[2024] KEBPRT 86 (KLR)

Muthoga Gaturu & Co. Advocates v Absa Bank PLC (Tribunal Case E020 of 2022) [2024] KEBPRT 86 (KLR) (10 January 2024) (Judgment)

Neutral citation: [2024] KEBPRT 86 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Tribunal Case E020 of 2022

Gakuhi Chege, Vice Chair

January 10, 2024

Between

Muthoga Gaturu & Co. Advocates

Tenant

and

Absa Bank PLC

Landlord

Judgment

1. The Landlord herein issued a tenancy notice dated 16/12/2021 seeking to terminate the Tenant’s tenancy over Title No. Nyeri Municipality Block III/221 with effect from 16th February 2022 on the ground that the landlord intends to occupy the premises comprised in the tenancy for purposes of carrying on banking business for a period of not less than one year.

2. Being opposed to the tenancy notice, the tenant wrote a letter of objection dated 12th January 2022 and moved to this Tribunal vide a reference dated 11th February 2022 contending that the notice was unjustified and that the landlord had failed and/or neglected to repair and maintain the business premises.

3. Through a ruling delivered on 14th July 2022 in respect of the application dated 11th February 2022, parties were directed to comply with Order 11 of the Civil Procedure Rules. The tenant filed a witness statement by Patrick J. Mwiti dated 21/9/2022 and a further witness statement dated 22nd September 2022. The tenant also filed a list and bundle of documents dated 21st September 2022.

4. On the other hand, the landlord filed a witness statement by one Gladys Njeri, the facilities manager at Absa Bank Kenya PLC dated 19th October 2022 together with a list and bundle of documents of even date and a further list of documents dated 6th December 2022.

5. The tenant filed a further supplementary list of documents dated 17th February 2023.

6. On 20th June 2023, the matter proceeded to hearing with the landlord’s witness Gladys Njeri giving evidence together with one Ansent Masila a valuer at N.W. Realite Ltd as PW1 and PW2 respectively. PW1 adopted her witness statements and produced the documents in the landlord’s lists aforesaid. PW2 produced the valuation and Rental Assessment report dated 24/11/2022 on behalf of the landlord. Both witnesses were cross-examined by the tenant’s counsel.

7. The tenant’s witness one Patrick Mwiti also testified together with one George Wachira Maranga (Valuer) and both were cross-examined by the landlord’s counsel.

8. According to the landlord’s witness no. 1, the tenant went into possession of the suit premises by dint of a lease agreement dated 12th March 1999 produced as exhibit 1 paying a monthly rent of Kshs.22,000/-. The lease was for a period of 5 years 3 months with effect from 1st June 1998. After the lease expired on 30th August 2003, the tenant did not issue notice of intention to extend it but remained in occupation of the premises. It continued to pay the same rent.

9. The landlord engaged the tenant to sign a new lease agreement but the tenant made demands for repairs to be undertaken on the premises before doing so. The landlord made the repairs but the tenant made further demands for repairs despite the premises being in a tenantable condition. The tenant refused to sign the new lease agreement under the guise of repairs to avoid paying rent at the market rate.

10. With the passage of time, the landlord developed a need for use of the business premises for its own business specifically Bancassurance. According to the landlord, first Assurance required a branch in Nyeri next to the bank for efficiency and synergy. Setting up such a branch is a long term business endeavor which can only be actualized in no less than one year and the mere fact that the tenant has been in occupation of the demised premises for 20 years with goodwill cannot defeat the landlord’s right to own use of the business premises.

11. The tenant alleges that the landlord has other unoccupied office space which it could have made use of for its Bancassurance business but it argues that it has a right to choose the space within which it wants to carry out its business aforesaid.

12. The landlord admits that it prepared and leased to First Assurance part of the space below its banking hall section of the building which has no bearing whatsoever on the tenancy notice issued on 16th December 2021 as it was not proof that it no longer needed the demised premises.

13. According to the landlord, First Assurance is an insurance company running its own insurance business and was in need of premises in Nyeri for its insurance operations and the notice issued to the tenant relates to the landlord’s Bancassurance business for which it needs space for its agents and the notice issued to the tenant is genuine and made in good faith.

