Goodwill and shop takeovers in Uganda, explained honestly

If you have ever tried to take over a shop in a busy Kampala arcade, you will have met goodwill. It is the payment the outgoing tenant asks for in order to hand you the unit — separate from rent, separate from the deposit, and almost always non-refundable. It is one of the least documented practices in Ugandan commercial property and one of the most expensive.

What goodwill is actually paying for

In principle, goodwill compensates the outgoing occupier for something of value they built and are handing over: a location with proven footfall, a fitted-out space, a customer base, a licence, a supply arrangement, or simply the scarcity of units in that arcade. In a market where the best trading positions rarely come free, that is not an unreasonable idea.

In practice it also functions as a queue-jumping fee. Where demand for a location far exceeds supply, whoever currently holds the unit can charge for the right to be next — regardless of whether they built anything. The payment can equal many months of rent, and it is typically made in cash between two tenants with the landlord playing no formal part.

Goodwill is a payment for a position in a queue that the landlord did not create and is not obliged to honour.

Why it is risky

• It is not rent, so the tenancy agreement often does not mention it at all.
• It is paid to the outgoing tenant, who may have no authority to transfer occupation.
• The landlord may refuse to grant you a lease after you have paid — or may grant one on worse terms.
• It is non-refundable by custom, so if the deal collapses, recovery means a court case against an individual who may have moved on.
• It is rarely receipted properly, which makes any later claim hard to prove.

We are deliberately not publishing figures for what goodwill costs in particular locations. Amounts vary enormously by street, arcade and floor, they move with demand, and any number we printed would be quoted back as a market rate it is not. Ask several people who trade in the specific building.

How to take over a unit safely

The rule is simple: the landlord must be in the room before money moves. Everything else follows from that.

• Meet the landlord or their managing agent and confirm they will grant you a lease, on what terms and for how long, in writing.
• Get the lease agreed and signed, or at minimum a written offer of lease, before paying any goodwill.
• Make the goodwill payment conditional on the lease being granted, in a written agreement with the outgoing tenant, and pay traceably through a bank.
• Establish exactly what is included: fittings, shelving, signage, cold room, partitions, any licence. List the items and photograph them.
• Check the outgoing tenant's rent and service charge are fully paid and get the landlord's confirmation. Arrears have a way of following the unit.
• Confirm there is no restriction on what you may trade in — some leases and arcades limit the use of a unit.
• Ask what happens at the end of your term, and whether you will be able to recover goodwill by passing the unit on. Get the landlord's position on that in writing.

The economics you should test before paying

Treat goodwill as a capital cost of the business and test whether the position earns it back. Sit outside the unit at different times and count people. Ask neighbouring traders how takings vary through the week and through the year. Add rent, service charge, utilities and the amortised goodwill, and see whether a realistic margin covers it. A great location at an impossible entry cost is still an impossible location.

For landlords and managers

Goodwill is often treated by landlords as none of their business. In reality it affects them directly: it deters good operators, rewards tenants who sit on space, and produces disputes at the door of buildings they manage. Landlords who publish how units are reallocated, and who insist that any handover goes through them, tend to attract better tenants and fewer arguments.

On Yellow Bricks Uganda, commercial listings state whether a goodwill or takeover payment is expected, alongside rent, advance, deposit and service charge. We do not take a position on whether goodwill is right. We take the position that a trader should know about it before they travel across town.