Legal Clinic: I want a refund for my four-year-old deposit

About four years ago, we paid a deposit to secure space at a mall. Before the mall was completed, the anchor tenant pulled out. The mall also took longer to be completed than expected.  After further assessment and negotiations, we decided to retreat. We were yet to sign the contract. We wrote to the leasing agent and asked for a refund. Their response was that they would only refund after the space is taken. It is more than three years now, and we are worried that we might lose our money. Kindly advise. Can I get a refund?

Hello, 

You are not clear about your deal with the anchor tenant, but the absence of such information provides a broad plate to discuss several legal constructions, concerns and responses.

First, there is the anchor tenant. Such is a tenant whose presence in a commercial space, building or shopping centre, is likely to attract other businesses. This could be a supermarket, banks, and popular food chain amongst others. The other construction is the contract of lease, which is an agreement between a landlord and tenant stating duties of both parties in relation to the use of land or building owned by the former within a specified time-frame.

Any agreement for disposition of interests in real estate must be writing.

Closely related, in and of law are the terms within a contract. These are binding and performable directions, commitments, duties and demands besides remedies placed on the parties. The other concept originating from your seemingly failed business venture is sub-letting or subleasing. This is the re-renting of a property by an existing tenant to a third party, for a portion of the original tenant’s lease contract.

Cardinal rule

You paid a deposit for space in a mall as a third party and without a written contract, yet the cardinal rule in real estate transactions in Kenya demands all such contracts of land and buildings thereon, be in writing. Our assumption is that the anchor tenant held the original tenancy lease, whose details remain unknown. Following, it is not clear, what benefits would have accrued if the sub-tenancy (re-renting) agreement had not terminated prematurely. In addition, there is no indication of whether the said verbal contract contained an exit (contract termination) clause and direction on dispute handling. Complicating this situation is how the leasing agent with whom you did not enter into a contract, assumes legal responsibilities of the anchor tenant, who has since vacated.

On the foregoing, several legal responses abound. The Law of Contract (Cap, 23) in Kenya provides for both verbal (oral) and written contracts but stipulates that any agreement for disposition of interests in real estate must be writing. This could defeat your claim of a refundable deposit in case the party that owes you denies the existence of such contract. However, it should also be known that the law is silent on the deposit refund process, and as such, this should be included in the tenancy contract.

Legal obligations 

In contextualising the response of the leasing agent, their action may have been by the legal obligations found in the revised Estate Management Act of 2012 and Sectional Property Act of 1987. The latter recognises your rights and obligations as a tenant to a section of the Mall. The Estate Management Act provides for registration of persons, who, by way of business, negotiate for or otherwise act in relation to the selling, purchasing, or letting of land and buildings erected thereon. Furthermore, it protects members of the public from exploitation or fraud. Our assumption is that the leasing agent is duly registered as provided for in Section 13 of the Estate Management Act, and their dealings with would-be tenants of the mall do not injure section 18 of the same Act.

Lastly, we identify mechanisms to address the outstanding dispute in order for you to recover the deposit. If the discussions between you and the anchor tenant did not provide for a dispute handling platform, Section 23 (1) of the Estate Management Act, directs the Estate Agents Registration Board to inquire a question brought before it, of omission or commission, manifesting as misconduct by an agent likely to harm the public interest. The other forums are Rent Restriction Tribunal and Business Premises Rent Tribunal. Since we are not privy on the amounts of money involved, let it be known to you that the former deals with disputes whose rent is Sh2,500 and below, while the latter deals with disputes with tenancies not reduced in writing, otherwise known as a controlled tenancy. You may also approach the court, but you will need a contract or lease as proof.

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Mr Mukoya is a lawyer with over 17 years' experience. He's the Executive Director, Legal Resources Foundation. Legal query? E-mail [email protected]