Who this guide is for

This guide is for businesses that occupy commercial premises in Kenya as a tenant — whether a retail shop, a restaurant, a hotel, a professional office or a catering establishment. It covers businesses that are protected by Cap 301 as well as those outside that protection and explains what both groups should do to secure their position.

The legal framework

Commercial tenancy in Kenya is governed by two principal statutes:

• The Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301) — the central piece of legislation, enacted in 1965. It gives tenants in covered premises strong statutory protection against eviction and arbitrary rent increases, and establishes the Business Premises Rent Tribunal as the primary dispute resolution forum.
• The Distress for Rent Act (Cap 293) — which governs a landlord’s right to levy distress (seizure of the tenant’s goods on the premises) for unpaid rent. Distress is a common-law remedy that Cap 293 regulates but does not abolish.

Where Cap 301 applies, its provisions take precedence over the terms of the lease on the matters it covers. A lease clause that attempts to contract out of Cap 301, or to penalise the tenant for invoking it, is void under section 3(6) of the Act.

Most office tenancies in CBD high-rise buildings are governed by written leases exceeding five years and therefore fall outside Cap 301’s definition of a controlled tenancy. They are regulated by the terms of the lease itself and ordinary contract law. Getting legal advice before signing such a lease is therefore especially important, because statutory protections will not fill the gaps.

What is a controlled tenancy under Cap 301?

Section 2(1) of Cap 301 defines a “controlled tenancy” as a tenancy of premises used as a shop, hotel or catering establishment, where the tenancy either:

• has not been reduced to writing; or
• is in writing but is for a period not exceeding five years, or contains a break clause or termination provision exercisable within five years.

Tenancies by or to the Government, a county government or a local authority are excluded.

In practice, this means most short-term retail and F&B tenancies are controlled tenancies and enjoy full Cap 301 protection. A tenant occupying a shop on a periodic monthly tenancy (common in Kenyan markets and malls) is almost certainly protected.

A long-term office or warehouse lease running for more than five years — with no break within five years — is typically not a controlled tenancy. The tenant’s rights then depend entirely on the lease terms.

The “shop, hotel or catering establishment” requirement

Cap 301 covers premises used for trade, business or professional purposes within those categories. This has been interpreted broadly by Kenyan courts and the Tribunal to include retail shops, restaurants, bars, cafeterias, hotels and guesthouses. Professional offices (solicitors, accountants, doctors) have in some decisions been held to fall within the Act’s scope where the premises are used for a business carried on with the public.

If you are unsure whether your tenancy is a controlled tenancy, seek legal advice before responding to any notice from your landlord — the consequences of getting this wrong can be severe.

Your notice rights as a commercial tenant

Under section 4(4) of Cap 301, a notice to terminate a controlled tenancy must give not less than two months’ notice. The notice must specify a termination date that is not earlier than the date the original tenancy would have permitted. Parties can agree in writing to a shorter period, but a landlord cannot impose a shorter period unilaterally.

Critically, receiving a termination notice does not mean you must leave. Section 6(1) of Cap 301 entitles a tenant who receives a notice to refer that notice to the Business Premises Rent Tribunal within two months of receiving it. Once a referral is made, the notice is suspended: it has no effect until the Tribunal makes a determination. The Tribunal will then decide whether the landlord has established one of the seven statutory grounds for possession.

This is one of the most important rights a commercial tenant has. If you receive a notice to vacate, the first call you should make is to a lawyer — not to a removal company.

Grounds for eviction: when a landlord can recover possession

For controlled tenancies, section 7(1) of Cap 301 limits the grounds on which a landlord can recover possession to seven. If none of those grounds is established, the Tribunal will not order possession, however long the tenancy notice has been in force.

