Legislation would make it mandatory for landlords to negotiate with retail tenants
By Sabina Mollot
New legislation could curb a trend of mom-and-pop businesses being replaced by banks and chain stores.
Manhattan Borough President Gale Brewer said she’s drafting legislation that would make it mandatory for a building’s owner to at least allow a retail tenant a chance to negotiate to keep his or her space.
“The future of street level retail stores and restaurants — I call them storefronters — has begun to look murky,” Brewer said on Monday. “Every day, the press has another story about a kids’ clothing store or a shoe repair shop closing to make room for a chain or a bank.”
The bill, which is being sponsored by the City Council’s Small Business Committee Chair Robert Cornegy at Brewer’s request, along with giving tenants a chance to negotiate, would also give the tenant the option of a one-year lease extension with a maximum rent increase of 15 percent. Additionally, a building owner, if planning on evicting the tenant, would have to give the tenant notice of that intention 180 days before the end of a lease. “So businesses will have enough time to find new space and make a transition, hopefully in the same neighborhood,” said Brewer.
Brewer also said she wanted to help business owners threatened by rent increases the option of purchasing the storefront through “condo-ization.”
“Many of the long-standing small businesses that are here today are only here because they had an opportunity to buy the building,” she said. “There was a time where you could buy a building, but that opportunity today is dim.”
While this is technically already possible under current law, Brewer said there are ways the city could be helping the process along. It may be possible, she added, to create a condo if the business portion of the building is split from the residential portion. Additionally, if 51 percent of the property or more is occupied by the business, it could qualify for a federal Small Business Association loan of up to $5 million.
Yet another proposal was aimed at the creation of what she referred to as “low-intensity” commercial districts. In neighborhoods where rapid rent increases are becoming the norm, Brewer said the low-intensity commercial district on quieter streets would reduce competition on high-traffic streets.
She noted how in her neighborhood on the Upper West Side, vacant retail spaces will languish sometimes for years at a time, which she believes is due to an owner holding out for a chain willing to pay the highest rent.
The borough president made her comments at a 95th Street Halal Guys restaurant, which is located just a few blocks away from her home. Noting that Halal Guys, now a business located in several cities throughout the U.S. as well as other countries, had started as one well-known food cart in midtown Manhattan, Brewer also called for reforms that would make it easier to have a street-vending business. In one example, she said that currently there are caps on how many licenses can be issued to vendors. In the case of merchandise, there are 853. For food vendors, the maximum is 3,000.
“We should raise those caps,” she said. She also said the city should help vendors who want to transition to becoming operators of brick-and-mortar businesses.
“But not next to a vendor selling the same thing. We know that is very much an issue.”
The legislation comes on the heels a report by the borough president’s office called “Small Business, Big Impact: Expanding opportunity for Manhattan’s Storefronters.” The report was comprised of interviews with over 20 individuals from organizations representing neighborhoods as well as small business groups, real estate firms, BIDs, community boards and city agencies.
In the report, Brewer also suggested reform of the commercial rent tax. Currently the tax is paid by commercial tenants paying at least $250,000 in gross rent. The report says this amount should be raised to “exclude the majority of storefronters from qualifying for the tax.” Other suggestions were helping more businesses get micro-loans and developing and promoting business-assisting apps.
Meanwhile, Cornegy said he didn’t anticipate any pushback from the real estate industry on the legislation, nor did Brewer.
“They understand the value of the shoe repair man and the pharmacy,” said Brewer.
A spokesperson for the Real Estate Board of New York, didn’t respond to a request for comment.
Brewer added that she’ll also be organizing a series of roundtables, starting on May 6, in the hopes of getting both businesses and other stakeholders, such as building owners and reps from city agencies, a chance to weigh in.