(Bloomberg Businessweek) — Editor’s note: This article is part of a package about small business owners struggling with rent obligations.
Andrew Zarro’s coffee shop, Little Woodfords, was named one of America’s 100 best by Food & Wine magazine last year. Employees earn “a livable wage,” health insurance, and paid time off, says Zarro. Over the past few years, the business recruited others and helped revitalize the Woodfords Corner area of Portland, Maine. Zarro and family members renovated the 1,000 square-foot space, investing at least $40,000.
The pandemic prompted him to temporarily close from March 15 until May 15. He hoped his landlord would be willing to negotiate when his three-year lease ended in June. His attorney floated multiple ideas, including a yearlong extension at the current terms and paying an additional $250 a month. Instead, Zarro’s landlord insisted on a three-year lease that would effectively more than double his $750 rent. “They would not negotiate,” Zarro says.
He listened to his lawyer (“This is a goodbye letter; this is not a lease”) and didn’t sign. Other Portland businesses reached out to him with similar stories. “You’re seeing a lot of places that are now closing left and right,” Zarro says. “I understand that property owners need to cover their mortgages, but the inability to see more than our immediate future is going to decimate our local economy.”
By chance, a smaller space in Portland’s downtown opened up and Zarro signed a new lease for six years. He and his three employees are getting used to the new space–it’s only about 390 square feet. Because of its busy location, it costs more. Without that lucky break, “I was going to call it,” Zarro says. “I keep saying to people, think of your favorite shop, whatever it is: coffee shop, cheese shop, barber shop. Now imagine it’s gone. How do you feel? That’s what we’re dealing with.”
Don’t keep the problem to yourself.
Zarro recommends talking about landlord issues (and other dilemmas) with other business owners. “Always speak up, because there is someone else who is going through it as well and they will stand by your side,” he says. “If you say, hey, this isn’t right, and we’re letting you know this isn’t right, it might not save your lease, but it might make someone think twice about doing business with someone who is notoriously not good.”
Think partnership when negotiating. Figure out your financial situation—how it compares with the previous year—and be prepared to share it with your landlord to make your case. You want to take an amicable approach that suggests you and your landlord are going to work together to get through the pandemic, says Gonzalez.
Don’t fly blind. Avoid agreeing to new terms without first getting an attorney to weigh in. “Oftentimes, you’re not negotiating just with the landlord; you’re negotiating with a landlord who has an attorney on his side who is trying to get his client the best deal possible,” says Shervon Small, supervising attorney with the Legal Aid Society’s Community Development Project.
Write your elected officials. Zarro encourages entrepreneurs to ask government leaders to discourage behavior like what he experienced. He acknowledges his efforts to engage officials about the problem have been “really hit or miss.” Pressure matters. “I bet a year from now there is going to be a commercial crash if the landlords don’t take a step back and look at the community’s needs, we’re going to be looking at vacant downtowns, and that’s just not good,” he says.
Eviction Filings by Big Landlords Surged After Trump Issued Ban;
A primer on commercial leases and Covid-19;
An explainer on rent negotiation;
An interview with an experienced mediator.
For more stories, strategies, and advice for Main Street business owners, check out the Bloomberg Businessweek Small Business Survival Guide.
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