The seven grounds are:

Ground	What it requires
(a) Breach of repair	The tenant has failed to observe a covenant or condition of the tenancy to keep the premises in repair, and the breach is substantial enough to justify eviction.
(b) Rent arrears or persistent late payment	The tenant is in arrears of two months’ rent, or has persistently delayed paying rent despite having the means to pay.
(c) Breach of other covenants	The tenant has substantially breached any other covenant or condition in the tenancy.
(d) Suitable alternative accommodation	The landlord offers suitable alternative accommodation for the business on reasonable terms.
(e) Reconstruction of the sub-tenancy	A sub-tenancy has been created and the landlord now requires possession for reconstruction purposes related to the sub-tenancy arrangement.
(f) Demolition or substantial reconstruction	The landlord intends to demolish or substantially reconstruct the premises and cannot reasonably do so while the tenant remains in occupation.
(g) Landlord’s own occupation	The landlord intends to occupy the premises for a business of their own, subject to the restriction in section 7(2).

The own-occupation restriction (section 7(2))

A landlord cannot rely on ground (g) — own occupation — if the landlord’s interest in the property was purchased or created within five years of the termination date and the premises have been continuously used for business purposes since that purchase. This prevents landlords from buying premises that are already tenanted, serving notice, and then recovering possession on the basis of their own use.

Compensation for tenants who lose possession

Under section 12(1) of Cap 301, where the Tribunal orders possession under grounds (d), (f) or (g), the Tribunal can award the tenant compensation for goodwill lost as a result of giving up the tenancy, and for any tenant’s improvements that were not authorised by the lease. Tenants losing possession on legitimate grounds should always ask for a compensation order — it is a statutory right that many tenants overlook.

The Business Premises Rent Tribunal

The Business Premises Rent Tribunal is established under section 11(1) of Cap 301. It is a specialist tribunal, not a court, and sits in Nairobi and other major centres designated by the Cabinet Secretary. Its proceedings are more accessible and faster than High Court litigation, and costs are typically lower.

Under section 12(1) of Cap 301, the Tribunal has wide powers, including to:

• determine whether a tenancy is a controlled tenancy;
• fix, increase or decrease the rent payable under a controlled tenancy;
• apportion rent for premises that are shared;
• fix or vary service charges payable to the landlord;
• order possession in favour of the landlord (on one of the seven grounds);
• authorise a tenant to carry out repairs where the landlord is in default;
• award compensation to the tenant for goodwill and for improvements made to the premises;
• permit or restrict distress for rent; and
• award costs against either party.

A Tribunal decision can be appealed to the High Court, but appeals are limited to questions of law. The Tribunal’s factual findings generally stand.

Section 3(6) of Cap 301 renders void any agreement, term or condition that purports to preclude or limit the application of the Act, or that penalises a tenant for making a Tribunal application. Any “no Tribunal” clause in a lease is legally unenforceable.

Rent increases for commercial tenants

For controlled tenancies, a landlord cannot unilaterally impose a rent increase in the way they might claim to be able to in a free-market lease. Section 9(2)(a) of Cap 301 provides that the Tribunal, when determining or varying rent, has regard to the terms of the tenancy and the rent at which the premises might reasonably be expected to be let in the open market. In making that assessment, the Tribunal disregards the fact that the sitting tenant is in occupation, the tenant’s goodwill, and any improvements made by the tenant at the tenant’s own expense that were not required under the lease.

A tenant who receives a notice of rent increase under a controlled tenancy can, under section 4(3) of Cap 301, serve a counter-notice on the landlord — a formal written notice requiring the landlord to respond or refer the matter to the Tribunal within one month. The rent cannot be increased until the Tribunal has made a determination.

For uncontrolled tenancies (long-term leases), rent review provisions are entirely a matter of contract. Well-drafted commercial leases in Kenya typically include a rent review clause every two to three years, with a mechanism that either pegs increases to the Consumer Price Index or requires the parties to agree on a new rent (with an expert determination or RICS valuer as the fallback). If your lease does not have a clear rent review mechanism, seek advice before the next review date approaches.

Assignment and subletting

Whether a commercial tenant in Kenya can assign the lease (transfer it to a new tenant) or sublet the premises depends on the terms of the lease. Most commercial leases in Kenya require the landlord’s consent to assignment and subletting, and many provide that consent may not be unreasonably withheld.

