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What to Look Out for in a Lease

Apr 13, 2018

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    | Nairobi Business MonthlySeptember

    BY AAMERA JIWAJI

    As the property market grows, more

    Kenyans are buying and investing in

    houses and apartments. Those who have

    purchased property as an investment are quick

    to rent it out in the hope that the rental incomewill oset a mortgage.

    The Landlord and Tenant Bill, 2007, applies

    to all residential and business premises, and is

    designed to protect tenants from unlawful rent

    increases and evictions. However, it only applies

    to residential premises which have a rent less

    than Sh15,000 per month and thus excludes the

    majority of upmarket properties. Rent disputes

    may be heard by the Rent Restriction Tribunal,

    under the Distress for Rent Act (cap 293) but the

    cost of bringing cases to tribunals discourages

    its use.

    South African estate agent Pam Goldings,

    which recently opened in offices in Kenya,

    says, what aspirant landlords should know is

    that the rentals business is as well-controlled

    and administered as the rest of the property

    industry; its no seat of the pants business.

    The danger, however, is that the landlords

    rights are much more protected than the rent-

    ers, and the Global Property Guide describes

    the Kenyan rental market pro-landlord. With

    no legal recourse, all that protects the landlord

    and the tenant is the lease agreement.

    PROPERTY LAW

    What to look out for in a leasebefore signing the dotted line

    Property&InvestmentsCONTENTSProperty agents make a kill from Kenyas real estateboom 53

    5-10%The agents are paid a commission

    of between 5% and 10% of rent

    paid per house by every landlord.

    options and terms for renewal, including the

    annual increment in rent (for example 10%).

    The contract must also clearly outline the

    procedures to be followed in case of contract

    termination or expiry, since this is the conten-

    tious period when the tenant is still in posses-

    sion of the residence but transitioning to

    another. While rent payments are taken care

    of, there are a number of tricky areas including

    access to the house by the owner to show it to

    prospective tenants.

    Rent payment

    Every owner will mandate advance payment of

    rent, which ensures a reasonable notice period,

    and the ability to withhold rent if repairs are

    More than 70% of Kenyans pay rent, and the

    majority of these leases are privately arranged,

    which means that it may not be aligned with

    current legislation. This does not oer su cient

    legal protection and often leads to the exploita-

    tion of the tenant.

    So what are the key clauses that landlords

    and tenants must look out for before signing

    a rental agreement?

    Lease and renewal options

    It is good practice to specify the duration of the

    contract (i.e. one year period) without leaving

    it open-ended. This will allow the agreement

    between the landlord and the tenant to natu-

    rally expire, giving both parties the flexibility

    to decide whether a renewal is mutually benefi-

    cial. The contract also needs to clearly specify

    Because the law protectslandlords more than tenants, youmust read the fine print whengetting into a new house

    Pro-landlord rental market in Kenya puts tenantson notice

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    September Nairobi Business Monthly |

    required in case of damage. More sophisticated

    contracts ask for a quarterly payment upfront,

    with one cheque to cover the current month and

    two post-dated cheques to cover two additional

    months.

    This period will, however, vary depending on

    whether the premises are furnished or unfur-

    nished (the standard practice is a longer period

    for furnished premises).

    In addition to monthly rent, the contract often

    specifies that utility bills electricity, water,

    telephone, service charges, garbage collection,

    security etc are to be paid by the tenant.

    Most owners usually pay for the value tax and

    land rent for their property, but some choose to

    pass it to the tenant, in which case this needs to

    be clearly disclosed so that the tenant is aware

    of the financial implication.

    Ingoing and outgoing inspections

    Any damage that is caused to the rental premises

    during the duration of the existing tenancy is

    directly the responsibility of the tenant, and

    most contracts spell this out clearly. The more

    detailed ones go so far as listing what is and is

    not allowed, for instance alterations or addi-

    tions to the premises through nails, screws or

    other fasteners.

    At the end of the tenancy period, most

    contracts mandate that the tenant must paint

    and varnish all rooms in the house, and restoreall furniture and fittings including keys or locks

    that have been broken, lost or damaged during

    the tenancy period.

    Traditionally, tenants expect their landlord to

    arrange for any plumbing, electrical or hardware

    repairs that are needed but todays contracts pass

    this to the tenant with the proviso that before

    taking occupation of the premises, the tenant

    verifies that everything is in working order.

    All these maintenance related clauses ulti-

    mately allow the landlord to force the tenant

    to take responsibility and bear the financial

    implications for anything that is not in work-

    ing order upon his exit.

    This means that new tenants need to thor-

    oughly inspect premises before taking posses-

    sion, and flag any broken or damaged elements

    otherwise they will be forced to pay for their

    repair when they leave.

