BY ALLIE RYAN | A rally was reently held at City Hall calling for a hearing and vote on the Commercial Rent Stabilization Act (CRSA) also referred to as Intro. 93.
Under the CRSA bill, the mayor would establish a nine-member Commercial Rent Guidelines Board that would set the annual percentage increase allowed for rents when a commercial lease expires.
Merchants at the rally related their own stories of the hardship, destruction and suffering caused by unregulated, sky-high rents demanded by their landlords. All speakers were in agreement that government intervention is needed to stop the closings and protect their businesses from huge rent increases when their leases expire.
Their solution to protect business owners from oppressive rent increases is the CRSA bill. They called for a City Council hearing on CRSA, touting it as the best solution to stop the rent gouging by implementing a system like the established Rent Guidelines Board that sets rent increases for residential renters.
The idea is that under CRSA, there would be no more outrageous 50 percent to 100 percent or even higher rent increases forcing good businesses to close. Speakers claimed CRSA would also protect mom-and-pop owners from predatory landlords seeking big chains and deep-pocketed commercial renters to replace the smaller mom-and-pop stores.
For many years prior to the COVID pandemic, New York City saw record closings of long-established businesses. In fact entire Web sites were created to track the closing of businesses, such as Jeremiah’s Vanishing New York and EVGrieve.
The growing number of empty storefronts on every block clearly shows that government intervention, as in legislation, is finally needed to regulate commercial landlords when a business’s lease expires. Especially in New York City, where the commercial tenant has no rights in the commercial lease renewal process, while the property owner has all the rights.
Before the June 2021 primary election, the only bill being seriously considered by the City Council was the Small Business Jobs Survival Act (SBJSA) a.k.a. the Jobs Survival Act. The bill had 28 sponsors and no real, plausible argument against it. Plus, it was written by the true small business advocates, led by Sung Soo Kim.
Mr. Kim for more than three decades was recognized as the city’s leading authority on small businesses. I was surprised when CRSA appeared and was granted a City Council public hearing in September 2021. It was obviously meant to replace the Jobs Survival Act.
My friends and I began receiving texts on personal cell phone numbers telling us to “Call our Councilmember to vote for this bill.” We knew big money had to be behind CRSA, because we had never received a text message about a City Council bill before — not even for the East Side Coastal Resiliency plan.
At the time of the CRSA rally, I was going from business to business in my neighborhood, the East Village, speaking directly to the owners about their need to negotiate fair lease terms. I had volunteered for the Coalition to Save Manhattan Small Businesses to go to the store owners and make them aware of both CRSA and the Jobs Survival Act — two very different bills that, if either one passed in the Council, would impact their fate and futures when their leases expired.
After meeting more than 100 small business owners, I was shocked to find that only one merchant was aware of CRSA. And that was because this particular small business owner was a member of a local independent merchants association that had a member who lobbied for the bill. Despite this small business owner’s many affiliations, she was unaware that the Jobs Survival Act even existed.
Upon comparing the bills, this merchant said she would rather have the Jobs Survival Act. Especially because it addressed the overall problems faced by small businesses during the lease renewal process, whereas CRSA addressed only one component of the lease renewal process: the percentage rate of rent increase.
After hearing directly from small business owners and doing additional research, I have chosen to strongly support and advocate for the Jobs Survival Act. This bill is the best and only real solution to stop the closing of our long-established and nascent small businesses and give them a fighting chance to negotiate fair lease terms that would enable them to stay in business for the long term.
The most vital factor was that the Jobs Survival Act gave commercial tenants the right to renew long-term, 10-year leases. Many small business owners told me that this was the most critical need because this right would open the door for the first time to negotiate equally with their landlord the terms of the lease. Without this essential right, the landlord still had total control of the commercial lease renewal process. Without this right, all negotiating in good faith ended and the landlord would tell their commercial tenant, “This is what I want — take it or leave.”
I was told by small merchants that the Jobs Survival Act would open the door for the first time for them to negotiate equally with their landlord on the lease terms. There is an old adage in small business that “The only truly good deal is a deal that benefits both parties.” The CRSA continues the practice of landlords (and the investment groups that have replaced who we traditionally think of when we think of “landlords”) being able to enact a form of extortion on essential small businesses any time they wish to capitalize on an uptick in the economy, while residents lose their needed local services and jobs.
Without this right to renewal, the property owner could continue to give only short-term leases or continue to demand cash from often-targeted multigenerational immigrant family owners under the threat of throwing them out and forcing them to find a new location. Without this right, the landlord could demand the commercial tenant continue to pay not only their rent, but the landlord’s property taxes or any costs the property owner wished to pass onto the commercial tenant — a common practice ensuring that any tax burden a property owner faces is simply passed on to ground-floor commercial tenants rather than the property owner.
