[2021] KEBPRT 111 (KLR)

REPUBLIC OF KENYA

IN THE BUSINESS PREMISES RENT TRIBUNAL AT MOMBASA

TRIBUNAL CASE NO. 114 OF 2021

FATMA AHMED AL MANDRY....................................LANDLORD/APPLICANT

VERSUS

RAHMA OMAR.................................................................TENANT/RESPONDENT

RULING

Parties and Their Representatives

1. The Landlord/Applicant, FATMA AHMED AL MANDRY (hereinafter the “Landlord”) acquired ownership and became the proprietor/landlord of all that Property known as PLOT NO. 778/1/MN (hereinafter “the suit premises”)

2. The Firm of Ragira & Company Advocates is on record for the Landlord.

3. The Tenant/Respondent, RAHMA OMAR(hereinafter “the Tenant”) has been a Tenant in the suit premises for a period of thirty-six (36) years to date, and has been carrying out the business of a restaurant by the name Nyali Dishes.

4. The Firm of Jamad & Associates Advocates is on record for the Tenant. (salwajamad@gmail.com)

The Background of The Dispute

5. This dispute arises from a notice of termination of tenancy issued by the Landlord to the Tenant and dated 5th May 2021.

6. The Landlord herein acquired the suit premises by virtue of a Vesting Indenture on 16th December 2019, having inherited the property from her deceased father. prior to 2019, the suit premises was owned by the Landlord’s parents.

7. Subsequently, and being desirous of conducting repair works on the suit premises, the Landlord made an application to the County Government of Mombasa seeking permission to conduct renovations on the suit premises. The County Government of Mombasa vide a letter dated 4th June 2021 granted permission to the Landlord to carry out the proposed repairs and which License was to expire after six months from the date of issue.

8. On 5th May 2021, the Landlord proceeded to serve the Tenant with a Notice of termination of tenancy in line with Section 4 (2) of theLandlord and Tenant (Shops, Hotels and Catering Establishments) Act, Cap 301 Laws of Kenya (hereinafter “the Act”),which notice was to take effect from1st August 2021. The grounds of termination of the tenancy as stated in the notice was that the Landlord intended to do renovations to the building and which would not be possible without obtaining vacant possession.

9. Subsequently, the Tenant in opposing the said notice of termination of the tenancy filed a reference before this Honourable Court on19th May 2021.

10. The Landlord thereafter vide a notice of motion Application dated1st July 2021, brought under certificate of urgency and supported by an affidavit sworn byFATMA AHMED AL MANDRY,sought for orders that the Tenant be ordered to give vacant possession of the suit premises to enable the Landlord commence the intended repair works.

11. On 5th July 2021, this Honourable Court considered the Landlord’s application and upon perusal, directed that the application be served for inter partes hearing. Subsequently, the parties agreed to dispense the matter by way of written submissions.

Jurisdiction

12. The jurisdiction of this Tribunal is not in dispute.

Issues for Determination

13. Having considered the parties’ pleadings, affidavits and submissions and having considered the relevant legal framework, the sole issue for determination before this Honourable Court is: Whether the Landlord’s notice of termination of Tenancy dated 5th May 2021 is lawful and valid?

Landlord’s Submissions

14. The Landlord mainly seeks from this Honourable Court an order permanently evicting the Tenant from the suit premises. The Landlord placed reliance on Section 7 of the Act which outlines the grounds on which a Landlord may seek to terminate a tenancy.

15. In the Application dated 1st July 2021, the Landlord asserted that the suit premises had been designed 35 years ago and that no major repairs or renovations had been done. It was therefore the Landlord’s intention to obtain vacant possession of the suit premises to enable her carry out the intended repairs. In support of this, the Landlord had obtained a License from the County Government of Mombasa on 4th June 2021, which permitted her to carry out the repairs for a period of six months after which the License would expire.

16. Additionally, the Landlord in the Further Affidavit and Submissions dated 27th August 2021and 30th August 2021 averred that upon termination of the tenancy and completion of the said repairs, she intended to start her own business on the suit premises and therefore sought to have the Tenant to permanently vacate the suit premises.

17. The Landlord further claimed that the Tenant had defaulted in payment of rent and had rent arrears amounting to KShs. 130,000. 00 and therefore necessitating termination of the Tenancy.

Tenant’s Submissions

18. The Tenant submitted that she had been conducting her restaurant business on the suit premises for thirty-six years, and had been loyal and dutiful in payment of her rent. The Tenant denied the allegations that she has defaulted in payment of rent.

