Investors need to avoid protected tenancy

By Collins Kowuor

Let me start by apologising to my readers for making them feel like orphans during the break. I am back and energised by your inquiries during the period.

Even though I was away from the print media, I did not stop interacting with my friends. Actually, I was having tea with my friend Maina when out of blues he asked me a question, “My friend, why is it that every time I get a new lease for an office or renew lease for my existing office, the term of the lease is usually five years and more, not less?” Friends of most professionals consult that way.  “To avoid making you a protected tenant,” I answered. “Protected tenant!” he exclaimed. It seemed that he had never bothered to ask that question despite leasing several offices.

“Relax”, I tried to calm him down. “It is a huge topic but I will try to summarise it into a ten minutes’ topic or less as you order for more tea,” I offered. Protected tenancy is related to two kinds of property use in Kenya; residential and commercial. They spring from two different laws. Rent Restriction Act is one of them and relates to residential properties. Landlord and Tenant Act is the other and relates to commercial property.

The residential law applies to houses with monthly rents of Sh2500 and below. The law prevents increase of rent and right to possession without leave of the tribunal.

 “The commercial law is what applies to you,” I went on. The law applies to premises (shops, hotels and catering establishments). This is where tenancy has not been reduced to writing, or when reduced to writing, it is for five years and less; or it has provided for tenancy termination within five years from the commencement of the tenancy.

The law defines catering establishment as any premise where there is trade on food items and drinks for consumption as carried out by persons other than those who reside in such premises.

A hotel in this context means any premises in which accommodation or accommodation and meals are supplied or are available for supply to five or more adult persons in exchange for money or other valuable consideration. Shop here means premises occupied wholly or mainly for the purposes of a retail or wholesale trade or business or for the purpose of rendering services for money or money’s worth.

What does rent mean in this context? The law defines rent descriptively that it includes any sum paid as valuable consideration for the occupation of any premises, and any sum paid as rent or hire for the use of furniture or as a service charge where premises are let furnished or where premises are let and furniture therein is hired by the landlord to the tenant or where premises, furnished or unfurnished are let with services.

What are considered as services? Use of water, light or power, use of sewerage facilities, sweeper, watchman, telephone or any other amenity or facility available to the tenant. It is the supplying of meals, and the right of access to any place or accommodation given to the tenant by reason of tenant’s occupation of the premises comprised in the tenancy that is exempted.

A tribunal called Business Premises Rent Tribunal is responsible for resolving disputes arising from such lease.  The disputes include determining whether or not any tenancy is a protected tenancy; varying the rent to be payable in respect of any protected tenancy; fixing the amount of such service charge where the rent chargeable in respect of any protected tenancy includes payment by way of service charge; and permitting the levying of distress for rent among others.

“Maina, that is enough for the tea,” I concluded with finality when I noticed he had started suffering from information overload.

The writer is Chairman of Institution of Surveyors of Kenya