Case: Rent of premises in a shopping mall

Rent of premises in a shopping mall

Alzhan Stamkulov
Synergy Partners Law Firm

In 2015, we were approached by a client, a small family business. They asked me to study the contract with the mall to change the lease payments. They rented a boutique of 150 square meters. They made expensive renovation for 200 000 euros, worked under the franchise of a well-known brand. They signed the lease somewhere in 2010 on the terms of the shopping mall. The clients was worried that the SEC could at any time raise indexed payments in the event of devaluation of the tenge against the US dollar, and raise other payments without any warning. The client begged the mall to remove the indexation of rent and other payments in the lease. After the devaluation in 2014, the dollar jumped from 155 tenge to 185 tenge. The client said that they began to work at a loss because of a decrease in demand and increase in rent.

The client said that the SEC does not agree. We studied the lease agreement. Unequivocally, the lease agreement was totally in the interests of the SEC. We said that if we go to court, then we will lose, as all clauses of the agreement are in favor of the mall. The SEC will even fine us for stopping the shop’s activities and closing the store, there are no tricks. The customer cannot just quit the store, since expensive renovation was done; also, the mall is probably the largest in the city and has the most visitors. The client said that they cannot part with the mall. And they asked me to find a way out of the hopeless situation. If there is another devaluation of more than 185 tenge per dollar, then the client will not be able to pay rent to the SEC, bottom line, the client will have big losses.

The client was convincing, persuaded us to get down to business. We said that we will undertake the case for 150,000 tenge, but successfully solving such a case is very difficult, since we will immediately lose in court. We will try to act out of the box, but there are no guarantees. For us, it was not even about money. Only out of respect for small business, for the fact that they are even engaged in entrepreneurship, which is actually defenseless, we have grappled with a difficult challenge.

According to the textbook of two strategists, Sun-Tzu and Wu-Tzu, it is recommended to choose a battlefield where a small army can defeat a large army. First, they win "in the minds", and then the strategist chooses the field and completes the action. We began to search for the battlefield. Of course, it was not a court. Besides that, we also needed an army. We decided to create a retail association. We convinced three small shops that were against the shopping center. We discussed the strategy. We decided that collective actions can force the SEC to listen and conclude some kind of collective agreement. With the right pressure, you can fix the "bad peace" and the mall will not need Pyrrhic victory.

We conducted intelligence work, collected insights, studied the situation and the battlefield. Through good acquaintances we learned that there is already an organization that is preparing to oppose the SEC. We decided to transfer our samurais into a ready army. Thus, the "army" already had 33 samurais. We gave a couple of advice to the army on joint combat operations. The army of 33 samurais began to besiege the castle, trying to take it by storm. The castle held the defense well, launched a powerful PR tank, which began to bombard tenants. There was a lot of noise in the media. The samurais held strong. Realizing the deadlock of the situation, the SEC decided to follow the principle of "divide and conquer”, and offered our client a deal – the rent is no longer indexed and remains at the level of 185 tenge per dollar. The client came and asked whether to agree or not. We said that we must agree, as it was what we expected. We said that when you went to them, they bounced you around, and now that we have done our work, they came to you and begged you to leave the battlefield with reconciliation. We told the client that you do not need to worry about some samurais whom you leave behind in the battle. By the way, before the battle, we already knew that behind the key samurais, behind the battlefield, there was a shogunate with its army, and victory is guaranteed to some key samurais. Later, when the situation came to a head, the shogunate told the owner of the castle to reconcile with the key samurais. Some samurais, who were not supported by the shogunate, did not manage to fix their victories. And for our client, we made a miracle! Because a little bit later, the exchange rate became more than 300 tenge per dollar. In general, do not underestimate professional lawyers!

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