    Standard additional clauses in lease agree-

    ments include a commitment that the premises

    will only be used for residential purposes, will

    not be sub-let, and specify whether animals will

    be allowed or not.

    It is mid month and the queue outside a tiny

    office measuring about 2 by 2 metres in

    Nairobis central business district is growing

    longer by the minute.

    A young man in the office fills bank slips

    from clients who are in a rush to beat the

    deadline for paying house rent. Others have

    come with complaints about their electricity

    and water bills, while some want their leaking

    tanks repaired or walls repainted.

    Caleb Ngunjiri, the young man in the office,

    works for a property agent and on this August

    midday, he is serving tenants who stay in

    houses managed by an agent. His employer

    is among hundreds of property managers in

    the capital, who have sprung up in the recent

    years in the rapid growth of the real estate

    Kenya.

    Increased demand for residential and

    commercial properties, especially in the

    capital, has offered agents lucrative business

    opportunities. Many people have seized the

    opportunity to become property agents,managing commercial and residential houses

    for busy landlords. The business is lucrative,

    going by the number of people joining it as

    Kenyas housing industry continues to register

    phenomenal growth.

    From the tiny office in the city centre,

    Ngunjiris employer manages over 15 proper-

    ties scattered across the capital. Many of

    them are apartments with at least three

    floors. The houses have two and three bed-

    rooms, said Ngunjiri.

    Their main work involves ensuring tenants

    pay rent on time, attending to queries and

    complaints and liaising with the landlord on

    maintenance. We also look for new tenants,

    help them settle in the houses and clear with

    those who are vacating, he noted.

    But Ngunjiris employer does not receive

    rent from tenants on behalf of landlords. Our

    contracts with landlords do not allow us to

    handle rent from tenants. Landlords have

    given us bank account numbers, which we

    pass to tenants. Tenants deposit the money in

    the account and bring to us slips for account-

    ing purposes, he said.

    The agents are paid a commission of

    between 5% and 10% of rent paid per house

    by every landlord. Property agents rake

    thousands of shillings from the business every

    month. This is beside other commissions thatthey charge potential tenants and landlords,

    which include searching and viewing fees

    and property listing fee respectively. There

    is good money in property management busi-

    ness, especially if you have numerous clients.

    The commission is good, noted Antony

    Kuyo of Avent Property Agents in Nairobis

    eastlands area. He noted that most landlords

    in the capital are currently contracting agents

    to manage their properties. Landlords are

    finding it easier to work with agents than

    deal with tenants directly, which can be very

    frustrating, he said.

    However, emergence of agents in the

    multi-billion dollars sector that is unregulat-

    ed has come with various challenges for both

    tenants and landlords. Some rogue agents,

    especially those in low and middle-income ar-

    eas of the capital, take advantage of tenants

    to con them and lay blame on the landlord.On

    the other hand, rent for various property has

    shot up in the East African nation to cater for

    agents fees.

    MANAGEMENT

    Property agents make a killfrom Kenyas real estate boom

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    | Nairobi Business MonthlySeptember

    LIFE TRAVEL RESTAURANT REVIEWS FILM& THEATRE ART MUSIC BOOK REVIEW

    Society&Culture

    BOOKREVIEW

    BY AAMERA JIWAJI

    Matteo Guzzinis speech is punctu-

    ated with pauses as he searches for

    the right words to express himself,

    whether it is in Italian, English or Swahili.

    He begins many of his sentences with Allora,

    a colloquial Italian word which means well

    .... And like many people new to the English

    language, he prefers the present tense I

    arrive, I take, I go which adds a sense of

    immediacy to his speech.

    But the challenges he experiences when

    trying to say something melt away when he

    communicates through his photographs.

    All of a sudden it doesnt matter that he is

    an Italian native who moved to Watamu

    three years ago, or that he doesnt speak

    fluent English or Swahili. With his camera,

    he conveys the humility of the religion of

    Islam, the gracefulness of waves as they carve

    Hes seen the lightHeir to lighting empiresettles in coastal townof Watamu and makes

    it big in photography

    THROUGH THE VIEWFINDER

    ThebookoffersaglimpseintothepsycheofthisEasternpower,itscultureandthestorybehindthegreatChineseeconomy.

    CONTENTS

    The hidden story behind Chinas success 63

    The lastword on Management 64

    a pattern on a bed of sand, and the wisdom

    etched into the face of a Maasai elder. Pauses,

    tenses and slang disappear in this intensely

    powerful moment of communication.

    Matteo Guzzini is one of the heirs to the

    iGuzzini family empire, a 50-year-old compa-

    ny that produces Europes most exclusively

    designed lights. He graduated from univer-

    sity and first worked at a marketing agency

    in Italy, but had a passion for photography. A

    visit to Watamu in 2000 for a holiday with his

    family changed his fortunes and his future.

