Analysis of difficulties faced by businesses pursuing commercial or regular lease in Zimbabwe
FUNGAI CHIMWAMUROMBE AND LEON GONA
Introduction
Leasing arrangements play a significant role in the Zimbabwean business landscape, allowing companies to access valuable assets and premises without the burden of outright ownership.
However, businesses in Zimbabwe often face challenges when pursuing commercial or regular leases.
This article aims to analyze the difficulties encountered, as well as how Zimbabwean law influences these leasing arrangements.
- Limited availability of suitable commercial spaces:
Finding appropriate commercial spaces can be a daunting task for businesses in Zimbabwe. The scarcity of developed commercial areas or buildings, particularly in urban centers, poses a significant challenge for companies seeking leases. The demand often exceeds supply, driving up rental prices and limiting choices for prospective lessees.
- Unpredictable and outdated rental markets:
The rental market in Zimbabwe suffers from instability and price fluctuations. Inflation and economic adversity affect rental values, making it challenging for businesses to predict their long-term expenses accurately. Additionally, leases may be subject to outdated rental controls established by the Rent Regulations Board, hindering landlords’ willingness to invest in maintaining or upgrading leased properties. The existing grievance mechanisms through the Rent Board may require to be reviewed to ensure an equilibrium is maintained between protecting lessees from capricious and unconscionable rental increases whilst the modern reality of the rental market dictates the constant review and or increases in the said rental.
- Clarity and enforceability of lease agreements:
Inadequate clarification of rights, obligations, and responsibilities in lease agreements can lead to disputes and legal uncertainties. Some leases lack clarity on issues such as maintenance responsibilities, rental reviews, or dispute resolution mechanisms. Consequently, businesses may encounter difficulties when seeking specific terms or trying to enforce rights in court. it is imperative that both lessee and lessor reduce their agreement into writing and seek the guidance and advice of legal practitioners in this endeavour as it duties and obligations incumbent upon either party are adequately explained and or addressed in the said lease agreement.
- Lengthy and cumbersome registration processes:
Registering long term lease agreements can be a tedious and time-consuming process in Zimbabwe. The Registrar of Deeds governs the registration procedure, and delays or backlogs in their office can hinder the timely and official recognition of leases. This can affect businesses’ ability to secure financing or provide legal recourse in case of a dispute. Moreover the lack of digitisation at the Deeds office vis-à-vis long term leases affect the commercial viability of said lease.
- Challenges with accessing financing:
Securing financing for leased premises can be a major hurdle for businesses in Zimbabwe. Financial institutions often require collateral, which is difficult to provide in the absence of property ownership. Additionally, the uncertain economic situation and perceived risk associated with long-term commitments make banks more cautious when considering loan applications for leased properties.
Conclusion:
The difficulties faced by businesses pursuing commercial or regular leases in Zimbabwe arise from multiple factors, including limited availability of suitable spaces, an unpredictable rental market, unclear lease agreements, lengthy registration processes, and financing challenges. In order to address these difficulties, it is crucial for policymakers to focus on improving the regulatory framework surrounding leasing arrangements. This could be achieved by revisiting existing legislation, streamlining registration processes, and fostering an environment that encourages investment in the commercial real estate sector. These measures would not only facilitate businesses’ access to leased premises but also contribute to the overall growth and productivity of Zimbabwe’s economy.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.
Leon Gona is a registered legal Practitioner and an Associate at Chimwamurombe legal Practice and can be contacted for feedback at leon@zenaslegalpractice.com. Whatsapp +263 77 245 1360