19. The Tenant further averred that she had enhanced the value of the suit premises through constant repairs, in addition to constructing a borehole in the building where the suit premises is situated, which she used to supply water to her restaurant and that the Landlord seeks to benefit from the improvements to the suit premises to the detriment of the Tenant. The Tenant further averred that she would suffer tremendous loss upon permanent eviction as she had an established business and most of her customers were used to her current location.

20. Additionally, in her replying affidavit dated 4th August 2021, the Tenant affirmed that the building in which the suit premises is situated is old and dilapidated and that the Landlord cannot carry out major structural renovations without demolishing the entire building. The Tenant submitted that the repairs intended to be carried out by the Landlord are minor in nature and therefore do not warrant permanent eviction of the Tenant from the suit premises.

21. Further, in the Tenant’s further affidavit dated 4th August 2021, the Tenant affirms that she is willing to temporarily vacate the suit premises for a reasonable period of time and allow the Landlord to carry out any renovations and/or repairs and thereafter, that she be reinstated back to the premises.

22. In addition, the Tenant further avers that in the event the this Honourable Court allows the Landlord’s application, then the court should assess the good will, enhancements and improvements made on the suit premises by the Tenant for the past thirty-six years.

Analysis and Determination

Whether the Landlord’s Notice of Termination of Tenancy dated 5th May 2021 is valid?

23. The Landlord issued the Tenant with a Notice of termination of the tenancy dated 5th May 2021, pursuant to section 4(2) of the of the Landlord and Tenant (shops, Hotels and Catering Establishment) Act.

24. The position of the law on the issue of a termination notice is now settled. The Court in Manaver N. Alibhai T/A Diani Boutique vs. South Coast Fitness & Sports Centre Limited, Civil Appeal No. 203 of 1994, stated that: -

“The Act lays down clearly and in detail, the procedure for the termination of a controlled tenancy. Section 4(1) of the Act states in very clear language that a controlled tenancy shall not 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 specified provisions of the Act. These provisions include the giving of a notice in the prescribed form. The notice shall not take effect earlier than 2 months from the date of receipt thereof by the tenant. The notice must also specify the ground upon which termination is sought. The prescribed notice in Form A also requires the landlord to ask the tenant to notify him in writing whether or not the tenant agrees to comply with the notice.”

25. It is evident that the notice of termination of the tenancy herein was in Form A as prescribed by the Act. further, the notice of termination of the tenancy was to take effect on 1st August 2021, being a period exceeding two months as required by the Act.

26. Having established that the notice of termination of the tenancy was in the prescribed form, I shall proceed to analyze the substance of the notice with regard to the grounds of termination of the tenancy as follows:

Whether the Landlord has met the requirements of Section 7 (1) (f) of the Act?

27. Article 40 of the Constitution of Kenya 2010 guarantees the right of every person either individually or in association with others, to acquire and own property. This includes the right of a proprietor of land to enjoy and benefit from the use of such property and to deal with the property as they please within the confines of the Law.

28. Accordingly, Section 7 of the Act clearly stipulates the grounds upon which a Landlord may seek to terminate tenancy. One of the grounds as enshrined in Section 7 (f) of the Act is: -

7(f) that on the termination of the tenancy the Landlord intends to demolish or reconstruct the premises comprised in the tenancy, or a substantial part thereof, or to carry out substantial work of construction on such premises or part thereof, and that he could not reasonably do so without obtaining possession of such premises.

29. The above provision affirms the right of the Landlord to undertake renovations and/or repairs to their property. According to the termination notice served upon the Tenant, the Landlord sought to terminate the tenancy on the ground “that on termination the landlord intends to do renovations and he wouldn’t be able to do so without obtaining vacant possession.”

30. In support of this intention, the Landlord made an application to the County Government of Mombasa seeking permission to conduct specific repairs and renovations to the suit premises. On 4th June 2021, the Landlord was issued with a License to undertake “proposed minor repair work permit to include wall plastering, electrical change, plumbing, flooring and wall titling on Plot No. 778/IMN” and which license was to expire after six months from the date of issue.

31. In expounding on the threshold that should be met by a Landlord placing reliance on Section 7(1)(f) of the Actas a ground for termination of tenancy, the High Court in the case of Auto Engineering Ltd Versus M. Gonella & Co. Ltd (1978) eKLR stated as follows: -

“…First, it is correct that the wording of section 7(1)(f) is “demolish or reconstruct”, and not merely to effect repairs. The distinction can of course be important; for while mere repairs may not necessarily mean that the landlord needs possession of the premises, an intended demolition or reconstruction of a substantial part of the premises would in all probability be frustrated if the landlord could not obtain possession, and that is why this provision exists.”

