Editorial: Commercial rentals in JP: When private business becomes a public issue

May 30, 2008
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Business is an emotional subject in Jamaica Plain. Many people love the business districts here—called the “living rooms” of a neighborhood by urban planners—as much as they love JP itself. And JP is famous for preferring friendly, accessible, independently owned businesses to national chains.

So when a popular local business closes, shrinks in size, struggles to stay open or just moves from a well-known location, neighborhood passions—sometimes echoing the feelings of the business owners themselves—naturally run strong.

The first reaction is usually sadness over loss, often followed—unless squelched by the business owner—by a search for someone to blame. A convenient target is the landlord, who sometimes becomes the focus of another emotion—anger.

In these cases, the status of a private business—with many confidential financial dealings, including a rental agreement with a private property owner—is suddenly placed before community members who are asked, or feel the need, to make judgments.

Ben Lem, owner of Sweet Christopher’s at 601 Centre St., said at a board meeting of the Jamaica Plain Business and Professional Association (JP BAPA) on May 21 that his local landlord, Stavros Frantzis, was making “unreasonable stipulations” for letting a potential new owner of his cafe have a lease. Briefly naming some stipulations, Lem said if something didn’t change, Sweet Christopher’s would have to permanently close the next weekend. [See related article.]

JP BAPA members—almost all small business owners with leases themselves—listened to Lem attentively but declined to take a stand because they lacked what one member called “the complete, necessary information.”

In the future, the JP community at large may want to imitate JP BAPA’s response when presented with any criticism of a commercial landlord by a tenant. The process of coming to judgment requires that the community knows all the related information—much of it complex and normally considered to be confidential.

Below are some of the subjects business owners and others have been known to bring up when they criticize landlords, followed by just some of the information community members would need to have before they form an opinion. Objective outside experts, both in small business economics and commercial neighborhood real estate, may need to be consulted.

Rental costs/increases: The community needs to know the exact rent per square foot, base rent before a percent increase and if an increase is a surprise. Other financial provisions (regarding utilities; storage space rent; triple net; costs/increases in real estate taxes and insurance; security deposits, etc.) in a lease are important. It would also be helpful to learn what are comparable market rents in the area and the supply of commercial rental space compared to demand.

Before the community can finally determine if—and why—rental costs may be considered “too high” for a specific business to pay, it would need to be given the rest of the business’s related financial information—at least the business’s annual income and expenses and the owner’s compensation.

The lease: This private contract spells out the specifics of the rental relationship for a period of time. Both business owner and landlord sign it willingly, often with the advice of their attorneys.

Tenant acceptance: Sometimes a business owner or prospective business owner complains when a landlord doesn’t agree to rent to a new owner under their terms. In order to evaluate that landlord decision, people would need to see confidential rental application materials submitted, including the applicant’s personal finances and the terms of any business purchase and sale agreement.

Currently, private commercial landlords who get blamed for individual business changes are often reluctant to get into a public debate. Presenting their “side” would require the landlords (who may be sad about the changes themselves) to reveal and discuss sensitive but relevant financial facts involving their business tenant. That could imply that the landlord’s confidential information should also be disclosed. Faced with public criticism that they think it would be wrong to publicly address with complicated private information, the landlords, who do not have a storefront “podium” like the business owners, sometimes get angry, too.

Even if they decide to withhold making judgments because they lack enough information, community members always have a perfect right to publicly express both sympathy for individual business owners who have to make changes and sadness at the resulting loss to themselves and the community.

Commercial rentals in general should become more of a focus of JP community discussion, education and advocacy. The topic of commercial leases has been on the agenda of JP BAPA for months. A practical workshop for the community, conducted by objective experts, on the complicated workings of commercial real estate as they relate to small business would be useful.

Business supporters and experts might take some helpful actions such as: prepare a list of provisions business owners may want to reject in a proposed lease; conduct a thorough survey of local business rents; research the possibility of local landlords joining together to buy insurance to reduce costs to everyone; etc.

Business tenants should be encouraged to consult experts during changes and rental negotiations and take their advice before signing a lease. They can also make sure, along with the entire JP community, to use their heads as well as their hearts before reaching conclusions.

Sandra Storey

Notes: Stavros Frantzis is also the landlord of Gazette Publications, Inc. Gazette Publications is a member of the Jamaica Plain Business and Professional Association. The writer announced at the beginning of the May 21 board meeting that she was there only as a reporter, and did not participate in discussions.