Russian court allows Burger King to avoid paying fine for air conditioning

Kashirsky Dvor – Severyanin JSC, which manages the Europolis shopping and entertainment complex (240 thousand square meters) in Moscow, was unable to sue Burger Rus LLC (which develops a network of burger restaurants in the Russian Federation under the American brand Burger King) for 31 million rubles for incorrectly installed air conditioners and lack of paper layouts for fire-fighting systems. Penalties for violations were provided for in the lease agreement. The case was considered by the Moscow Arbitration Court.

Burger Rus has been renting 211 premises with an area of ​​about 100 square meters in one of the largest shopping and entertainment centers in Moscow on Prospekt Mira. m since 2010. In 2022-2023, the plaintiff discovered during inspections that the burger restaurant had installed outdoor air conditioning units in a technical corridor, violating the agreed HVAC (heating, ventilation and air conditioning) design. The plaintiff considered this fact a violation of the lease agreement.

• According to the lease agreement, penalties and interest were imposed for such violations, as follows from the case materials, which RB.RU reviewed. It was said to be $1,000 per day with a subsequent increase “up to $20,000 for each such violation.” The landlord also demanded that the burger chain pay a fine of 5% of the monthly rent for each day of delay in eliminating the violations.

The plaintiff identified 556 days during which the violation existed and demanded from the court to recover 31 million rubles from Burger Rus, or 1.12 million rubles for each month. The shopping and entertainment company also claimed that the owner did not provide them with the paper layout of the premises or the construction documentation for the fire-fighting systems and demanded 1 million rubles for this. The court found that the identified violations did not have any negative consequences for the plaintiff’s activities.

The court reduced the amount of fines for air conditioners to 300 thousand rubles and ordered another 100 thousand rubles to be paid for other violations, for a total of 400 thousand rubles. The reduction was made on the basis of Article 333 of the Civil Code of the Russian Federation (reduction of penalties). The burger restaurant was also forced to pay a fee of 184 thousand rubles.

abuse of rights

RB.RU asked experts to comment on the test results.

“The court proceeded from reasonable and proportionate calculations. It is obvious that a fine of 1,825% is not within the normal course of business. In addition, the plaintiff waited a long time to file the claim, which significantly increased the amount, which can be considered an abuse of law,” RB.RU said. Corporate lawyer Yulia Bondarenko.

The lawyer added that the stated claims do not concern the principal debt, but rather penalties, and the defendant has the right to inform the court about the need to apply Article 333 of the Civil Code of the Russian Federation (reduction of penalties) and, accordingly, a reduction in the amount of penalties if the claim is satisfied.

“I have had cases in practice when, out of a declared fine of 1.5 billion rubles, 21 million rubles remained in the final decision,” Bondarenko said.

The expert added that the penalty is usually 0.1% per day of the amount of unpaid claims.

Arbitration lawyer of Eclecs Law Firm Pavel Kalyaev considers that the court did not rightly rely on the provisions of the lease when calculating the penalty, since it took into account all the circumstances.

Among these circumstances:

• A penalty is provided for violation of the fulfillment of an obligation in kind,
• the landlord did not suffer any damage,
• A penalty in the amount provided for in the contract is intended to unjustly enrich the lessor due to the enslaving terms of this contract.

“A fair and reasonable amount of the fine per year cannot be 1825% of the monthly rent. In the situation at hand, there is a high probability that the higher authorities will confirm the court decision,” the lawyer believes.

Sides of struggle

Founder of the consulting agency Level Up Consult (experience in leading catering companies) Natalya Mileenkova RB.RU stated, that in agreements between the landlord and the tenant there are often references to certain rules, but the rules themselves are not provided, so it is important to insist that all documents are issued simultaneously with the agreement and are studied by a lawyer together with the tenant.

“Unfortunately, there are well-known companies that own premises that supplement their budgets with additional fees. Employees of their rental departments sometimes receive bonuses for this “additional income,” the expert said.

In most cases, such demands are illegal, Mileenkova believes. If the contract contains clauses that contradict the legislation of the Russian Federation, in the event of disputes in court, “the law prevails.”

A representative of shopping centres told RB.RU that tenants, in pursuit of profit, often violate the requirements of shopping and entertainment centres, which have to act tough.

“Tenant violations are a common occurrence in most shopping centres, especially at the stage of preparing the premises for opening and at the beginning of rental relations. Improper installation of equipment, failure to comply with technical and fire requirements, as well as other violations can have serious consequences affecting the safety and comfort of visitors and employees. That is why shopping centres are developing strict rules and regulations, and high fines serve as a deterrent to prevent such violations,” RB.RU said. Partner, Development Director of NF PM (a management company providing business management and real estate operation services) Mikhail Safonov.

According to Safonov, tenants often consider compliance with all the requirements of the shopping centre to be a secondary task. Management companies must find a balance between the interests of all parties, and this requires not only strict measures, but also effective communication and work to improve the management culture. Experience shows that regular disclosure and monitoring help reduce the number of violations, but they can rarely be completely avoided, the expert concluded.