BY SHARON WOOLUMS | For years, and especially recently, Village business owners have looked out their windows in despair wondering what their future would be. Decades of real estate speculation, fueling exorbitant rents that only big banks and franchises can pay, have wreaked havoc on the commercial rental market, destroying for many the American Dream.
The sight of successful, iconic businesses closing month after month has led to fear and hopelessness among merchants. Would their business survive when their lease expired? Would the landlord demand such an unreasonable increase that signing would make it little more than an indentured-servitude agreement?
Merchants’ futures were more and more in the hands of speculators and unreasonable landlords. Merchants most dreaded outcome was receiving a “Vacate the premises in 30 days” notice.
Now a ray of hope is shining on New York City’s mom-and-pop shops. A store owner might discover outside his window customers collecting petitions demanding legislation to save her business.
The recent flurry of activity to support small business — from the media blitz and community forums to grassroots social-media public-advocacy groups, community board involvement, political club resolutions and beyond — makes it clear: Politicians may be silent as businesses close but the public will remain silent no more, and we are demanding action.
This public outcry recently produced three proposals claiming to address exorbitant rents causing closures. One, introduced in Albany, supporting tax breaks for landlords who don’t rent gouge their commercial tenants, will merely be borne by the taxpayers. And because landlords’ participation is voluntary, it should not be taken seriously as a solution to this crisis.
Instead, we will focus on the two measures designated for a City Council vote. The first proposal comes from Manhattan Borough President Gale Brewer, who under the City Charter, can introduce legislation in partnership with a councilmember. Brewer chose Robert Cornegy, chairperson of the Council’s Small Business Committee, to introduce her bill.
Brewer’s legislation would give rights to retail storefront tenants owners prior to their leases expiring. Mediation could be requested to negotiate new lease terms, though this would be nonbinding upon the landlord. If this nonbinding negotiation process failed to reach an agreement, then the retail tenant would get a one-year lease extension at a 15 percent increase, giving him time to find a new location.
The reasoning behind Brewer’s proposal is that, in today’s speculative commercial market, with high rent increases and tenants having no rights, store owners rarely know what their new rents and lease terms will be until shortly before expiration of the old lease. For merchants wanting to find a new location in their neighborhoods where loyal customers can still patronize them, they need adequate time for their search. Brewer’s bill gives that added time to move the business to a new location.
The other proposal is the Small Business Jobs Survival Act, whose original version was first introduced in 1986 by then-Councilmember Ruth Messinger. The S.B.J.S.A. deals only with the lease-renewal process, giving business owners in “good standing” (i.e. no illegal activities, pay rent on time, etc.) the right to a minimum 10-year lease. This bill calls first for nonbinding mediation with landlords, with both parties having equal rights to negotiate terms. If mediation fails to achieve a mutual agreement, then there would be binding arbitration, with both parties having equal rights to present their arguments.
To break it down in a point-by-point comparison:
The S.B.J.S.A. gives the right to a lease renewal. Brewer’s proposal offers no right to a lease renewal.
The S.B.J.S.A. gives merchants a minimum 10 years to stay at their location. Brewer’s bill gives them a one-year extension so they can move.
Both bills give the right to undergo nonbinding mediation. However, the S.B.J.S.A. calls for binding arbitration, if necessary, for a final decision. In Brewer’s bill there is no arbitration — the landlord makes the decision.
The S.B.J.S.A. applies to all commercial tenants. Brewer’s bill applies only to retail storefronts.
Brewer is adamant that her bill can pass and that the S.B.J.S.A. can never pass. Does she know something the voters don’t about our elected officials or who really runs City Hall? She said her primary reason for this conviction is that, “[The S.B.J.S.A.] raises serious constitutional issues about contract and property rights.”
I asked James Caras, Brewer’s general counsel, if he advised the borough president on this issue, and, if so, could he e-mail me the case law supporting that position?
I also inquired if there was any amendment to the S.B.J.S.A. that could satisfy his legal concerns about the bill and, if so, could he describe the amendment.
The reply came from Brewer’s press secretary, Andrew Goldston: “There’s no easy tweak or quick fix that will make S.B.J.S.A. impervious to a court challenge or politically feasible. To help small businesses that are suffering today, we must embrace realistic proposals that can pass today. Mom-and-pops have spent decades waiting for action, and it’s time for us to stop tilting at windmills and do something that will help.”
Attorney Steven Barrison, a spokesperson for the Small Business Congress (www.saveNYCjobs.org), was more than willing to offer a rebuttal.
“The only windmills being tilted here,” he declared, “are the phony bills backed by big real estate to distract from the solution offered by the S.B.J.S.A., which actually does directly attack, and solve the lease-renewal crisis facing small businesses in New York City. Proposals that ‘can pass’ but offer nothing as a real solution are just that, nothing; thus, they are, in fact, unrealistic because they accomplish zero.
“No legislation is ‘impervious to court challenge.’ That is why we have a judicial system in the first place! The only reason the S.B.J.S.A. hasn’t passed and was stopped in 2009 — after 32 councilmembers signed on in support of it at that time — was the misleading and undocumented legal advice by the same general counsel’s office to then-Speaker Christine Quinn,” Barrison stressed. “And now that same Quinn’s office adviser is advising Borough President Brewer, and continuing this baseless, meritless empty argument again.
