Leasing of property, whether for residential or commercial use, is a common practice in Kenya. However, situations may arise where a tenant may need to terminate the lease agreement before the expiry of the agreed duration. This could be due to various reasons, such as financial difficulties, changes in personal circumstances, or the need to relocate. Early or premature termination of a lease is not always a straightforward process and it may have legal and financial implications for both the tenant and landlord. In this context, it is essential to understand the legal framework governing lease termination in Kenya and the implications of early or premature terminations for tenants and landlords.
The Legal Regime Governing Termination of Leases in Kenya
- Periodic Leases (Section 57 of the Land Act, 2012)
A periodic lease occurs when the term of the lease is not fixed and there is no provision of issuance of notice for termination of the lease. It also includes arrangements where a landlord permits exclusive occupation of a property at a specified rent without any agreement in writing between the parties. In the case of Ukwala Supermarket (Eldoret) Limited v Amritral Sojpar Shah Wholesalers Limited [2017] eKLR, the Court held as follows;
“I do find that there was no written agreement between the plaintiffs and the defendant and agree with the plaintiff that the relationship between the plaintiff and the defendant was a periodic tenancy. A periodic tenancy is a tenancy that continues for a successive period until the tenant gives the landlord notification that he wants to end the tenancy. The period depends on how the rent is paid. For a calendar month, it becomes a monthly tenancy. If rent is paid quarterly, it becomes a quarterly tenancy and if paid yearly, a yearly tenancy.”
Termination of a periodic lease is as provided under Section 57(3) of the Act and it is by reference to when the rent is payable. This means that if a tenant desires to terminate a periodic lease agreement, they will give notice based on the period by which they pay rent. As such, if the rent is payable on a monthly basis, then they should issue a termination notice of one month; if it is every quarter, a notice of not less than a quarter; if it after every six months a six months’ notice; and if it is yearly then a notice of a year will be sufficient.
- Short Term Leases (Section 58 of the Land Act, 2012)
A short-term lease is a lease for a term of 2 years or less without an option for renewal. It may be entered into orally or in writing. As such, short term leases are periodic in nature and therefore similar to the provisions discussed above, the termination will be in reference to when rent is payable by a tenant.
- General Leases
General leases are not periodic in nature and have a specified/ determined duration of term. This type of lease will expressly contain a termination clause providing the parties with an option to terminate a lease by the issuance of a written notice for a specified period. This type of lease is mostly issued by a landlord who does not desire to have a short-term or a periodic lease over their residential premise.
A tenant who wishes to terminate a general lease will have to rely on the provisions of the lease agreement and comply with the termination clause when issuing their notice.
- Fixed Term Leases without a Termination Clause
This type of lease mostly applies to commercial property and it is preferred as it eliminates the risk of creating a controlled tenancy. Therefore, a commercial lease must be in writing, for a fixed duration term of more than 5 years and should not contain a termination clause.
It is difficult for business owners(tenants) to terminate this type of lease before the expiry of the agreed duration term (which is more than 5 years). Premature/early termination of a commercial lease grants the landlord a right to seek compensation from the tenant for breach of the terms lease.
In Indar Singh Limited vs, Star Times Media Company Limited (2021) eKLR, the plaintiff sought to restrain the defendant from unilaterally terminating a commercial lease agreement for a term of 6 years and for the defendant to continue paying rent over the premises. On the other hand, the defendant desired to terminate the lease due to bad business as it was unable to meet its rental obligations. The Court held that a tenant cannot unilaterally terminate a fixed term lease that has no termination clause. However, the defendant could not be forced to continue the occupation of the leased premises if it had decided to vacate citing the inability to meet its rental obligations. Therefore, while dismissing the plaintiff’s prayers, the Court held that the plaintiff’s only remedy, in this case, would be a claim for damages for breach of the contract.
Can a landlord claim full payment of rent for the remainder of the lease period for early termination?
In light of the above, it is wrongful for landlords to claim full payment of rent for the remainder of the lease when a tenant terminates a lease early. This position was echoed in the case of Chimanlal Meghji Shah & Another vs. Oxford University Press (EA) Limited, where the High Court ruled that it is unconscionable for a landlord to demand full rent for the remaining part of the tenancy/lease period when such lease/tenancy has been terminated. This is because the landlord reserves the right to offer the same premises to a different tenant for occupation.
In conclusion, early or premature termination of leases in Kenya can be a complex and challenging process for both landlords and tenants. Effective communication and negotiation go a long way in resolving any disputes that may arise during the termination process. Ultimately, landlords and tenants should seek legal advice on a case-by-case basis before making any decisions that may affect their rights and obligations under the lease agreement.
Written by Cynthia Kitolo
Legal Officer & Advocate of the High Court of Kenya
