Zimbabwe: Boka, Zitac in Rent Row

Source from:  All Africa 11/01/2010

Harare - BOKA Investments, the owners of Zimbabwe's largest tobacco auction floor are embroiled in a rental dispute with its tenant, Zitac after the later opposed the interim arbitration order compelling them to pay monthly rentals of up to US$43 000. In the interim arbitration order, granted in April this year, Boka also proposed a payment of eight percent of gross commission earned by Zitac. Tobacco auctioneers are entitled to a commission of 0,025 percent of the purchase price of tobacco. The arbitrator provisionally ruled that basic monthly rental for the Boka premises should be US$36 800 and if value added tax is factored, it will come to just above US$42 000. The valuation of the property was done by Property Plus Realtors. The arbitration has in the interim concluded that Zitac are supposed to pay US$592 480 for the period between February 2009 and April 2010, plus 20 percent of rentals paid by subtenants. Zitac has been renting Boka premises for the past nine years. The late businessman Mr Roger Boka built the Boka facility in the late 1990s. Zitac was also accused of recklessly using the property, which now requires huge sums of money for refurbishment. However, Zitac has opposed the arbitration order, arguing that the building was used for tobacco auctioning and the rentals should not be flat throughout the year. It said tobacco auctions were seasonal. Tobacco auction seasons normally run between April and September. And in arriving at the figure of US$36 800, Zitac, owned by a local consortium led by Mr Wilson Nyabonda, said the arbitrator ignored the fact that the landlord was also entitled to 20 percent of rentals from subtenants. Zitac said if the valuers were of the view that the premises were worth US$36 000 per month, the arbitrator failed to make downward adjustment from that figure after taking into consideration the landlord's 20 percent entitlement from subtenants. "That failure to make adjustments makes the premises more expensive since apart from rent paid by Zitac, Boka gets an additional 20 percent of the rent paid by subtenants on the same space," according to lawyers representing Zitac. Zitac entered into a lease agreement with Boka in 2001. At the time of executing the lease, the basic rent was fixed at Z$1,3 million. And if converted to the US dollars using the parallel market rate at that time, the figure was US$6 341, according to Zitac. Zitac further argued the property was supposed to have been valued in comparison with other auction floors and not with any other building. "Had the valuators made the relevant comparisons, they could have arrived at a lower rental figure which fluctuates in line with the seasonal use of the buildings. The valuers therefore erred in arriving at the figure of US$36 800. "This erroneous report was then relied upon by the arbitrator to come up with the rental figure," according to Zitac. Zitac has also described as "untenable" the proposal by Boka to earn eight percent of the gross commission earned. It said it could have been understandable if 8 percent was paid on net profit as opposed to the gross commission earned. In its application to the High Court, Zitac said the arbitrator was "grossly unreasonable on the fact that no reasonable arbitrator could have arrived at such a decision given the evidence and submissions by the company. Enditem