32. The Court went ahead to state as follows:

“For this purposethe Court must be satisfied that the intention to reconstruct is genuine and not colourable: that it is a firm and settled intention, not likely to be changed: that the reconstruction is of a substantial part of the premises, indeed so substantial that it cannot be thought to be a device to get possession; that the work is so extensive that it is necessary to get possession of the holding in order to do it; and that it is intended to do the work at once and not after a time. Unless the Court were to insist strictly on these requirements, tenants might be deprived of the protection which Parliament intended them to have. It must be remembered that, if the landlord, having got possession, honestly changes his mind and does not do any work of reconstruction, the tenant has no remedy. Hence the necessity for a firm and settled intention. It must also be remembered that the Act is intended for the protection of shopkeepers, and that this protection would be nullified if a big concern could buy the property and get possession by putting in, say a new shop-front. Hence the necessity for the work being substantial.”

33. In this present case, the license from the County Government of Mombasa permits the Landlord to undertake minor repairson the suit premises. The permit goes ahead to specify the repair work that the Landlord should undertake on the premises as cited above and the duration within which such repairs should be conducted being within six months.

34. It is my finding that the repairs intended to be undertaken by the Landlord are not substantial within the meaning of Section 7(1) (f) of the Act. The repairs/renovations do not constitute demolishing or reconstructing the suit premises and as such, it is my considered view that they do not warrant permanent eviction of the Tenant from the suit premises. Indeed, I am persuaded that the County Government considered the magnitude of the work to be done in fixing the period in which the said repairs should be undertaken.

35. Additionally, the Landlord affirmed in (d) of the notice of motion application dated 1st July 2021 that “That all the Landlord/Applicant’s tenants in the building where the suit premises are located did not object to the said notice and have all given vacant possession of their respective rented premises on the said building which repair works has since been completed with the exception of the Respondent…”

36. Based on the foregoing, it is evident that the repair works intended to be undertaken by the Landlord on the suit premises are not substantial in nature. Indeed, as confirmed by the Landlord, the repairs in the other premises have been completed, and only the suit premise herein is pending renovations.

37. On this basis therefore, I find that the Landlord has not convinced this Honourable Court that the renovations to be conducted in the suit premises are substantial or extensive in nature to warrant vacant possession of the suit premises. The Landlord has therefore failed to meet the threshold of terminating a tenancy in accordance with Section 7 (1)(f) of the Act.

Whether the Landlord has met the requirements of Section 7 (1)(g) of the Act?

38. Section 7 (1)(g) of the Act allows for termination of tenancy on grounds that the Landlord intends to personally occupy the premises for a period of not less than one year.The provision specifically provides as follows:

7(g) Subject as hereinafter provided, that on the termination of the tenancy the landlord himself intends to occupy for a period of not less than one year the premises comprised in the tenancy for the purposes, or partly for the purposes, of a business to be carried on by him therein, or at his residence.

39. From the outset, I would like to point out that the Landlord did not indicate in the notice of termination of the tenancy dated5th May 2021that she intended to occupy the suit premises upon termination of the tenancy. In fact, the Landlord introduced this ground in her further affidavit and written submissions dated 27th August 2021 and 30th August 2021 respectively.

40. This is evident in paragraph 14 of the Further Affidavit wherein the Landlord stated as follows: “…I wish to state that in addition to wanting to repair the suit premises, I want to take possession of the suit premised after the intended repairs as I intend to start a business of my own...”This assertion is reiterated in paragraph 29 of the Further Affidavit as well as paragraph 12 (d) of the Submissions dated 30th August 2021.

41. It is my considered opinion that the Landlord ought to have stated her intention of taking possession of the suit premises at the instance of issuing the notice of termination of the Tenancy or as early as she formed the intention. A good Landlord’s notice of termination of tenancy ought to specify that the Landlord intends to use the premises for a period of more than one year.

42. The above notwithstanding, according to Section 107 of the Evidence Act Cap 80 Laws of Kenya, it is trite law that he who alleges must prove. The burden of proof therefore lies with the Landlord to show that she intends to occupy the suit premises for a period of not less than one year for the purposes of a business to be carried on by her therein, or at her residence. In addition, the Landlord bears the burden of proving that she does not intend to benefit from the good will already created by the Tenant by virtue of running her business in the suit premises for thirty-six years.

