How Landlord, Tenant Bill will reform tenancy
The Landlord and Tenant Bill 2021 (Bill) was introduced by the Majority Leader in the National Assembly, Hon. Amos Kimunya earlier in 2021 and has since been passed by the National Assembly and is currently being considered by the Senate.
The Bill seeks to promote stability in the rental sector by consolidating laws governing the relationship between landlords and tenants and repealing existing laws including the Distress for Rent Act (DRA), the Rent Restriction Act (RRA) and the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (LTA).
The Bill applies to all residential premises other than certain excepted residential premises such as residential premises leased on serviced tenancies as well as residential premises whose monthly rent does not exceed such amount as will be prescribed by the Cabinet Secretary. It is expected that the rent limit to which the Bill will apply is likely to be increased from the current KES 2,500 provided under the RRA.
The Bill also applies to tenancies over business premises which are not reduced to writing or are reduced to writing but are for a period not exceeding five years or contain a provision for termination other than for breach of a covenant within five years of the commencement of the tenancy term. These are the tenancies currently known as controlled tenancies under the LTA which is earmarked for repeal should the Bill become law.
For long, to avoid issues touching upon controlled tenancies, landlords creating tenancies over business premises have insisted on leases in writing, with lease terms of over five years without any lease break or exit options. The expectation was that the Bill would address this issue but the Bill has retained the same definition. It remains to be seen whether the Senate will address this issue when the Bill is considered. Should the issue of controlled tenancies be addressed and there are no restrictions on the term and exit options, this would certainly make business premises more marketable and attractive to tenants as they would not be locked into long term leases and would be able to exercise exit provisions.
One of the more significant reforms proposed by the Bill is the introduction of the Chief Justice’s power to establish tribunals to handle disputes between landlords and tenants. This is a significant departure from the current procedure where the powers to establish tribunals are vested in cabinet secretaries responsible for matters relating to landlord and tenants. By transferring the establishment of the tribunals to the judiciary, it is expected that this will lead to a streamlined process of dispute resolution and enhance efficiency.
The tribunals have also been granted far reaching powers including the powers to punish for contempt in the same manner as any court of law. In discharging their mandate, the tribunals will be required to dispose of matters expeditiously and the Bill proposes a timeline of three months within which a dispute must be resolved. Where the tribunal is not able to determine a matter within three months, the chair of the tribunal is required to provide written reasons for the delay. This is expected to ensure that justice is served in a timely manner and to deal with chronic delays that litigants continue to have experience.
Parties to a tenancy agreement are free to negotiate the agreement and mutually agree the terms. However, the Bill sets out terms that shall be implied in every tenancy. These terms accord protection to the party with a weaker bargaining position which is often the tenant. Where a tenancy agreement seeks to exclude the operation of the Bill, such a provision shall be deemed to be void.
Tenants will no longer have to worry about arbitrary evictions as the Bill proposes clear procedures on how tenancies can be terminated by either party. Where a landlord seeks to terminate the tenancy, they are required to give the tenant a notice in the prescribed form stating when the tenancy terminates and the reason for the termination. If the tenant does not vacate at the end of the notice period, the landlord must seek an order from the tribunal to evict such a tenant. A landlord may, however, terminate a tenancy without reference to the tribunal where the landlord gives twelve months’ notice in case of residential premises and twenty-four months’ notice in case of business premises. A tenant also has an obligation to give notice before terminating a tenancy. For business premises the notice period is two months while for residential premises, it is one month.
The parties to a tenancy will be free to mutually agree on the applicable rent. However, where they fail to agree, either party can approach the tribunal which shall then determine the rent based on comparable premises within the area. Where a landlord seeks to increase rent, they must give the tenant at least a ninety days’ notice. If the tenant does not object to the increase within thirty days, they are deemed to have consented to it. Further, where the landlord ceases to offer certain services, the landlord shall be required to reduce the rent proportionate to the services reduced. A landlord may, however, avoid the requirement for notice before increasing rent by providing for a rent escalation within the tenancy agreement.
The Bill gives the tenant the right to assign or sublet the premises with the consent of the landlord, which consent shall not be unreasonably withheld. If the tenant is dissatisfied with the landlord’s decision to withhold consent to sublet or assign the premises, the tenant can approach the tribunal which shall then consider the issue and if it finds that the landlord has unreasonably withheld the consent, order the assignment or subletting.
Another significant proposal relates to distress for rent. Under the Bill, landlords will now be required to pursue legal process before distraining for rent. This essentially means that landlords will be required to institute proceedings at the relevant tribunal for necessary orders authorising them to distrain for rent which is a complete departure from the current dispensation where landlords do not have to obtain any such orders. While this may be a welcome relief to tenants who currently dread the ease with which landlords may distrain for rent, it is likely to be seen as a hurdle to landlords who will have to suffer additional time and costs in distressing for rent where a tenant is in default in rental payments.
In conclusion, one must be cognisant to the fact that the laws that the Bill seeks to repeal were enacted as early as the 1950’s and while the Bill may not have dealt with or gone far enough with all the reforms required in this area of the law, it is certainly a step in the right direction in easing and simplifying the relationship between landlords and tenants, in keeping with the current times and a welcome start to further reforms.
The article was published in the Business Daily on 19 April 2022 and can be accessed here.