14. As such, the instant reference is attacked on the basis that it is meant to deprive the landlord of its right to use the suit property in violation of its property rights under Article 40 of the Constitution.

15. In cross-examination, the landlord’s PW1 was referred to page 19 of the tenant’s list of documents wherein the bank offered a new lease for a period of 5 years 3 months to the tenant which would have continued until the year 2026 if it was accepted. The witness admitted that not all repairs demanded by the tenant were undertaken. The complaints were partially attended to.

16. According to the landlord’s witness (PW1) there was no intention to start the insurance Agency before 2021 when the letter of offer to the tenant to lease the space was made. The branch had not been selected to host the Bank Assurance initially. As at 13th August 2021, there was no need for Bank Assurance services at the Nyeri Branch.

17. PW2(Valuer) produced the valuation report and Rental Assessment over the suit premises. The report gave a market rent of Kshs.75/- and Kshs.85/- for the lower ground floor (Basement) and upper ground floor respectively.

18. The valuer admitted that he was not registered at the time of signing the valuation report but the report was counter signed by a co-director who is a registered valuer. No measurements for tenant’s space were taken.

19. The tenant’s witness No. 1 was Patrick Mwiti who relied on his two witness statements dated 21/9/2022 and 22/9/2022. He produced the documents on the lists of documents dated 21/9/2022 and 22/9/2022.

20. The tenant confirmed having occupied the suit premises since the year 1998 both on lease which expired and thereafter on periodic tenancy basis. Although, it continued to pay rent and maintain the interior of the premises, over time, the premises fell into disrepair which necessitated repair of leaking roof, waste disposal system on the ground floor area, drainage system and balcony floor tiles. The landlord upon request only undertook partial minimal repairs and maintenance works. Meetings were held and there was exchange of correspondence since mid 2000 as evidenced by exhibits in the list and bundle of documents.

21. Over the period, without finalizing the necessary repairs and maintenance works, the landlord started requiring the tenant to sign a tenancy on new terms but the latter insisted on completion of the repairs and maintenance works.

22. On 14th September 2021, the landlord issued another offer of tenancy without addressing outstanding repair and maintenance works before the offer could be discussed. The tenant reminded the landlord to first address the said repair concerns. However on 17th December 2021, the landlord issued a tenancy notice purporting to terminate the tenancy relationship on grounds that it intended to occupy the premises for the purpose of carrying out banking assurance business.

23. According to the tenant, the said ground is not genuine or true for reasons that it had offered it a long term tenancy of 5 years and 3 months on proposed fresh rental terms. This is meant to force the firm to sign the new lease while avoiding to attend to the concerns for structural repairs it had requested. The firm has operated in the premises for over 20 years and stood to suffer irreparable harm in the event the tenancy notice is enforced.

24. In a further witness statement, the tenant’s witness states that the landlord has always had unoccupied office space which it could have made use of for BancAssurance purposes. Recently in the month of September 2022, and in the course of these proceedings, the landlord prepared and leased out to First Assurance part of the space below its Banking Hall section of the building which had remained vacant and unoccupied for several years as can to seen on page 2 of the tenant’s supplementary list of documents.

25. Both parties filed written submissions which I shall consider together with the issues for determination.

26. The following issues arise for determination:-a.Whether the Landlord’s tenancy notice dated 16th December 2021 ought to be approved or dismissed.b.Who is liable to pay costs?.

27. Section 4(2) of Cap. 301 Laws of Kenya provides that a landlord who wishes to terminate a controlled tenancy or to alter to the detriment of the tenant any condition in or right or service enjoyed by the tenant is required to give notice in that behalf to the tenant in the prescribed form.

28. Section 7(1) (g) of the said Act provides one of the ground for termination as follows:-“(g)Subject as hereinafter provided, that on 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 as his residence”.

29. I have looked at the tenancy notice served upon the tenant and find that it complies with Sections 4(2) and 7(1) of the said Act. What this Tribunal is required to consider is whether the landlord has established the ground upon which it intends to terminate the tenancy.

30. According to the landlord, it intends to use the office space occupied by the tenant for its BancAssurance business which need arose after the year 2021. The tenant disputes the said ground stating that the landlord had offered to lease out the space to it for a period of 5 years 3 months by a letter dated 13th August 2021 (see page 19 of the tenant’s bundle of documents). The tenant by a letter dated 14th September 2021 insisted on more repairs of the building whereupon the landlord served the impugned notice dated 16th December 2021.