43. In order to succeed in a claim of vacant possession, this Honourable Court must be satisfied that the Landlord himself intends to occupy the suit premises for a period of not less than one year. The criteria for determining the landlord’s intention were dealt with in the case ofAuto Engineering Ltd Versus M. Gonella & Company Limited (1978) eKLRwhere the Court held:

“Apart from making a mere assertion that he intends to occupy the premises for a period of not less than one year the landlord’s intention can be gauged from surrounding circumstances which lead a court to find on a balance of probabilities that the Landlord has established such an intention.”

44. Indeed, in finding that the Landlord had established a clear and settled intention to occupy the suit premises, the Environment and Land Court in the case of Hashim Omar Hashim versus Alliance Nominee Limited [2020] eKLRstated as follows:

“…I do not think that in the instance of this case there is any doubt as to what business the landlord wishes to carry out, for it is clear that it is for short term rental. I am in the circumstances of this case, ready to infer that the landlord wishes to use the premises for more than one year, based partly on the reason that the landlord disclosed the nature of the business he intended to operate and the amount of money intended to be spent, which is Kshs. 20 – 30 Million. I do not think that one would use this amount of money on this premises in order to use it for a period of less than one year. I am satisfied, just as the Chairman of the Tribunal was, that there was a genuine reason given by the landlord for needing to have the premises to operate its own business. The notice given, which was six months, was also sufficient, and I think that it was now incumbent upon the appellant to seek alternative ways of operating his restaurant business without the bungalow in question.”

45. A similar position was upheld by the Court in James Kariuki Kithinji versus Dominic Ntongai [2020] eKLR,where the Court in noting that the Landlord had established a clear intention to commence a business in the suit premises stated as follows:

“…The act does not state that a detailed account should be given regarding the nature of the intended use of the premises by the landlord. It was therefore sufficient for the respondent to demonstrate that he intended to put up a business and use the suit premises...As regards the first issue, I find that the respondent gave evidence before the tribunal stating that he had registered a company and was intending to carry out a business. He was to use the suit premises as an office and a show room for the products he was to be selling. He provided details of his registered company...”

46. It is important to note that in this present case, apart from the representation that the Landlord intends to start a business of her own, the Landlord has not specified the type of business she intends to engage in. This Honourable Court therefore does not have the benefit of establishing whether the intended business is similar to that carried out by the Tenant in the premises as alleged by the Tenant.

47. In addition, the Landlord has not tendered any evidence to indicate that she has taken any positive steps to commence her business for instance registration documents or any indication that the Landlord has the necessary resources to execute her intentions. I am therefore not persuaded that the Landlord is acting in good faith and that she genuinely intends to start her own business on the suit premises.

48. Additionally, as stated earlier, the Landlord has in paragraph (d) of the notice of motion application informed this Honourable Court that all of the Landlord’s tenants in the building where the suit premise is located have given vacant possession of their respective premises on the building which repair works have been completed, clearly indicating that the Landlord herein has alternative premises in which she can conduct her business.

49. I find that the Landlord has not specified whether she intends to carry out her business in the entire building. In addition, the Landlord has not tendered any evidence to indicate that the vacant premises in the building are not suitable for the business the Landlord intends to run on the suit premises and further that the said business can only be conducted from the suit premises.

50. To this end, it is my finding that the Landlord has not indicated a firm and clear intention that she intends to start a business, and further that the business can only be conducted from the suit premises.

51. Further to the above, Section 7(2) of the Act imposes a limitation on the right of any Applicant seeking vacant possession of a rented premises in accordance with Section 7 (1) (g). The above provision to seeks to protect a tenant from eviction by a Landlord who has not been a Landlord for at least five years preceding the notice seeking termination of the tenancy. The provision specifically provides as follows:

7(2) The Landlord shall not be entitled to oppose a reference to a Tribunal on the ground specified in subsection (1)(g) of this section if the interest of the Landlord, or an interest which has merged in that interest and but for the merger would be the interest of the Landlord, was purchased or created within the five-year period preceding the date of the tenancy notice seeking to terminate the tenancy, and at all times since such purchase or creation the premises concerned have been occupied wholly or mainly for the purposes of a shop, hotel or catering establishment.

52. Courts of in several authorities interpreted the requirement of Section 7 (2) of the Act. Indeed, the Court in Auto Engineering Ltd Versus M. Gonella & Company Limited affirmed that:

“It is common ground, for the purposes of these appeals at least, that the landlord has owned the property for at least five years before the date of the notice to quit, and that the tenancy is a controlled tenancy within the meaning of the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act.