    Twelve years ago, Watamu was empty,

    says Matteo. There were only two lodges.

    After two days in Watamu, my family decided

    to buy a house here. For me, it was the reali-

    sation of a dream.

    As a young boy, he says, he would look

    lustily at pictures from National Geographic

    of Maasai Mara and Amboseli. Kenyas rich

    diverse landscapes brought to life his dreams

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    September Nairobi Business Monthly |

    Society&Culture

    This will be the first book to show all the differentMaasais: the ones from Ngorongoro, Lake Natron,

    Tanzania, Maasai Mara, Loitokitok and Samburu.

    in a way that Italys urban and rural settings

    never could.

    Matteos visions of Kenya stayed with

    him as he returned to Italy to trade on

    the European and North American stock

    exchanges. Some months later, global stockmarkets crashed and he realised he needed

    to distance himself from the emotions of

    the market, and its allure of haraka profit

    through hasty buy or sell decisions. In that

    moment I understood that to spend the time

    in front of the laptop and to see the stock

    market move was to lose time. Instead I

    preferred to stay away and look at the stock

    market kidogo, he says.

    Matteo restarted his life by moving to

    Kenya. Initially, he apprenticed for Armando

    Tanzini, an Italian artist based in Kenya for

    over 30 years. A renowned architect and

    sculptor, Tanzini had designed the Safari

    Park Hotel in Nairobi and was known in

    coastal circles as the man who designed

    Malindi. Together, they published a book

    called P O Box Kenya Africa, which featured

    Matteos photographs of Tanzinis work. It

    was a stimulating start for me, says Matteo,

    and it oered direction to his passion for

    photography.

    The second book to carry Matteos work

    is an Italian publication entitled The Last

    Warrior in Africa. It will be published by Skira,

    a leading Italian publisher of photography,

    followed by an exhibition of Matteos photog-

    raphy in Milan in January 2013 and in Nairobi

    in April or May.

    My passion has always been travel. I have

    visited the border of Ethiopia, Somalia, Tana

    River, Taveta, Busia, Mumias, Kakamega,

    Kisumu, Matteo says. It was his one-month

    long stay with the Maasai in Samburu andMaralal, and the photographs he took during

    this time, which gave birth to this second

    book.

    This will be the first book to show

    all the dierent Maasais: the ones from

    Ngorongoro, Lake Natron, Tanzania, Maasai

    Mara, Loitokitok and Samburu.

    The national networks that Matteo has

    built in Kenya over three years have made

    him a port of call for Italian media. So earlier

    this year, when journalists from Italy wanted

    to do a documentary on the Al Shabaab and

    their activities in Lamu, Matteo arranged

    interviews with members of the Al Shabaab

    group.

    For the next phase of the documentary,

    they will visit the drought-stricken areas of

    Garissa, a conflict-ridden border post.

    Parallel to his passion for photography,

    Matteo continues to follow the stock

    markets. Everyday I wait for news on what

    is happening in the market in Italy, or Spain

    or Greece or Germany. In the last months, I

    have spent a lot of time in front of the laptop

    My passionhas alwaysbeen travel. I

    have visitedthe borderof Ethiopia,Somalia,Tana River,Taveta, Busia,Mumias,Kakamega,Kisumu,Matteo says.It was hisone-month

    long stay withthe Maasaiin Samburuand Maralal,and thephotographshe tookduring thistime, whichgave birth tothis secondbook.

    Matteo Guzzinis

    photographsdocument the

    different Maasaigroups in East

    Africa.

    Italian born photographer Matteo Guzzini

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    | Nairobi Business MonthlySeptember

    to make trade because the markets, theygo very fast up and down so if you take a

    good moment and you buy when they break

    some level you can find money. In the same

    moment I dont make speculation for only

    one day or today. This is also the time to

    invest money in the stocks market because

    the prices are very down.

    Matteo says he invests in a basket of stocks

    but sees a lot of potential in financials,

    and is focusing on a Russian hedge fund,

    which recently bought 70% of the stocks of

    Unicredit, one of the largest Italian banks.

    He sees clear parallels between his photog-

    raphy and his passion for stock trading: both

    demand patience, and quick action at the

    perfect moment.

    To take a picture you have to be very

    relaxed because sometimes you have only

    five seconds, he says. You have to have a

    nice light on the face, on the eyes; you have

    to see the things that happen around you

    and if you are stressed you dont see nothing

    around you. You become selfish, you dont

    see the soul of what is happening.

    He started taking photographs 15 years

    ago when he was 25, and gradually honed

    his skills. Today, he describes himself as a

    portrait photographer: a genre where you

    take the perfect moment when people show

    an emotion. In the photograph you describe

    the moment, he says. I want to be like a

    hunter. Someone who goes around with a

    gun, you weigh the moment and you shoot.

