It has been a month since Covid-19 was declared a world pandemic by World Heath Organisation and following various measures taken thereafter by the Kenyan government it’s very clear that the writing is on the wall. The effects of the pandemic are already being felt across many industries and the aftermath will be dire to every sector of the economy in few days to come.

It is evident that many companies have already started restructuring through layoffs, termination of employment and some are even contemplating winding up because no one had anticipated or planned to have the right buffer in place to shield them against the financial effects of Covid-19.

The Ministry of Health has in the recent days implemented the Public Health (Covid-19 Restriction of Movement of Persons and Related

Measures) Rules, 2020 which have inter alia imposed penal conse- quences against persons found in breach of the Government’s directives in relation to suspension of congregations, enforcement of social distancing and mandatory quarantining.

In light of the present state of affairs, Kenya has witnessed massive stagnation of operations in both public and private entities, with widespread job losses and steep decline in profits characterizing the employment sector.

In my opinion, the Real Estate sector will be amongst the most affect- ed economic sectors in Kenya because most of the Kenyan popula- tion resides in cities and towns in homes or houses which are rented out from Landlords who in turn acquired the same through loans or mortgages and if not, they own or work for a company that has let out a commercial space.

The Real Estate Sector compromises of various players but for purposes of this Article we will focus on Landlords and Developers of commercial and residential properties.

Most Developers either own commercial offices or residential houses while some have invested in warehouses and industrial parks. The constant overheads for many businesses are rent and salaries or wages while for most individuals it’s either rent or mortgage. As already mentioned, the pandemic shall leave no commercial sector unscathed with many businesses already restructuring to reduce overheads.

Commercial Buildings

In Kenya most commercial buildings are let out on long term Leases between a tenant and the landlord. However, this Leases for some special reason they are usually drafted without an exist clause. An exit clause is a legal provision in a contract that allows either party to rescind or terminate the contract.

The exclusion of an exit clause from long term Leases is a strategy that most Commercial Developers or Landlords use to retain Tenants for at least 5 years 1 month to exclude the lease from the ambit of the Landlord and Tenant (shops hotels and catering establishments) Act (which in my opinion is wrong and unjustified as the mischief the Act sought to correct is being perpetuated by providing for a longer lease term than 5 years therefore tenants are still being exploited).

As it has been the norm, lack of exit clauses in these Leases has always meant that the developers or Landlords hold the Tenants at ransom because terminating such Leases before the end of the lease term has dire consequences.

This might not be the case this time around and landlords and devel- opers should be aware that it is not going to be a rosy affair as the tables have now been turned by the pandemic. In fact, in my opinion they should prepare for the worst because it is a fact that most business may not be able to pay or afford rent for the spaces that they are currently occupying.

Since Covid-19 has been declared a world pandemic, I am of the view that this situation constitutes a force majeure event if exclusively provided in the Lease and if not, the common law doctrine of frustration may apply. Consequently, either party to a contract has the option to exercise its right to terminate a contract or renegotiate the contract terms.

Unfortunately, landlords within this space will have no option but to accept either of the two options if they are to survive the pandemic. Landlords must be aware that their tenants will sooner or later approach them with new terms to vary their existing commercial agreements.

The new terms the Tenants may propose and which every landlord should be aware of are;

Failure to consider the options above may result in a likelihood of an avalanche of law suits either filed in the commercial courts or in the rent tribunals after the pandemic.

On the flipside, there is light at the end of the tunnel. In my opinion developers of virtual offices will experience a boom as an aftermath of the Covid-19 because most people will have adapted to working away from offices and many businesses will opt for serviced or shared offices to minimize their rent overheads as they will be starting afresh.


According to the Kenya Bureau of Statistic, a large population of Kenyans within urban centers are tenants. Moreover, a big number of this tenants are employed. This means that a large percentage of the tenants will be affected by the ensuing financial impact on the country’s economy occasioned mainly from stagnated business opera- tions, unprecedented salary deductions and unforeseen job losses. Consequently, many people shall not have the capacity to fulfill their monthly obligations to pay rent, as provided in their tenancy Agree- ments.

Landlords owning residential houses or apartments in the country must be prepared to embrace the impact of default in rent and notic- es terminating tenancy agreements. This in turn might greatly affect financial institutions especially where the Landlord or developer relies or rent from let out spaces to service their loan obligations.

I opine, that Landlords with loan obligations, should negotiate on restructuring their loans with their financial institutions since there is a likelihood that the current situation might persist longer than we expect. Landlords letting out residential spaces have similar options to the ones highlighted above and it is important that Landlords empathise with their tenants by accommodating them during this period of uncertainty.

In my opinion, Landlords need to be innovative in order to survive the aftermath of this crisis. It is my proposal that Landlords should strongly consider renegotiating their tenancy agreements or commer- cial Leases by waving rent or reducing it substantially so as not to lose tenants and rent consequently.

They should also consider flexibility in the payment of rent. Howev- er, while renegotiating the rent where rent is reduced to accommo- date the tenant the difference in the amount should be agreed upon by the parties to accrue as a debt to the Landlord so that it is recov- ered without interest when we return to normalcy.

Leave a comment

Your email address will not be published. Required fields are marked *