53. This position was also reiterated by the Court in the case of Battan Engineering Works versus White Line Retreat Depot [1977] eKLR in interpreting Section 7(2) of the Actstated that:

“The mischief the sub section is designed to prevent is the acquisition of controlled premises by a person as landlord in order to obtain early occupation for the purposes of a business to be carried on by him. The clear intention of a parliament was to protect a tenant from eviction by a landlord for at least five years preceding the notice seeking termination of the tenancy.”

54. Additionally, the Court in the case of Pentapham Limited versus Soroya Investments Limited Nairobi ECLA No 62 of 2016 [2018] eKLR in finding that the Landlord had acquired interest in the suit premises for a period of at least five years prior to issuing the notice of termination of tenancy stated as follows:

“…From the above provisions it is clear that a landlord is only allowed to oppose a reference under Section 7 (1)(g) if he purchased the premises 5 years preceding the issuance of termination notice and if the premises had been occupied wholly or mainly for purposes of a shop, hotel or catering establishment. In the instant case the premises were purchased by the respondent from Kenya National Assurance Company Limited in 2008. The notice to terminate the tenancy was issued on 1st December 2014. As at the time of issuance of the notice, the premises were occupied as a shop which was operating as a chemist. The respondent had held the premises for more than five years and therefore was allowed to terminate the tenancy. I therefore find that the Respondent had met the requirement of Section 7(2) of the Act.”

55. Applying the above analysis to this instant case, it is not disputed that prior to 2019, the Applicant/Landlord had neither acquired interest nor had she been the Landlord of the suit premises. Indeed, the Landlord acquired interests over the suit premises by virtue of a vesting indenture issued on 16thDecember 2019. The Landlord thereon proceeded to issue the Tenant with a notice of termination of tenancy on 5th May 2021,being one year and five months from the date in which the Landlord acquired interest over the suit premises.

56. On this basis, I find that the Landlord failed to meet the threshold set inSection 7 (2) of the Actwhich requires that the Landlord should have acquired interest in the suit premises for at least five years preceding the date of issuance of the notice of termination of tenancy.

Whether the Landlord has met the requirements of Section 7 (1)(b) of the Act?

57. The parties herein did not major on this issue extensively and as such, I shall address it briefly.

58. One of the grounds on which a Landlord may seek to terminate a tenancy as specified in Section 7 (1) (b) of the Actis:

7(1)(b) that the tenant has defaulted in paying rent for a period of two months after such rent has become due or payable or has persistently delayed in paying rent which has become due or payable.

59. The Landlord has alleged that the Tenant has constantly defaulted in payment of rent and currently has arrears amounting to KShs. 130,000. 00. I note that the issue of rent arrears was not captured in the notice dated 5th May 2021 as a ground for termination of the tenancy, but was only introduced by the Landlord in her Further affidavit and submissions. I reiterate that the Landlord ought to have notified the Tenant of this ground at the earliest and especially at the point of issuing the notice of termination of the tenancy.

60. However in support of this ground, the Landlord annexed several letters demanding for payment of rent from the Tenant between the period of 2016 to 2020with the last demand of KShs. 130,000. 00 being issued vide a letter dated 8th February 2020. The Tenant in response annexed several letters indicating that the rent for the above mentioned periods had been paid and that there was an error in the reconciliation of the rent accounts from the Landlord’s side for the period preceding the year 2020.

61. I note that the arrears were more than this and the Tenant partially paid the same leaving a balance of Kshs 130,000/-

62. In the upshot, the Landlord’s application dated 1st July 2021 is partially allowed in the following terms:

i. The Tenant shall vacate the suit premises temporarily within 7 days upon service with an extended notice for repairs from the County Government considering the current one expires end December 2021.

ii. The Landlord shall undertake the necessary renovations and repairs within ONE Month.

iii. The Landlord and Tenant shall thereafter agree on new terms for reentry into the premises failure to which parties will be at liberty to apply.

iv. The Tenant shall pay the 130,000/- being arrears owing to the Landlord before reentry.

v. Each party shall bear its own costs.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL

RULING DATED, SIGNED AND DELIVERED VIRTUALLY BY HON A. MUMA THIS 3RD DAY OF DECEMBER, 2021 IN THE ABSENCE OF THE PARTIES.

HON A. MUMA

VICE CHAIR

BUSINESS PREMISES RENT TRIBUNAL