Several years ago, lawyers and property experts started raising concerns about Kenya’s outdated law governing commercial leases — the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act. Although this law was meant to protect tenants, smart lease drafting and rigid interpretations by landlords often made it very difficult for tenants to exit leases, even in genuine cases of hardship.
A recent Supreme Court decision in Kwanza Estates Limited v Jomo Kenyatta University of Agriculture and Technology (JKUAT), delivered in December 2024, now provides clarity — and some important lessons — for both landlords and tenants.
What Happened?
In 2016, Kwanza Estates (the landlord) and JKUAT (the tenant) entered into a six-year lease. The rent started at Kshs. 45.5 million per year and would increase over time. The lease was not registered and had no break clause (meaning there was no easy way to end it early).
In 2021, after COVID-19 hit hard and new government policies reduced JKUAT’s income, the university decided that running its Nakuru campus was no longer financially sustainable. JKUAT gave the landlord a three-month notice and tried to vacate the premises.
But Kwanza Estates refused to accept the termination. They blocked JKUAT’s attempts to move out, issued fresh rent invoices, and even sent auctioneers after the university to recover unpaid rent — arguing that the lease was still in force until April 2022.
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What the Courts Said
- The Environment and Land Court (ELC) sided with the landlord, saying the lease had no break clause and JKUAT must pay rent until the lease expired.
- The Court of Appeal overturned that, finding that COVID-19 and other unforeseen changes had frustrated the lease, and the phrase “sooner determination” in the lease allowed early exit. They ordered JKUAT to pay Kshs. 40 million to fix any damages to the premises but freed them from paying future rent.
- The Supreme Court, however, disagreed with the Court of Appeal and mostly agreed with the original trial court — but with important clarifications:
- Force majeure (unforeseen major events like pandemics) can only apply if it’s written in the contract — and it wasn’t in this lease.
- Frustration (when unexpected events make it impossible to perform a contract) applies only in very rare cases — and COVID-19 restrictions had already been lifted when JKUAT tried to exit.
- The lease had no valid early termination clause.
- JKUAT’s attempt to leave early was a breach of contract.
The Supreme Court ruled that landlords cannot force tenants to stay on a property they want to vacate, but they can claim damages for the early breach. In this case, damages — not future rent — were the correct remedy.
Why This Decision Matters
The Supreme Court’s ruling clears up several big questions for anyone entering a lease:
- Fixed-term leases without termination clauses are risky for tenants. Exiting early can expose tenants to heavy damages claims.
- Force majeure needs to be clearly stated in the contract. Without it, tenants cannot easily argue that events like a pandemic justify ending a lease.
- Landlords must try to mitigate their losses. If a tenant leaves early, landlords should look for a new tenant rather than simply claiming full rent for the remainder of the term.
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Practical Lessons
For Landlords:
- Always draft leases carefully — including provisions for early termination and penalties.
- If a tenant leaves early, focus on finding a replacement quickly. Courts expect landlords to minimize losses, not sit back and demand full rent.
- Understand that damages, not continued rent, are the main legal remedy if a tenant breaches a lease.
For Tenants:
- Never assume you can walk away from a lease, even in tough times, unless the lease allows it or you can prove true frustration.
- If you want protection against events like pandemics or economic crises, insist on a strong force majeure clause when negotiating your lease.
- Know that you bear the burden of proving frustration — and courts apply it very strictly.
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Final Thought
The Supreme Court’s decision in Kwanza Estates v JKUAT is a wake-up call: both landlords and tenants must be deliberate and cautious when entering lease agreements. Old tricks like drafting long leases without exit options may no longer guarantee landlords rent security. On the other hand, tenants must understand that hardship alone doesn’t automatically release them from their lease obligations.
Clear contracts, clear expectations, and clear remedies — that’s the way forward.
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