An American Dream Lost

The heartbreaking current state of commercial real estate has turned into an American dream lost.

Recently at “The Lost Village” Q&A we discussed the Small Business Jobs Survival Act (SBJSA) which is a bill currently being fought at City Hall by the lobbyists and protesters to get passed. It will provide commercial lease tenant’s protection from having their rents doubled and tripled. 

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Truth be told, there has been an unethical “price gouge” by the real estate industry on commercial tenants (specifically small business tenants) since the late 90’s, which has allowed such commercial landlords to pass exorbitant rents and real estate tax increases on to these same small business owners to a point where they cannot afford to renew their leases.

A standard that was once a 30-yer lease for commercial tenants only a few decades ago, has turned into three-year and most commonly one-year leases. Real estate and local city governments have been in cahoots.

In fact, many believe the real estate industry owns the government.

The real estate industry has sucked the life out of the mom and pop once thriving businesses and has created an American dream lost.

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An American Dream Lost: Vacant Storefronts Across Main Street America

As a result, there have been growing hordes of vacant storefronts in major cities all across Main Street America and around the globe. This has led to the enormous loss of “mom and pop stores” in many cities around the world and the great character decay of once historic neighborhoods.

The result has become the massive gentrification problem we all face (which I covered in my post “There’s Trouble in the Village”), where only the faceless mega-conglomerate chains can thrive.

There's Trouble in the Village

Until now, in NYC there hasn’t been core legislation in existence for decades to protect small commercial business owners from this price gouge, as commercial landlords continue to leverage this lack of protection by giving new commercial tenants only one-year leases, knowing that when their leases are up for renewal, the rents and real estate taxes can be jacked up.

One such unfortunate small business owner had his real estate taxes increased by $150,000 from his previous year's lease to the point where he could no longer stay in business.

Here is how and why the current passionate revival of a legislative bill (SBJSA) that has been thrown around for the past 30-years could change the status quo of real estate in NYC if it passes though.

The Core of SBJSA

Our topic of discussion at the Lost Village Q & A was: Struggling Small Businesses and Mom and Pop Shops.

One of our panelists tonight was Marni Halasa, a former candidate for City Council who championed The Small Business Jobs Survival Act. Marni has started a new group, Community Control of Land Use, to educate and collectively organize small businesses against intrusive development.

Prior to the City Council meeting on Monday afternoon, the bill’s supporters held a rally on the steps of City Hall. Marni was an ardent supporter at the rally.

Over the course of eight hours of sometimes heated testimony, many New Yorkers spoke passionately for and against the bill’s passage. Some of the core tenets of the SBJSA, now being sponsored by City Council member Ydanis Rodriguez, would allow tenants a 10-year renewal upon the completion of their lease, and create the option of arbitration if the tenant and landlord aren’t able to agree to the terms of a rent increase.

“We have a small business crisis in New York City and it’s not about Amazon or high taxes, but about rising rent,” said David Eisenbach, founder of the Friends of SBJSA, a Columbia University history professor, and one of the key champions of the bill

An American Dream Lost:  Summary of SBJSA

The Small Business Jobs Survival Act (SBJSA) is a bill that has been introduced in the NYC City Council that would give commercial tenants three specific rights:

• A minimum 10-year lease with the right to renewal, so they can better plan for the future of their business.
• Equal negotiation terms when it comes time to renew their lease with recourse to binding arbitration by a 3rd party if fair terms cannot be found.
• Restrictions to prevent landlords from passing their property taxes on to small business owners.

STEP BY STEP

The law would create a quick step by step process to arrive at fair lease terms. One which is controlled by both parties and can be stopped at any time by mutual consent.

An arbitration process, which gives both parties equal opportunity to present their arguments for their reasonable terms of the lease. A process which takes into consideration the unique nature of every business and every business community, where the arbitrator’s decision is guided by strict criteria and based upon a case by case situation to decide fair and reasonable lease terms.

WHAT PRESENT LANDLORD ABUSES WOULD BE STOPPED BY THIS BILL?

• End illegal extortion of commercial tenants who are forced to pay money under the table to keep their leases
• End rent gouging by landlord
• End instances in which landlords refuse to even negotiate a lease renewal with the tenant
• End instances in which landlords refuse to bargain in good faith with their tenants
• End instances in which landlords work deals behind the backs of the tenants in order to take over their successful businesses or in some way gain profits as a result of the years of hard work by the tenants
• End instances in which landlords pass along all their own costs and responsibilities onto their tenants to pay
• End instances in which landlords only want to offer short term leases to the tenants so they can be in a better position to speculate on the property
• End excessive security deposits without interests going to the tenants

WHAT ARE THE GOALS OF THIS BILL?

• Protect business tenants from unreasonable lease demands, thus keeping successful businesses from going under due only to rent gouging or unfair lease terms.
• Stop the loss of jobs resulting from excessive rents or business failures due only to exorbitant lease demands.
• Put stability and predictability back into the free marketplace, which would result in encouraging business expansion and the creation of more jobs.
• Give businesses longer leases, which would enable them to expand, create jobs, and take advantage of the loan and assistance programs in the private sector as well as from government agencies. Longer leases promote economic growth.
• Stop illegal extortion by unscrupulous landlords

WHO IS PROTECTED UNDER THIS BILL?

• All manufacturing businesses
• All Not-for-Profit organizations
• All performing arts and theater groups
• All retail businesses
• All service businesses
• All professional medical offices and businesses
• All commercial tenants in New York City

If passed, the bill will be a tremendous victory for all mom and pop business owners and commercial tenants in NYC, and could set a precedent for all major cities in Main Street America and across the globe.

It's a hard and difficult fight.

But it can be won.

For those who believe in the American dream, we must never give up that fight.

We must never give up the fight of an American dream lost.

Thank You for reading, and please feel free to share your comments and insights below.