‘Time is up.’ The economy is open again and landlords want their rent money
There have been high-profile litigation before: Last month JP Licks owner Vincent Petryk was sued by his ex-wife Kimberly Goldstein over overdue payments at the ice cream chain’s flagship store on Center Street in Jamaica Plain. The main landlords of Newbury Street and Harvard Square have sued high-profile tenants. And last year, the Caffe Nero coffee chain won a landmark lawsuit when a judge ruled it didn’t have to pay rent back to its landlord, Urban Meritage, for months when the state ordered restaurants inside to close.
But for every high-profile case, there are dozens of calmer disputes that bubble up, putting business owners on edge and highlighting how much the relationship between retailers and their owners has changed since last summer.
The onset of the pandemic was an “armageddon” for the retail industry, said Thomas J. Phillips, partner at Brown Rudnick law firm. Many commercial tenants and their landlords saw survival as a mutual matter and made a good faith effort to strike deals and restructure leases for the new reality. But not everyone.
“The ones that haven’t been settled, most people continue to kick the box,” said Phillips, who represents both tenants and landlords in lease negotiations. “But I’ve noticed lately that a lot of homeowners are saying, ‘Time is up.’ “
However, business has yet to take off.
Despite an increase in consumer spending, incomes for many retailers remain well below pre-pandemic levels, and many storefronts are grappling with the chicken-and-egg dilemma of not having enough staff to keep them busy. respond to the request. Meanwhile, retail vacancies continue to rise: 1.4 million square feet of space emptied last year in Greater Boston, according to real estate firm Avison Young, with a high vacancy expected to persist until the end of the year. ‘in 2022.
How owners deal with this can depend on their size. Large institutional owners of mixed-use developments often see retail as a leading product for apartments or upstairs offices and make deals with their tenants, said Gustavo Quiroga, director of strategy and development. development of the neighborhoods of the real estate company Graffito SP. In many cases, it is now the small family owners who impose the squeeze.
They got bills to pay, small businesses advocates recognize this, but it leaves many family businesses in the grip.
Some community development agencies are trying to help. The Dorchester Bay Economic Development Corporation, for example, last week released a Quick Resilience Loan program to help businesses pay off rent, utilities and other bills. But Alison Moronta, director of economic development for Dorchester Bay, fears that’s not enough.
“In Massachusetts, we have great protection for residential tenants, but when it comes to commercial tenants, there are very few protections,” she said, arguing that the state needs to create Stronger guardrails to protect against eviction and displacement of small businesses. Legal clinics don’t often extend pro bono services to cover business eviction proceedings, she said, and if a small business owner “can’t afford the rent, he can’t afford to pay his rent. can’t afford to pay $ 250 an hour “for a lawyer.
The pressure is intense in neighborhoods such as Union Square in Somerville, where despite an increase in activity, more and more landlords have relied on small businesses to catch up on rent, said Jessica Eshleman, executive director of Union Square Main Streets.
“I am deeply concerned that we are going to see continued closures,” she said. “There is a real divide between perception and reality.
One business currently facing lawsuits is Elliot’s House, a doggy day care center that opened near Union Square in 2018. Operations manager Taghi Shaw said he approached owner George Moussallem, shortly after the pandemic, to ask for rent relief. Moussallem seemed accommodating, but then changed his mind, Shaw said. Elliot’s House operated on a restricted basis and received the Paycheck Protection Program funds to keep employees on the payroll, Shaw said, but that wasn’t enough to stay in the dark. Even so, Shaw said, they continued to pay half of their rent throughout the pandemic.
As soon as the moratoriums on evictions were lifted in October, Moussallem began to ask them for arrears of rent. He and the company are now in a legal dispute, and although Shaw said he could not discuss the specific details of the case, he said two neighboring tenants, Bantam Cider and Achieve Fitness, had already vacated their housing. Shaw said he didn’t want to do this.
“We just want to be left alone and live out the terms of our lease and be able to move on,” he said.
Moussallem did not respond to a request for comment.
Some companies have simply suffered from bad timing.
In 2019, Hermela Belachew opened Adorn Boutique Studio in Norwood, a birthday party venue offering manicures, facials and other mini-spa sessions for kids, accompanied by pizza and cake.
“It was skyrocketing,” Belachew said, with multiple bookings lined up every weekend. But Adorn was no match for COVID-19, when spa services, indoor dining and children’s activities all came to a halt. And because Belachew had been open for less than a year when COVID hit, it was not eligible for federal P3 funds.
After making an agreement at the start of the pandemic to pay part of the rent, Belachew started paying the rent in full last fall. Earlier this year, she asked her landlord to restructure the payments and received an eviction notice. Now her landlord, Doctors of Norwood LLC, is suing her for $ 50,000 in rents, fees and to pay off the remainder of her three-year lease. Norwood doctors did not respond to a request for comment.
Belachew has already moved to a new location in Walpole. And after maximizing the pro bono hours of Small Business Strong, a state public / private aid program, she has now hired a lawyer. She fears losing in court will cost her $ 100,000 in legal fees and payment arrears.
“It’s so stressful,” she says. “It really took a toll on our family. “
And for other businesses that were already struggling, the pandemic has pushed them into an abyss.
Patricia O’Keefe arrived at her store, Community Fire & Police Equipment in Walpole, earlier this month to find an eviction notice in the mail. She’s behind on rent since a stroke three years ago. Then COVID hit, business took a hit, and now she owes her owner $ 57,000. All of this, she said, has resulted in crippling stress and anxiety that makes it difficult even to operate her store. Now she is looking for a job as a waitress to earn extra income. “My family is not happy, but I am a big girl,” she said. “I need something to boost my ego, to get my self-esteem back.”
Stories of small business owners like O’Keefe who are stressed and running out of options, or worse, threatened with eviction, have only grown since the state reopened, said Iván Espinoza-Madrigal, executive director of Lawyers for Civil Rights. Calls to the organization’s BizGrow hotline have resumed, with some saying they owe six months or more in rent.
“I think we are still only at the start of the wave,” Espinoza-Madrigal said. “We are seeing an increase from week to week. “