Sublease agreements in Kenya: what an operator's paperwork must say

Operators tend to go looking for a “sublease agreement template” and download the wrong document. If you lease a unit to re-let it on short stays, the sublease is the least important of the three pieces of paper you need, and the one you probably do not need at all.

What is a rent to rent agreement?

It is not a single named contract, which is why searching for one produces templates that do not fit. A rent to rent agreement, sometimes called a rental arbitrage contract, is a normal lease between the owner and the operator, with the added permission to re-let. The operator becomes the tenant and pays a fixed rent. The right to put paying guests in the unit comes from a consent clause inside that lease, or from a separate consent letter, rather than from a different species of document.

Almost every downloadable template gets this wrong. UK rent to rent packs are built around assured shorthold tenancies and guaranteed rent structures that have no equivalent in Kenyan law, and American arbitrage contracts assume a landlord regime that does not exist here either. A Kenyan operator needs a Kenyan lease with the right permissions in it, not a translated form.

The three documents, in order of importance

A short-let operation on a leased unit rests on three instruments, and people consistently attend to them in reverse order of how much they matter.

One: the head lease, between you and the owner

This is the document that decides whether the business works. It sets your rent, your term, and above all what you are permitted to do with the unit. Every operator failure we have seen traces back to this document rather than to anything downstream.

Two: the owner’s written consent

Either a clause inside the head lease or a separate letter annexed to it. It has to name short-stay letting specifically, because a general permission to sublet may not authorise nightly occupation at all, for reasons set out in lease or licence.

Three: your terms with the guest, which are not a sublease

A guest staying four nights is a licensee, not a sub-tenant. They have no exclusive possession, you retain control of the unit, you enter to clean, and you can move them. So what you need with a guest is booking terms and house rules, which the platform largely supplies, not a sublease.

You need an actual sublease only where you are granting somebody exclusive possession for a term: a corporate let of three months, a relocation tenant, a month-to-month arrangement. If your model is nightly bookings, the sublease template you were about to download is solving a problem you do not have.

What your head lease has to get right

Negotiate these before you sign. Every one of them is cheap to fix at the outset and expensive or impossible to fix later.

• Permitted use, expressly including short-stay letting. Not silence, not a general subletting permission. The words “including letting the Premises on a short-stay or nightly basis, whether directly or through a booking platform” do the work. A use clause limiting occupation to “a private dwelling for the Tenant and their family” kills the model however permissive the subletting clause is.
• Permission to appoint a managing agent. Separate from permission to sublet, and frequently overlooked. If you intend a firm to run the unit, the lease has to allow it.
• A term long enough to amortise the furnishing. You are putting four to nine thousand dollars into somebody else’s property. A twelve month term with no renewal right means you may not recover it. Two to three years, or one year with an option to renew at a rent capped by a formula rather than left to negotiation.
• A rent review formula, not a rent review discretion. An owner who watches your operation succeed and can set the renewal rent freely will capture your margin. Cap it: a fixed percentage, or a published index.
• What happens to the furniture on exit. Say that the furnishing remains yours and that you may remove it, or agree a price at which the owner takes it. Leases silent on this have produced arguments about fixtures at exactly the moment you have no leverage.
• Repair obligations split sensibly. Short-stay turnover generates more wear, so expect to carry more of the internal repair. What you should resist is structure, roof, and the building’s own systems.
• Utilities and service charge. Short-stay consumption is materially higher than tenant consumption. Know whether service charge is included and whether it can be increased mid-term.
• Quiet enjoyment and access. An owner reserving unrestricted access is incompatible with paying guests in occupation. Notice provisions need to work around bookings.
• Insurance, and whose covers what. Name who insures the structure, who insures contents, and record that the occupation is commercial short-stay so the owner’s insurer is not later told it was residential.
• House rules, identified. If the lease incorporates the building’s rules by reference, get a copy and read them before signing. A committee resolution banning short-stay guests then becomes a term of your lease without anybody amending it.

The clause that ends most Nairobi short-let operations is not the subletting clause. It is the use clause, or the house rules the lease quietly incorporates.

What the consent letter should contain

Short, specific, signed and dated by the registered owner rather than by an agent without written authority.

• The property, identified the way the lease identifies it
• Consent to sublet and to let on a short-stay or nightly basis, named separately
• Consent to appoint a named managing agent
• The conditions the owner is imposing: insurance, deposit, compliance with house rules
• Whether and how the consent can be withdrawn, and on what notice
• That it is given under the lease dated [date], so it is anchored to the instrument it varies

A one-line email saying “that’s fine” is better than nothing and much worse than this. For how to get to a yes in the first place, and a letter you can adapt, see how to ask a landlord for permission to short-let.

If you genuinely do need a sublease

For a corporate let or any arrangement granting exclusive possession for a term, the sublease has to sit inside your head lease and not overreach it.

• It cannot outlast your own term. A sublease granted for longer than the head lease has left is the classic drafting error, and you cannot grant what you do not hold.
• It should mirror the head lease’s restrictions. Whatever you covenanted not to do, your sub-tenant should covenant not to do, because you remain liable upstream for their conduct.
• Mind the statutory overlay. A residential sublease may attract the protections of the Rent Restriction Act, and a let of shop, hotel or catering premises may create a controlled tenancy under the Landlord and Tenant Shops, Hotels and Catering Establishments Act, with its own tribunal and notice regime. Creating a security you then cannot end is worse than a vacancy.
• Stamp duty and registration. Longer subleases attract registration requirements and duty. Ignoring this does not make the document invalid between the parties but can matter when you need to rely on it.

How Goldstay handles it

We read the head lease before we agree to manage a unit for an operator, and we say so when the lease will not support the model. That conversation is unwelcome roughly half the time and it is cheaper than the alternative, which is discovering the use clause in month four with the furnishing already installed.

Our own management agreement carries a capacity written for this position. You sign as an authorised leaseholder rather than as an owner, warranting that you hold a valid lease, that the owner has permitted both the subletting and our appointment, and that the lease runs for at least our initial term. If that authority lapses or is withdrawn you are obliged to tell us in writing and we can end the arrangement immediately without an exit fee, because taking bookings for a unit you no longer control is the outcome neither of us survives.

Management for operators sets out the whole service. This article is general information and not legal advice on your documents, which turn on wording we have not seen; on a head lease you are about to sign, take advice from an advocate.

Related reading: whether Airbnb arbitrage is legal in Kenya and a residential lease clause by clause. Before the paperwork stage, how to find units that work for arbitrage in Nairobi covers finding an owner who will sign one at all.