Property &Investments

CONTENTS Property agents make a kill from Kenyas real estate boom 53

The agents are paid a commission of between 5% and 10% of rent paid per house by every landlord.

5-10%

PROPERTY LAW

What to look out for in a lease before signing the dotted line
Because the law protects landlords more than tenants, you must read the ne print when getting into a new house
BY AAMERA JIWAJI s 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 income will 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 renters, 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.
| Nairobi Business Monthly September

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 sucient legal protection and often leads to the exploitation of the tenant. So what are the key clauses that landlords and tenants must look out for before signing a rental agreement?

Pro-landlord rental market in Kenya puts tenants on notice

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 naturally expire, giving both parties the exibility to decide whether a renewal is mutually benecial. The contract also needs to clearly specify

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 contentious period when the tenant is still in possession 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

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 unfurnished (the standard practice is a longer period for furnished premises). In addition to monthly rent, the contract often species 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 nancial implication.

MANAGEMENT

Property agents make a kill from Kenyas real estate boom I

t is mid month and the queue outside a tiny oce measuring about 2 by 2 metres in Nairobis central business district is growing longer by the minute. A young man in the oce lls 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 oce, 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 oered 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 oce in the city centre, Ngunjiris employer manages over 15 properties scattered across the capital. Many of them are apartments with at least three oors. The houses have two and three bedrooms, 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

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 additions 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 restore all furniture and ttings 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 veries that everything is in working order. All these maintenance related clauses ultimately allow the landlord to force the tenant to take responsibility and bear the nancial implications for anything that is not in working order upon his exit. This means that new tenants need to thoroughly inspect premises before taking possession, and ag any broken or damaged elements otherwise they will be forced to pay for their repair when they leave. Standard additional clauses in lease agreements 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.

the account and bring to us slips for accounting 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 that they charge potential tenants and landlords, which include searching and viewing fees and property listing fee respectively. There is good money in property management business, 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 nding 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 unregulated has come with various challenges for both tenants and landlords. Some rogue agents, especially those in low and middle-income areas 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.

September

Nairobi Business Monthly |

Society & Culture

THROUGH THE VIEWFINDER

CONTENTS The hidden story behind Chinas success 63 The last word on Management 64

The b o ok o glimpse in ers a to the psyche o f this Eas tern power, it s culture and the s tory beh ind the great Chinese economy .

BOOK RE

VIEW

LIFE TRAVEL RESTAURANT REVIEWS FILM & THEATRE ART MUSIC BOOK REVIEW

Hes seen the light

Heir to lighting empire settles in coastal town of Watamu and makes it big in photography
BY AAMERA JIWAJI

atteo Guzzinis speech is punctuated 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 uent English or Swahili. With his camera, he conveys the humility of the religion of Islam, the gracefulness of waves as they carve

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 company that produces Europes most exclusively designed lights. He graduated from university and rst 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 realisation 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

| Nairobi Business Monthly September

Society & Culture

This will be the rst book to show all the dierent Maasais: the ones from Ngorongoro, Lake Natron, Tanzania, Maasai Mara, Loitokitok and Samburu.

Italian born photographer Matteo Guzzini

Matteo Guzzinis photographs document the dierent Maasai groups in East Africa.

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 and Maralal, and the photographs he took during this time, which gave birth to this second book.

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 stock markets crashed and he realised he needed to distance himself from the emotions of the market, and its allure of haraka prot 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 photography 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 and Maralal, and the photographs he took during this time, which gave birth to this second book. This will be the rst 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 conict-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
September Nairobi Business Monthly |

Society & Culture

to make trade because the markets, they go very fast up and down so if you take a good moment and you buy when they break some level you can nd 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 nancials, 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 photography 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 ve 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 selsh, you dont see the soul of what is happening.
| Nairobi Business Monthly September

Muslim children peer through a doorway in Lamu

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 sacrice 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 working 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

BOOK REVIEW

Factory Girls
The hidden story behind Chinas Success
As a portrait photographer, he exercises a great deal of patience to capture the perfect moment.

Author: Leslie T Chang

About iGuzzini
he Guzzini family business has worked with light for over 50 years. A company that makes indoor lighting and outdoor lighting luminaries, 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 quality 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 numerous 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 Guzzini. It is the leading lighting company in Europe, and recently established subsidiary oces in Shanghai but it is yet to expand into Africa.

When you have a big business like my family which is worth Sh40 billion and you have 2,500 people working 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 you have to work 365 days a year, 24 hours a day, you have to put 2,000% in the industry.

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 sacrice all his life to the business. I was born free. I want freedom. I am like a bird, I like to y 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 dicult 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.

train trip from Hong Kong through Shenzhen, Dongguan 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, earning as little as 200 Yuan a month, (Sh2400). They learn English, Mandarin and basic computer courses which catapults them to success and save thousands 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 oers 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

September

Nairobi Business Monthly |