore only apply where a tenant after giving the termination notice, refuses or fails to vacate the premises at the expiry of the notice period.
With regard a notice to alter the terms and conditions of a controlled tenancy, is important to note that such a tenant’s notice does not have a reciprocal effect similar to a landlord’s notice as under section 10 of the Act; of altering the terms and conditions or increasing the rent by operation of the law at the expiry of the notice period, if the landlord does not refer the matter to the Tribunal.  Indeed, courts have held that with regard to alteration of terms and conditions of the tenancy or increase of rent, section of the Act 10 applies only in the event of a landlord’s notice and never in the case of a tenant’s notice.
In order to avoid coming within the ambit of the Act, most landlords insist on granting written tenancies for a term more that 5 years, e.g. 5 years and 3 months.  

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