Where the lease requires consent and the landlord unreasonably refuses, the tenant may have a claim for damages. What counts as “unreasonable” depends on the circumstances, but courts have held that a landlord cannot refuse simply because they dislike the incoming tenant or would prefer a different tenant at a higher rent.

For controlled tenancies, creating a sub-tenancy may also bring the Tribunal into play if the sub-tenancy falls within Cap 301’s definition of a controlled tenancy. A landlord whose tenant has sub-let to a controlled sub-tenant faces additional restrictions on recovering possession.

Before assigning or subletting, always:

• read the assignment and subletting clauses of your lease carefully;
• obtain the landlord’s written consent and make sure it covers both the assignment and any change of use;
• have the incoming assignee or sub-tenant checked for creditworthiness; and
• ensure the assignment or subletting agreement transfers the correct rights and obligations.

Repairs and dilapidations

The repair obligations in a commercial tenancy depend on what the lease says. Full repairing and insuring leases (FRI leases) — common for longer tenancies — place the entire burden of internal and external repair on the tenant. Shorter tenancies often limit the tenant to keeping the interior in the condition it was received (fair wear and tear excepted).

At the end of a tenancy, a landlord may serve a schedule of dilapidations — a list of repairs that the landlord says the tenant was obliged to carry out but has not. Tenants are often served large and inflated dilapidations claims. You are entitled to challenge such claims, particularly where:

• the schedule includes items for which the lease does not make you responsible;
• the claimed cost of repair significantly exceeds the diminution in the property’s market value caused by the disrepair; or
• the landlord intends to redevelop the premises and the alleged disrepairs are therefore irrelevant to any loss.

A well-prepared schedule of condition at the start of the tenancy — a photographic and written record of the state of the premises on the day you took possession, agreed with the landlord and attached to the lease — is the most effective defence against an inflated dilapidations claim. Insist on one before you sign.

If your landlord is in breach

Commercial landlords in Kenya are sometimes slow to carry out repairs they are responsible for, interfere with a tenant’s quiet enjoyment of the premises, or attempt to pressure tenants into leaving without following the legal process. The remedies available to a commercial tenant include:

• Tribunal referral: for controlled tenancies, the Tribunal can order the landlord to carry out repairs (or authorise the tenant to do so and recover the cost from rent). The Tribunal can also award damages for interference with the tenant’s business.
• Deduction from rent: in limited circumstances, a tenant may be entitled to deduct the cost of urgent repairs from rent, but this carries risks and should only be done on legal advice.
• Injunction: the High Court can grant an injunction restraining a landlord from interfering with the tenant’s occupation or from carrying out unlawful self-help eviction. Self-help eviction — changing the locks or removing the tenant’s goods without a Tribunal or court order — is unlawful for controlled tenancies. If it happens to you, contact a lawyer immediately.
• Damages: a tenant can sue for damages caused by the landlord’s breach of the lease or of the implied covenant of quiet enjoyment.

Negotiating and reviewing a commercial lease

A well-negotiated commercial lease is the best protection a business tenant can have. Regardless of Cap 301’s protections, most disputes between landlords and tenants arise from poorly drafted leases that leave critical terms ambiguous. The following are the points that matter most:

• Rent and review: what is the starting rent, when does it review, by how much, and what is the review mechanism? Avoid open-ended clauses that give the landlord sole discretion.
• Permitted use: make sure the permitted use is wide enough to cover all activities you intend to carry on, including any likely changes of use during the tenancy.
• Repair: understand exactly what you are agreeing to keep in repair. If the lease requires you to maintain the property in a condition better than it was when you arrived, say so — and insist on a schedule of condition.
• Assignment and subletting: negotiate for a right to assign with landlord consent, not to be unreasonably withheld or delayed, so you can sell your business without losing the lease.
• Break clauses: a tenant-only break clause gives you the option to exit early if the business underperforms. A break clause exercisable after three years in a five-year lease is worth fighting for.
• Service charges: if the landlord is recovering service charges (maintenance, security, common areas), insist on a cap, a right to audit, and a list of what is included.
• Deposit: negotiate the amount, the conditions for return, and the timeline. A deposit that sits in the landlord’s personal account for the life of the tenancy and is returned late (if at all) is a common source of disputes.
• Development and alterations: make sure you have the right to carry out fit-out works, install signage, and make alterations necessary for your business. Get the landlord’s consent in writing before starting any works.