Whoever controls the “right to renew” in reality controls the commercial lease renewal process. And the current lease negotiation process lacks humanity and any consideration for the value that a small business brings to a neighborhood; it’s all about removing money and small business jobs from neighborhoods. The current lease process is transferring wealth to a select few while essential storefront spaces stay shuttered and neighborhoods become dangerous and are destroyed in the name of future profits from faceless corporate chains.
On the other hand, the CRSA bill actually would not save one small business owner unless the property owner wishes the merchant to remain as a commercial tenant. Under CRSA, all other terms of the commercial lease except the rent percentage increase are solely in the hands of the landlord. Many small business owners explained that the length of their new lease was intrinsically tied to their profits, location stability and future planning. In short, small businesses’ fate would continue to be solely in the hands of the property owners under CRSA. Property owners could and probably would continue to give short-term leases (month to month or one to three years), especially to multigenerational immigrant family store owners. Many small business owners became emotional as they told me that short-term leases cause anxiety, fear and uncertainty about their future.
When I brought up the main argument being made on behalf of CRSA — that the bill would cap the rent increases a landlord can make when a lease expires — many small business owners responded that they did not want the rents to go up at all. They complained that they have paid high rents for many years for way too long, to the point that it is now difficult to make a reasonable profit. Yet, they remain in business because they know their small businesses are valued and needed in the neighborhood. Rents must only go down — not up — if you want the owners to survive, grow and create jobs.
Unanimously, small business owners wanted to negotiate their own lease terms on a case-by-case basis, as they have for centuries in New York City. Another universal response was, “What good are rent caps if the property owner can throw you out when your lease expires?”
It is a falsehood to believe that CRSA would protect local store owners from having big chains brought in to replace them. In reality, any landlord has the right to issue a 30-day notice to a commercial tenant to vacate the premises when a lease expires. Why does a landlord have a right to do this? Because, unlike the Jobs Survival Act, the CRSA bill does not give commercial tenants the right to renew their lease.
The debate over the future of our local mom-and-pop shops is a fundamental rights issue. Who should have the rights during the critical commercial lease renewal process — the tenant or the landlord, or both equally? Who needs the rights during this process to be able to negotiate reasonable lease terms that allow a reasonable profit for all parties? Who needs the rights to protect their investment and the jobs of their employees?
Yes, landlords need rights to protect their investment as much as small business owners do — but which bill levels the playing field to allow profits that would ensure survival for both sides? And the ripple effect is that small business owners, in a fact unknown to many people, provide the vast majority of jobs for New York residents.
Ryan is the Village leader for the Coalition to Save Manhattan Small Businesses.
Finally, someone took the time to listen to the victims of the out-of-control rents and unfair lease terms that were forcing good businesses to close for over a decade in NYC. Allie Ryan exposed the truth that the property-owner BIDs, fat-cat Chamber of Commerce developers, lobby-controlled Dept. of Small Business Services and Empire Development Corp., claiming to speak for our small business owners, really only serve special interests. She exposed the three-card Monte being played by a lobby-controlled government, in which the RIGHT TO RENEW is under the shell. The merchants know now that the right to renew their lease is not included in the Commercial Rent Stabilization Act bill.
BTW, the City is sabotaging small shops and businesses in other ways.
For example, the Dept. of Transportation issued a concept-paper request last year for ideas on building e-commerce vehicle/distribution hubs in neigborhoods — which would make things much easier for e-commerce and basically prioritize e-commerce over small retail.
And the City and City Council continue to seek expansion of street vendors — this would hurt regular stores on many levels.
Incredibly the City has now halted its new small business loan program because of “too much demand.”
Articles in Crain’s and the Washington Post – but, incredibly, no mention in the New York Times.
Allie Ryan is the only choice for change in District 2.
The city government should largely stay out of the lease negotiations between building owners and commercial tenants. What it can do instead is encourage owners to keep their spaces occupied. How to do this? Assessing a fee (fine) for a storefront vacant for more than 3 months is one idea. We need to disincentivize and penalize owners from sitting on empty commercial spaces. Let them sell their buildings to landlords that actually want the cash flow from renting out space, instead of just letting it sit empty to 10 years. I’m finally starting to see some reasonable retail rent asks on LoopNet. (Hint: if it’s more than $100/sq ft it’s probably too high…)
Wrong, the goal is to keep the store owners in business and not have to respond to empty stores.