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ELCPartially AllowedELCA Case No. 32 of 2015· [2020] KEELC 3410 (KLR)

Margaret Wanjugu Nduma & 3 others v James Gichuki Gathura [2020] KEELC 3410 (KLR)

Environment and Land Court
5 March 2020
4,228 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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This was a first appeal to the Environment and Land Court at Nyeri against the judgment and order of the Chairman of the Business Premises Rent Tribunal (Hon. Mbichi Mboroki) delivered on 17 July 2015, in four references (BPRT Nos 21, 22, 24 and 26B of 2015) in which the Tribunal assessed increased rents using an average comparable rate of Kshs.64.75 per square foot. The Appellants (tenants) contended they were denied a fair hearing, that the Tribunal ignored their valuation report and the dilapidated state of the premises adjacent to Majengo slums, and that the resulting rent increases were exorbitant. The Respondent (landlord) maintained that the Tribunal had a wide discretion under Section 12(1)(b) of Cap 301, that both valuation reports were considered, and that averaging the two valuers' rates was a permissible method. The court framed three issues: whether the Chairperson properly applied the principles governing assessment of rent; whether the rent increase was outrageous; and whether the Chairperson adopted an erroneous formula. Holding that the Tribunal placed excessive emphasis on comparables while ignoring the other Form G principles (age of building, market value of land, improvements), was not alive to the reality on the ground, and that simple averaging of the two valuation reports was not a proper criterion, the court allowed the appeal, set aside the impugned assessment and remitted the matter to the Tribunal for reassessment of the rents. Each party was ordered to bear their own costs of the appeal. Judgment dated and delivered at Nyeri on 5 March 2020 by M.C. Oundo, Environment & Land Judge.

Key legal issues

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01

Whether the Chairperson properly applied the principles governing assessment of rent

Holding

No. The Tribunal placed so much emphasis on comparables at the expense of all the other statutory principles and was not alive to the reality on the ground, contrary to Section 12(1)(b) of the Act.

Reasoning

The Form G principles require the Tribunal to consider the original cost of construction, age of building, market value of land, improvements and amenities, and rents over the past three years. Here, there was no mention of the age of the building, the market value of the land or improvements, even though both valuers had remarked on the deplorable condition of the premises. The Chairman relied almost exclusively on comparables.

p. 5
02

Whether the rent increase was outrageous

Holding

The rents arrived at by the Tribunal cannot be allowed to stand, given the misplaced emphasis on comparables alone.

Reasoning

Assessment of rent requires consideration of location, comparables in nearby premises and other factors. Having found the Chairman erred by considering only comparables, the court held that the resulting rent increases were unsustainable. Reliance was placed on Karibu House (1973) Ltd v Travel Bureau Ltd on when an appellate court may interfere with a Tribunal's assessment.

p. 6
03

Whether the Chairperson adopted an erroneous formula in arriving at the rent increase

Holding

Yes. Taking the simple average of the two valuers' rates (Kshs.64.75 per sq ft) was not a proper criterion; the Tribunal ought to have decided which report was better, and where serious disparities existed, should have employed a valuer under Section 12(3).

Reasoning

Following Tala Investments Ltd v Green Spot Limited, a Tribunal must consider all reports properly before it and go into individual comparables rather than merely arrive at a mean figure of the landlord's and tenant's valuers' reports. The court found the simplistic averaging formula erroneous and remitted the matter for reassessment.

p. 6

Legal principles established

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  • In assessing rent, a Tribunal must consider each individual comparable carefully and decide which is the better report, not merely take the average of the comparable presented by both sides
  • An appellate court can interfere with a Tribunal's rent assessment if it was reached by mistake of law, disregard of principle, misapprehension of fact, or other enumerated errors
  • The duty of the court in determining a fair rent is to balance the tenant's continued occupancy against the landlord's fair return
  • Where a Tribunal realises serious disparities between the parties' valuation reports, it should employ the services of a valuer under Section 12(3) of the Act

Court orders

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  1. 1.The appeal is allowed
  2. 2.The matter is remitted back to the Tribunal for a reassessment of the rent to be paid by the Appellants for the premises
  3. 3.Each party shall bear their own costs of the Appeal

Authorities

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Legislation

  • Constitution of KenyaArticle 50(1)
  • Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301)Section 4(2)
  • Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301)Section 9(2)(a)
  • Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301)Section 12(1)(b)
  • Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301)Section 12(3)
  • Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301)Section 15(1) and (2)
  • Civil Procedure RulesOrder 42 rule 13(4)
  • Regulations under the Landlord and Tenant (Shops, Hotels and Catering Establishments) ActForm G

Cases cited (6)

  • Supa Duka Nakuru Limited v Baringo United Company Limited
    (2017) eKLR
  • Shah & Shah vs Kagunda
    1978 KLR 35
  • Ephantus Mwangi & Another vs. Duncan Mwangi Wambugu
    (1982) IKAR 278
  • Cleaners Limited –vs- Barclays Bank DCO
    [1972] EA 188
  • Tala Investments Ltd. vs. Green Spot Limited
    Civil Appeal No. 269 of 1993
  • Karibu House (1973) Ltd –vs- Travel Bureau Ltd
    [1976-80] KLR 152
On appeal from
Business Premises Rent Tribunal
Nos 25, 22, 24 & 26B/2015 at Nyeri
Jurisdiction invoked
Appeal under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301), Section 15(1) and (2)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Margaret Wanjugu Nduma & 3 others v James Gichuki Gathura [2020] KEELC 3410 (KLR)", Case Analysis (2020). ELCA Case No. 32 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/3410/eng@2020-03-05

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.