We recommend having a lawyer review any commercial lease before you sign it, however familiar the landlord or agent may seem. The standard “market lease” is rarely standard — and the clauses that look routine are often the ones that cause the most trouble.

Common questions

My landlord says Cap 301 does not apply to my premises. Is that right?

Not necessarily. The scope of Cap 301 is determined by the nature of the premises and the length of the written tenancy — not by what the landlord tells you. Even if your landlord insists you are not protected, refer the matter to the Tribunal, which has jurisdiction to determine whether a tenancy is a controlled tenancy under section 12(1). Do not accept the landlord’s characterisation without taking independent legal advice.

I have not paid rent for two months. Can my landlord change the locks?

Not without a Tribunal or court order for a controlled tenancy. Self-help eviction — changing the locks, removing your goods, or physically excluding you from the premises — is unlawful. A landlord who does this exposes themselves to a damages claim and a potential injunction. However, two months’ rent arrears is one of the seven statutory grounds for possession under section 7(1)(b), so the landlord can apply to the Tribunal for a possession order. If you are in arrears, seek advice and pay what you can to reduce the arrears before the Tribunal hearing.

My landlord wants to increase the rent. Do I have to pay?

For a controlled tenancy, no — not without the Tribunal’s approval if you dispute the increase. A landlord who serves a rent increase notice must follow the procedure in Cap 301, and you can refer the notice to the Tribunal. The Tribunal will assess the market rent disregarding your goodwill as a sitting tenant, which often produces a rent lower than what the landlord is demanding.

For an uncontrolled tenancy, the position depends on your lease’s rent review clause. Read it carefully and seek advice well before the review date.

My lease is coming to an end. Do I have a right to renew?

For a controlled tenancy, the protection of Cap 301 continues after the original term ends — the landlord cannot simply refuse to renew and ask you to leave without following the Act’s procedure. The landlord must serve a valid notice under section 4 and, if you refer it to the Tribunal, establish one of the seven grounds for possession. If none is established, you can remain in occupation on the same terms (subject to any rent review).

For an uncontrolled tenancy, there is no statutory right to renew. Whether you can negotiate a renewal — and on what terms — depends on the market and on whether the landlord is willing. A lease with an option to renew on specified terms gives you far greater security than one that is silent on renewal.

Can I claim compensation for improvements I have made to the premises?

Yes, under section 12(1) of Cap 301, the Tribunal can award compensation to a departing tenant for improvements made at the tenant’s expense that were not authorised by the lease. To succeed you will need to show that the improvements genuinely added value to the premises and that the cost was borne by you (not the landlord). Keep records — invoices, permits, photographs — of all improvements you carry out.

How OLM Law can help with commercial tenancy matters

OLM Law Advocates LLP advises commercial tenants — from sole traders to listed companies — across a wide range of commercial tenancy matters in Kenya, including:

• Reviewing and negotiating commercial leases before signature;
• Advising on whether your tenancy is a controlled tenancy under Cap 301;
• Referring termination notices and rent-increase notices to the Business Premises Rent Tribunal;
• Representing tenants before the Tribunal in possession hearings, rent-determination applications and compensation claims;
• Advising on assignment, subletting and change of use;
• Challenging dilapidations claims at the end of a lease; and
• Obtaining injunctions against unlawful eviction and interference with quiet enjoyment.

We offer commercial tenants a no-obligation consultation to assess your position and advise on your options. If your landlord has served notice or is putting pressure on you to leave, do not delay — the referral period under Cap 301 is limited, and acting early gives you more options.

This guide is for general information only and does not constitute legal advice. The law governing commercial tenancy in Kenya is fact-specific: whether a tenancy is protected, what notices are valid and what remedies are available depend on the particular lease, the nature of the premises and the circumstances. You should seek independent legal advice before taking any action in relation to your tenancy. OLM Law Advocates LLP is a law firm regulated by the Law Society of Kenya.