UNFORESEEN CRISES AND LEASE AGREEMENTS: KENYA’S LANDMARK RULING ON EXIT CLAUSES IN COMMERCIAL TENANCIES

Kwanza Estates Limited v. Jomo Kenyatta University of Agriculture and Technology (Petition E001 of 2024)

On December 6, 2024, the Supreme Court of Kenya delivered a judgment in the case of Kwanza Estates Limited v. Jomo Kenyatta University of Agriculture and Technology (JKUAT) (Petition E001 of 2024). The dispute centered around a lease agreement for a property in Nakuru, initially signed on May 1, 2010, and renewed on May 1, 2016. The original lease was set to begin from May 1, 2010, to expire on April 30, 2016, and the renewed lease was to begin from May 1, 2016, to expire on April 30, 2022. JKUAT contended that the lease had been frustrated due to unforeseen circumstances, including the COVID-19 pandemic, and sought relief from its obligations under the lease.

This judgement has significant implications for commercial leases in Kenya. The Supreme Court’s decision clarified that commercial leases must include clear exit clauses to address unforeseen circumstances that may frustrate the lease. This change in the law ensures that both landlords and tenants have a legal framework to terminate leases amicably when necessary which is an unprecedented change from the norm. The court’s ruling was influenced by the specific events that frustrated the lease, highlighting the importance of flexibility and foresight in lease agreements. Understanding the legal framework surrounding commercial leases is crucial, as highlighted by this judgement. The judgment ensures that both parties in a lease agreement have a fair exit strategy when faced with unforeseen events that make the lease untenable. This not only protects the interests of property owners but also provides tenants with legal recourse in situations where continuing the lease is no longer viable. By including comprehensive exit clauses in lease agreements, both parties can safeguard against unforeseen events, ensuring a clear understanding of their rights and obligations. This reduces the risk of protracted legal disputes. Staying informed about such landmark decisions helps our clients navigate their lease agreements with greater confidence and legal clarity, making more informed decisions and protecting their interests in future lease agreements.

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Disclaimer: The information contained in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.