2. Landlord and Tenant Bill, No. 3 of 2021

The Bill consolidates the laws relating to the renting of business and residential premises and seeks to regulate the relationship between landlords and tenants.

Quick Link: https://kenyalaw.org/kl/fileadmin/pdfdownloads/bills/2021/TheLandlordandTenantBill_2021.pdf

· The Bill seeks to repeal and replace the Distress for Rent Act (Cap 293), the Rent Restriction Act (Cap 296) and the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act (Cap 301).

· The Bill attempts to introduce a legal framework which balances the interests of landlords and tenants in a free market economy by ensuring that landlords earn reasonable income from their investment in housing and protects the tenant.

· Part II of the Bill provides for the establishment, composition and jurisdiction of the Landlord and Tenant Tribunal. Under Section 17, the Tribunal may determine rents payable where the same cannot be agreed mutually between parties, by referring to lettings of similar status or the market rent of the premises.

· Section 18 obligates a landlord to issue a 90 day written notice to a tenant before increasing rent and such increase shall only upon if: there has been carried out or undertaking to carry out capital expenditure on the premises or provides additional service; and taken into account the inflationary trends which inflation shall be based on the percentage change from year to year in the Consumer Price Index for prices of goods and services as reported monthly by the Kenya National Bureau of Statistics, averaged over the twelve-month period that ends at the end of December of the previous calendar year, rounded to the first decimal point. Rent increases are also limited to a period of 12 months for residential premises and 24 months for business premises.

· Overall, rent controls have the effect of restricting the ability of landlords to increase rents to existing tenants. While this may serve to promote affordability of housing for tenants in current occupation at least for the time the rent controls remain in place, it may potentially serve to reduce the quality of housing as landlords cease to improve or maintain the housing units and even potentially attempt to make the houses unconducive for habitation to force tenants to leave. Even more fundamentally, it may have the effect of reducing housing supply as developers, landlords and prospective landlords shy away from investing in housing units due to the reduced profit margins.

· In the main therefore, rent control regulations may have the perverse and unintended effect of disincentivising investment in the housing sector especially at the lower end of the market segment. What is more, rent controls provide an incentive to tenants to remain in occupation of rented houses rather than leave, which effectively works against the necessary mobility that is key to economic productivity and which may even harm such households, and effectively limiting upward mobility of low-income households to better housing.

· Proposals for improving the Bill include: strictly specify timelines for determination (reduce from current 3 months with possible extension to a flat 45 days with predefined days for each step); integrate digital platforms to log and track dispute resolutions and the determined market rents (which would become an invaluable market making mechanism); promote equitable risk sharing mechanisms by tying period before landlord can evict tenant to be tied to deposit held by landlord, reduce period for which landlord must safeguard tenants goods and the housing unit in case of death or abandonment by tenant; and ensure rent ceiling to which units will be applicable be determined with public consultation and reviewed every 5 years.

· The Bill was in the Senate awaiting passage before the term of Parliament expired.