By Sabina Mollot
Manhattan Borough President Gale Brewer has promised to make 2016 the year of the mom-and-pop shop.
Nine months after proposing new legislation she believes will throw a lifeline to small businesses forced out of their premises by steep rent increases, Brewer said she now considers it priority.
“It’s definitely imminent. Robert Cornegy, the chair of the small businesses committee, has been trying to carve out the best possible bill,” said the borough president, who has been holding roundtables with proprietors of small businesses over the past several months.
The legislation has been likened to a bill that’s collected dust at City Hall for about 30 years called the Small Business Jobs and Survival Act (SBJSA).
Brewer has faced criticism for not supporting the SBJSA but she insists it is a folly that would never be passed by the City Council. Critics, including the Real Estate Board of New York, have blasted SBJSA as being unconstitutional.
REBNY President John Banks, said, “For nearly four centuries, the one constant about New York City has been that it is always changing. The city’s dynamism, in part, is driven by its ever-changing population, building stock and mix of businesses. Understandably, some don’t like change. However, such feelings don’t justify unconstitutional legislation like the Small Business Jobs Survival Act.”
Take Back NYC, a lobbying group for small businesses aimed at passing the SBJSA, however, have countered that no one has actually shown evidence that the bill is unconstitutional. According to Take Back NYC, every month, between 1,000 and 1,200 businesses lose their leases because of steep rent increases.
Meanwhile, Brewer’s yet unnamed bill aims to help small businesses by making it mandatory for a building owner to at least go through mediation and, if necessary, arbitration with a storefront tenant who wants to renew his or her lease. The arbitration would not be binding but if the two parties can’t come to an agreement, then the tenant’s lease would be extended by one year at a rent hike of 15 percent. The extension, Brewer said, is to make sure a tenant at least has enough notice to find a new place, ideally in the same neighborhood. 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.
The SBJSA on the other hand also mandates mediation and if the tenant and owner can’t come to an agreement, arbitration, but it would be binding.
Currently, its primary sponsor in the City Council is Annabel Palma, whose district in the Bronx includes Parkchester and Soundview.
In these areas, she’s noticed more businesses being forced to move or close in the past 12 years. “Because they just couldn’t afford the rent anymore.” Business owners are also not investing in making improvements to their stores, because their futures are so uncertain.
During an interview over the phone, Palma cited one recent example as a rent hike that resulted in the closure of a Soundview Key Food supermarket at the end of October. She isn’t privy to how high the hike was or what kind of business the landlord wanted to replace the market with. However, the community is hoping for a new supermarket.
The Council member also noted that while the SBJSA would mandate arbitration with the aim of getting an extension of 10 years, the tenant isn’t necessarily guaranteed that lease extension.
“It doesn’t mean the arbitrator is going to side with you,” she said. “It doesn’t guarantee you a 10-year lease. That’s not what arbitration does.”
“The ultimate goal,” said Palma, “is to give tenants a right to negotiate a lease and be allowed to enter the negotiation process and not be at the mercy of a landlord with an enormous rent increase and be forced out of the business.”
However, language of the bill indicates that in most scenarios, the tenant would get that extension. Exceptions would be made of course for problem tenants who don’t pay rent on time, conduct illegal activity or violate the terms of their lease or if the landlord doesn’t have the right to lease the property for that period of time. The length of the lease could also be shorter than ten years if the tenant wants that and the landlord agrees.
Additionally, the law applies to all commercial tenants, not just storefront businesses.
As for those questioning how constitutional the bill is, Palma said the only way to address that is to discuss it in the Council.
“I would say to have a hearing,” she said. “That’s the only we can understand the nuance of it. No one has been able to prove that it’s unconstitutional.”
But among those questioning the SBJSA’s legality is fellow Council Member Dan Garodnick, who’s also an attorney. Instead he’s been pushing to cut commercial taxes that retailers in Manhattan whose rents are at least $250,000 a year are made to pay.
“When it comes to helping struggling small businesses, we need sound legislation that will provide real relief,” Garodnick said, when asked about the SBJSA. “Unfortunately, I believe the Small Business Job Survival Act is unconstitutional. I am focusing on exploring alternatives, and pushing for solutions like rolling back the Commercial Rent Tax, which we know will bring direct relief to the mom-and-pop stores in our community.”
But Steve Barrison, an attorney and a longtime advocate of the SBJSA, insisted there is nothing illegal about the bill.
“There is no legality issue and I personally have been working on this for over 25 years,” he said.
“All of the legislative things that are being offered do nothing for mom-and-pops except for the SBJSA,” Barrison added. As a result, he said, small businesses are not only getting astronomical rent increases — if offered a renewal at all — but sometimes they’re even extorted for extra cash.
“Illegal money under the table. It’s very common,” said Barrison. “But no one wants to come forward. They’re petrified. Mom-and-pops are going to be extinct in five years.”
This is dangerous to the city in part, he said, because small businesses are known to do more civic giving than chains, even if the chains are better at promoting it. “There’s hundreds of studies that show big businesses give a fraction of what mom-and-pops do,” Barrison said.
Currently, 27 Council members support the SBJSA, but in order to guarantee it gets a hearing, the bill needs a super-majority of 34, Palma said.
Responding to comparisons of her bill vs. the SBJSA, Brewer said, “We all have the same goal — how do we save mom-and-pops?”
She also said she would be open to revisions of her bill to make it stronger, like, for example, increasing the length of a lease extension, or including businesses on second floors as well as ground level. “I’m open to all ideas, absolutely,” she said.
Well, all except for one. “I don’t want to spend another 30 years talking about this,” she explained.
The SBJSA is a piece of legislation Brewer is certainly familiar with, having worked on it when she worked for Ruth Messinger in the City Council.
A spokesperson for Cornegy, who co-introduced the Brewer bill in March, did not respond to a request for comment on this article.
Palma, meanwhile, said she doesn’t believe it is Cornegy-Brewer bill that’s preventing a hearing within the Small Business Committee, but “other political things happening behind the scene.”
She had hoped the bill would get a hearing by the end of this year. “That didn’t happen.”
However, she is remaining optimistic about the future.
“I think there’s definitely a shift in the City Council,” she added, referring to promises made by legislators to help owners of small businesses. “This bill will do just that.”
Locally, the bill recently got a boost in terms of public awareness within the Stuyvesant Town neighborhood after a flier about it was put up at Stuyvesant Town’s Associated supermarket.
As Town & Village previously reported, this independently owned supermarket is in danger of being closed. After 25 years of business on East 14th Street, the store’s owner was offered a buyout by CWCapital to end his lease early, and new owner Blackstone, while committed to keeping an affordable supermarket onsite, hasn’t said it would necessarily be the Associated. As a result, the store has put off investing in a long-needed renovation.
Principal owner Joe Falzon told Town & Village he thought how helpful the SBJSA would be would “depend on what the percentage (of the rent increase) is going to be, but I like this one more than the other one.”
As for the Brewer bill, “It’s just prolonging the agony,” Falzon said. “If you know you’re going, you still have to tell your employees you only have one more year. A lot of our employees are young. They need more than a one-year guarantee of a job and right now there’s not too many people hiring. You’re just putting off the inevitable.”