Examining the Practice of Commercial Tenancy Agreements in Kigali City, Rwanda: How can Current Practice be Improved?

Abstract

The purpose of the study is to critically examine the practice of commercial tenancy agreements in Kigali city paying particular attention to; the nature and content of key tenancy terms, whether these terms enhance landlord’s property value while meeting the tenants’ business requirements, and tenants’ perceptions about their current tenancy agreements. The research was based on the empirical data gathered mainly from a questionnaire survey of 247 office and shop tenants occupying both prime and secondary properties as well as interviews from few selected property professionals in Kigali city. The findings revealed that majority of commercial tenancy agreements were substandard since they lacked key tenancy terms of modern leases mainly because of; lack of specific commercial landlord and tenant law to guide the practice, commercial property market in Rwanda is a landlord market (landlords normally dictate the lease terms), and most landlords and tenants do not seek professional advice in negotiating tenancy terms and drafting leases. Furthermore, the findings showed that majority of the tenancies lacked security of tenure and they were gross leases meaning rental incomes obtainable by landlords are not net of operating expenses. Moreover, the findings indicated that majority of the tenants were dissatisfied with their overall current tenancy arrangements. The study recommends among others; enactment of the commercial landlord and tenant law, use of professionals in commercial tenancy negotiations, use of standard leases that contain all the key tenancy terms, and negotiating long fixed term leases that will ensure security of tenure to tenants and security of income to landlords.