On February 20, Justice Patricia Mutesi of the High Court ruled in favour of Downtown Investments in its rent dispute with prominent law firm Muwema & Co Advocates. The firm was ordered to vacate the property at Plot 50 Windsor Crescent Road in Kololo owned by Downtown Investments and pay Shs 1.3 billion in arrears and penalties.

Here is the simplest rundown of the case as requested by a friend I have known for more than 30 years, who graduated with a diploma in Music, Dance and Drama (MDD) from Makerere University in 2004.

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What is the real dispute between Muwema and Co Advocates and Downtown Investments?

At its core, this dispute is about unpaid rent and a failed attempt by Muwema & Company Advocates to buy the premises they have occupied for the last 12 years.

Downtown accused the law firm of failing to pay rent, refusing to vacate the premises after the lease was terminated, and accumulating rent arrears amounting to approximately Shs 563 million.

Muwema & Company countered that they had exercised their right to purchase the property and that once they made the purchase offer, there was no need to pay rent. They also claimed they had spent about Shs 706 million renovating the building and should either be refunded or allowed to deduct that amount from the rent owed.

Therefore, to you, my friend who did MDD, the central question before the court was whether the relationship was still that of landlord and tenant, or whether it had changed into seller and buyer.

How did the case arise?
On December 15, 2014, the two parties signed a lease agreement.

The monthly rent was set at approximately Shs 19 million, inclusive of VAT. The agreement stated that rent would increase by 10 percent every year after the first two years. The lease was for five years (ending in December 2019).

The agreement also gave the law firm the first option to purchase the property. If the purchase was concluded within 12 months, the price would be about Shs 7.6 billion. After that period, the parties agreed that the sale price would be determined by market value.

On December 15, 2019, the five-year lease expired. However, Muwema & Company Advocates continued to occupy the premises while paying rent. In law, this meant the tenancy agreement continued under the same terms, signed in 2014, even without a new written agreement.

Downtown Investments says the law firm paid rent up to December 15, 2021, although payments were often late.

After some time, the payments from the law firm became irregular and eventually stopped.

Muwema & Company Advocates offers to buy the property

Muwema & Co made a written offer to buy the property for Shs 3.99 billion, but it was far below the Shs 7.6 billion mentioned in the lease.

Downtown Investments said the offer was too low, and one of the directors told the law firm that they would consult other stakeholders. So at this stage, dear MDD friend, no formal acceptance was ever issued, and no sale agreement was signed.

Muwema defaults on rent.

From December 2021 onwards, Muwema & Company Advocates started defaulting on rent, and Downtown issued several reminders.

After two years of pressure, the law firm in June 2023 paid Shs 190 million as a partial rent settlement. After calculating the outstanding balance, Downtown said Shs 563 million remained unpaid.

Downtown then terminated the lease in July 2023 and demanded that Muwema & Company Advocates vacate the premises. The law firm refused, leading to the court case.

What did Muwema & Co Advocates argue?

First, they argued that the property was effectively being purchased. They said they had exercised their option to buy and that Downtown was obliged to conclude the sale.

They maintained that once the offer to purchase was made, they stopped paying rent and that any payments after August 2021 should be taken as money deposited to purchase the property.

Justice Mutesi rejected this reasoning. She said under contract law, an offer does not become binding unless it is accepted. Since there was no signed sale agreement between Muwema and Downtown, there was no sale. She said at this point, the relationship remained that of a landlord and tenant.

Second, the firm argued that rent increments were not automatic and required mutual agreement. Justice Mutesi disagreed, stating that the lease clearly provided for rent revision by 10% annually after the first 24 months.

In commercial practice, she said, revision in this context means increase.

Third, Muwema & Company Advocates claimed to have spent about Shs 706 million on renovations of the property. They said the building was in poor condition and required major repairs, including walls, roofing, drainage, electrical systems, and flooring.

The court dismissed this claim, saying the firm needed to seek the written consent of the landlord before any renovations, which was not the case. Secondly, the firm did not provide any receipts to prove that it had spent the money on renovations.

What did Downtown Investments argue?

Downtown Investments maintained that the lease expired in December 2019, but the tenancy agreement continued on the same terms. It said it did not accept the law firm’s purchase offer, meaning the lease terms remained valid.

Downtown produced demand notices, invoices, and WhatsApp exchanges showing repeated promises by Muwema & Company Advocates to clear rent arrears. Justice Mutesi agreed that the evidence showed that the landlord repeatedly requested payment without success.

Who won?

Downtown Investments won the case, and Muwema & Company Advocates was ordered to pay the arrears of Shs 563 million plus additional costs, bringing the total to about Shs 1.3 billion.

The firm was also ordered to vacate the premises and return the Kololo property to Downtown Investments. Muwema & Company Advocates have said they will appeal the ruling.