31. It is on that basis that the tenant submits that the landlord has no genuine intention to occupy the premises for its own business. It is submitted that the landlord did not produce any other evidence except the emails of 27th October 2021 to demonstrate that the premises were required by the bank for its own business. There was no comparable evidence to show that the Eldoret branch which was also intended to start BancAssurance had launched operations more than one year 6 months at the time of hearing of this case.

32. The landlord had other space in the building which it leased out in the pendency of this case to another Tenant which fact was admitted in cross examination. The notice to terminate was for banking business and not insurance business in my considered view.

33. The landlord’s submissions heavily relies on the email correspondence relating to the proposed establishment of bancassurance business by first Assurance. It is the said First Assurance which is said to have already gotten an alternative space within the same building occupied by the tenant.

34. The landlord submits that there was approval to spend a sum of Kshs.1,090,676/- for partitioning of the suit premises and in reliance on the decisions in Hashim Omar Hashim v Alliance Nominee Limited (2020) eKLR andSoham Singh & Sons Ltd v Parkview Properties Ltd (2004) eKLR urges this Tribunal to uphold the tenancy notice.

35. According to the landlord, the issue of renewal of lease and its need to use the suit premises is mutually exclusive and even if the lease was signed, it was terminable since the landlord needs the premises for own use. I do not agree with this argument as there was no basis to offer the premises on long term lease in August while intending to use the premises later in the year for own business.

36. I agree with the tenant that the circumstances surrounding issuance of the tenancy notice smacks of bad faith on the part of the landlord. The emails on purported establishment of BancAssurance business in the suit premises was an afterthought clearly intended to justify the tenant’s eviction from the suit premises. I do not see why the landlord had to give out empty space in the same building to another tenant while insisting that it requires the space occupied by the tenant herein for its own business. The intention in my considered view is not genuine.

37. The landlord being an international company operates its business on the basis of fore plans and not knee jerk business decisions. It could not have offered the same space occupied by the tenant 3 months before while aware that it required the same space for its business of Bank Assurance. There is more than meets the eye.

38. In the case ofAuto Engineering ltd v M. Gonella & Co. Ltd (1978) eKLR, the superior court while considering termination of tenancy based on need to reconstruct a business premises had the following to state at page 7/11-“……………….in such circumstances, the court must be careful to see that Section 30(1) (f) is fully satisfied before it allows him to get possession. For this purpose, the 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…..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 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 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 by putting in, say a new shop front. Hence, the necessity for the work being substantial”.

39. By parity of reasoning, the landlord’s intention to use the suit premises for own business is not demonstrated nor proved. No business resolutions nor plans have been tendered in this case and it is merely a ploy to kick out the tenant in order that it may lease out the space to another tenant at a more lucrative rate as per the unexecuted letter of offer exhibited by the tenant. The landlord would have done better by issuing a notice for increment of rent than termination of the tenancy. The notice is a candidate for dismissal.

40. Costs of every action before this Tribunal are under its discretion pursuant to Section 12(1)(k) of Cap. 301 Laws of Kenya but always follow the event unless for good reasons otherwise ordered. I have no reason to deny costs to the tenant.

41. In conclusion, the final orders which commend to me in this case are:-a.The landlord’s tenancy notice dated 16th December 2021 is hereby dismissed for lack of merit under Section 9(1) (a) and (b) of cap 301 and is declared to be of no effect.b.The costs of the reference to be assessed/taxed by the Tribunal’s Deputy Registrar are awarded to the tenant which shall be offset against the rent account once done.c.No other notice based on the same ground shall be issued for a period of twelve (12) months in line with Section 9(3) (b) of Cap. 301, Laws of Kenya.It is so ordered.

JUDGEMENT DATED, SIGNED & VIRTUALLY DELIVERED THIS 10TH DAY OF JANUARY 2024. HON. GAKUHI CHEGE - VICE CHAIRBUSINESS PREMISES RENT TRIBUNALJudgement delivered in the presence of:Mugambi for the TenantKiplagat for the Landlord