“Attorney Caras has not produced a single shred of evidence or documents to demonstrate, in any clear way, a legal problem with the Small Business Jobs Survival Act in over six years and eight months — because there is none! Since that phony claim in 2009, that is another 80,000 lost small businesses costing New York City 864,000 jobs!
“The only question is how many more small businesses will go under while Brewer and her legal advisers delay, distract and destroy what is left of the remaining small businesses in New York City, while they lobby for passage of their bill for big real estate,” Barrison stated. “On average, more than 1,000 small businesses are closing each month in our city, with the single biggest issue being the unfair lease-renewal process. The S.B.J.S.A. resolves that issue, and Brewer’s bill ignores the main issue, resolving nothing.”
Defending the S.B.J.S.A. as the only real solution is Sung Soo Kim. Founder of the oldest small business service center in the Big Apple, Kim is often called the “Godfather of Small Business.” For more than 30 years, Kim has negotiated thousands of lease renewals for his Korean members.
“In October 2009,” Kim said, “prior to a vote on S.B.J.S.A., certain to unanimously pass the Small Business Committee, someone in the Speaker’s Office made the claim that the bill had legal issues and stopped a vote on it. What usually happens next with legislation is that changes are recommended to the bill’s language or amendments to make the bill more constitutional. However, that never happened with the S.B.J.S.A. once this ‘legal roadblock’ stopped the vote,” Kim noted. “Never once in six years has anyone from the Speaker’s Office made any recommendations to amend the bill to satisfy their legal concerns so it could continue for a hearing and possible vote.”
The non-action on changing the bill is a big change of policy by the speaker’s legal and legislative office from what happened with past versions of the S.B.J.S.A. In fact, back in 1989, the Speaker’s Office recommended changes to the bill to satisfy their legal concerns; the legislation’s then-prime sponsor, Councilmember Ruth Messinger, made all the changes requested. And then, again, in 1995, then-prime sponsor Guillermo Linares was asked by the Speaker’s Office to make more changes to the bill to satisfy their legal concerns. Linares accommodated them by amending the bill to satisfy their stated legal concerns.
The absolute essential component of any law to stop the closing of businesses is the “right to renewal of the lease,” without which all proposals will fail and all independent owners in New York City will eventually be forced to close.
The creation of the largest commercial real estate bubble in the world combined with a pro-real estate City Hall has drawn money from around the world to invest in real estate in New York City, only inflating the bubble further. The Brewer bill — without arbitration that would give rights to small business owners — will not stop the closing of any businesses or stop out-of-control rent increases.
As for giving businesses time to find a new location and move, my question is, “Move to where?” Many small businesses have already moved several times over the past decades to escape ridiculous rent increases.
How can new shop owners pay these exorbitant rents when well-established storeowners could not? Also, Brewer’s bill will not halt unscrupulous landlords’ illegal extortion of cash payments from mostly immigrant owners under threat of being thrown out of business. Only the S.B.J.S.A. will halt rent-gouging and such extortion.
Kim said he had expected a lot more from this new administration in terms of support for the long-stymied legislation.
“I assumed electing a progressive mayor, speaker and Council who pledged to take a new direction from the Bloomberg administration, would make passing the S.B.J.S.A. easier not harder,” he said. “However, progressive policies on social issues for the 99 percent, but keeping the 1 percent’s conservative Republican economic policy in place has wreaked havoc upon the 99 percent.”
Brewer said dismissively of the S.B.J.S.A., “It has languished in the Council, perpetually reintroduced legislation that has been spinning its wheels for more than 30 years, a bill that’s spent decades collecting dust.”
But Kim took exception to that description of the bill he has steadfastly championed year after year despite the daunting political roadblocks.
“Not even the squeaky wheel of injustice has allowed the dust to settle on the S.B.J.S.A.,” Kim declared. “The bill has always had strong support. In fact, in 1988 only last-minute lobbying by then-Speaker Peter Vallone, using the full force of the Speaker’s Office, flipped a ‘Yes’ vote to a ‘No’ vote, causing the bill to lose 4-3 in committee.
“How can anyone state the bill has been collecting dust,” Kim said, “when in 2009 it had 32 sponsors, including the entire Small Business Committee and its chairman, David Yassky, who pledged, ‘We have to do something to help small businesses. It is not an option to do nothing. We cannot allow them to be pushed to the point of disappearance, which is what is happening now. The cornerstone foundation to save small businesses,’ Yassky said, ‘is the Small Business Survival Act.’ “
“The ‘collecting dust’ reference is especially strange,” he noted, “when you consider the bill Brewer is introducing was the same recommendation of the infamous ‘Limousine Commission’ from 30 years ago, which business and civil-liberty groups denounced as ‘the Landlord’s Bill’ to stop Ruth Messinger’s Arbitration Bill! It was dismissed as a biased commission made up of bankers, real estate, Wall St. and big businesses; it was never heard of again until this mummified bill was dug up, dusted off and reintroduced as the Brewer Bill — word for word!”
So here we have a tale of two bills. This is the litmus test that tells the tale of de Blasio’s two cities. One city is stuck in the quagmire of “Cannot Do”; the other is the “Can Do” city of renewed hope, rejuvenated growth and a frenzy of artistic activity.
Resurrect the S.B.J.S.A. Dust off the American Dream long buried in a hopeless hole of despair. Take Back NYC. We Can Do It!