    Matteo is well aware of the enormity of the

    decision and the great sacrifice that it took

    when he chose life as a photographer over the

    Guzzini family empire. When you have a big

    business like my family which is worth Sh40

    billion and you have 2,500 people work-

    ing you have to be really professional and

    serious. You cant just go there to try and be a

    good manager. If you are in such an industry

    Society&Culture

    Muslim

    childre

    peer

    throug

    doorw

    Lamu

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    September Nairobi Business Monthly |

    BOOK REVIEW

    Atrain trip from Hong Kong

    through Shenzhen, Dong-

    guan to Qaungzhou doesnt

    reveal the factories adjacent to these cities and

    the people inside. These are industrial cities, like

    other coastal cities of China. Yet the people in the

    factories are the most important resource of Chinas

    success. And 70% are women, while over 95% are

    migrants from distant villages in interior China. And

    hundreds of items like shoes, handbags, beauty

    products, and materials which are today supplied

    to developing and developed world are created by

    these women.

    Author Leslie T Chang, an American of Chinese

    origin and a correspondent for the Wall Street

    Journal, follows the lives of two ordinary girls in her

    book Factory Girls. Lu Qingmin and Wu Chunming

    grow up in the village; leave home in their mid teens

    partly because the boys are respected more than

    them and because there is nothing to do at home.Like 130 million others, they go to the cities to earn

    a living. They are an explanation of what China is

    today. Migrants create the economy of China, earn-

    ing as little as 200 Yuan a month, (Sh2400). They

    learn English, Mandarin and basic computer courses

    which catapults them to success and save thou-

    sands and even millions of shillings in a few years.

    They send home over Sh80,000 a year and change

    their lives and those of their families. They soon call

    the shots back home. A few years later they begin

    to date, start a business, get married and even buy

    homes in the cities. The long-held dream of going

    back home and getting married to a local man

    fades.

    Factory Girls is about the self-improvement,

    ambition and resilience of the human spirit. Beyond

    that, the book offers a glimpse into the psyche of

    this Eastern power, its culture, and through the

    narratives of a group of women, the story behind the

    great Chinese economy. It is about the triumph of a

    disadvantaged people in a competitive world.

    Mr. Kipchumba is a Consultant with Quest Works and

    adjunct faculty at Strathmores Executive Education

    Author: Leslie T Chang

    Factory Girls

    The hidden story

    behind Chinas

    Success

    About iGuzzini

    The Guzzini family business has

    worked with light for over 50

    years. A company that makes indoor

    lighting and outdoor lighting luminar-

    ies, it was established in 1959 and is

    now the leading Italian company in

    the lighting design sector.

    Since its inception, the company

    has focused on the idea that the qual-

    ity of a designed light is fundamental

    to contributing to the quality of the

    environment and so its applications

    across the world are developed in

    collaboration with leading architects

    and designers, and known for their

    subtlety and elegance. As a result,the company has received numer-

    ous international design awards

    including the coveted Guggenheim

    Prize. iGuzzinis designs illuminate

    the most popular locations in the

    world including Leicester Square in

    London, Cathedral of Resurrection in

    St Petersburg, Rolex tower in Dubai,

    and the Shirvanshahs in Azerbaijan.

    Their designs are also displayed at

    international museums, which trace

    the changing fortunes of the industry

    and the transition from copper to

    plastic casings.

    iGuzzini is a family business owned

    and managed by the Guzzini families

    who took over the business after the

    demise of its founder, Mariano Guzzi-

    ni. It is the leading lighting companyin Europe, and recently established

    subsidiary offices in Shanghai but it is

    yet to expand into Africa.

    you have to work 365 days a year, 24 hours a

    day, you have to put 2,000% in the industry.

    At 40, Matteo is the youngest amongst his

    brothers and his 19 cousins, and the only one

    who has not been absorbed into the industry.

    Not all of us are born to be on the frontline,

    to be a manager, to sacrifice all his life to the

    business. I was born free. I want freedom. I

    am like a bird, I like to fly here, there.

    His parents had nurtured hope that Matteo

    would eventually return to the fold: My

    mother and father had a lot of dream for my

    future but I was not clear. So it was a very

    strong decision to go away and take my life

    and do what I wanted to do.

    In a characteristic shrug, Matteo shakes o

    any regrets and di cult memories from the

    past, and says, Allora, I know that here I can

    do something good for myself. Something

    good for the Kenyans who are my friends.

    When you havea big business likemy family whichis worth Sh40billion and youhave 2,500 peopleworking you

    have to be reallyprofessional andserious. You cantjust go there totry and be a goodmanager. If you arein such an industryyou have to work365 days a year, 24hours a day, youhave to put 2,000%in the industry.

    As a portrait photographer, he exercises a great deal of

    patience to capture the perfect moment.