Bricks Need Mortar fights for equitable and sensible commercial rent relief and real estate reform. Check out Bricks Need Mortar founder Sarah Shaoul’s recent op-ed in The Portland Business Journal. The piece is copied below for those who are unable to access the paywall. Please also see urgent action for Tuesday’s hearing on the extension of the commercial rent repayment deadline beyond March 31st.
“In this pandemic, I have spent the greater part of my year advising and helping small brick and mortar commercial tenants renegotiate their leases. I’ve met with landlords who have made the calculations and chose to work with their tenants by accepting a percentage of sales, forgiving rent, or sharing the economic burden of the pandemic with their tenants in some way. But for many tenants, the greatest challenge is longstanding real estate law and the personal guarantee in their commercial lease.
A great majority of commercial leases require a Personal Guarantee, which states that a tenant is responsible for the full rent for the lease term, regardless of viruses and other impediments to conducting business. Let’s say an owner opened a restaurant last March with a five-year lease for which they paid $4,000 a month in base rent. If they found themselves ineligible for PPP, they would have exhausted their start-up funds in their first six months with virtually no revenue, putting them on the hook for $240,000 plus NNN and the landlord’s operating expenses, which often include taxes, property insurance, and common area maintenance.
And while there are landlords exercising great ethical responsibility by sharing the burden, there are those landlords who shame, intimidate, and refuse to negotiate with their tenants because the personal guarantee means there’s nothing to bring to the table to negotiate with tenants.
With mandated closures and even the eviction moratorium, landlords are to be paid in full by March 31, 2021, or their tenants can be evicted. Legislators are focused on making the landlords and the banks who hold their mortgages whole. PPP helps with wages, rent and other expenses, but what about that lost revenue?
Even if Federal relief reimburses or addresses, say, 18 months of rent for commercial tenants, the landlords will be made whole. But how will our small businesses recover 18 months of significantly reduced revenue? We can waive or pay their rent, but they will never recover the lost revenue that occurred due to closures and significantly decreased capacity.
Here’s what we need:
1- We need a cap on the Personal Guarantee to bring tenants and their landlords to the table to share the burden of this crisis with our small businesses.
2- We need federal relief that fully covers the rents of small businesses that have experienced a 25%-plus decline from March 2020 until we achieve herd immunity through vaccinations.
3- We need Covid specific bankruptcy protection that will allow small businesses the ability to close without the threat of losses of any personal assets.
4- We need greater access to capital for people of color and more opportunities for BIPOC and women to qualify for commercial property loans.
5- We need to prioritize incentives and tax breaks for small businesses, our job creators, alongside, or better yet, before, tax abatements and credits to developers and property owners.
6- Sensible and equitable real estate law reform.
Back to the recent snowstorm. In that key weekend, many businesses weathered significant losses and declines in revenue because they simply didn’t have staff who could walk to work.
If we look at this economic recovery as an opportunity to address social and economic disparities, we must put in place instruments that help us move beyond opportunity hoarding, including imbalanced real estate law.”
Sarah Shaoul is co-founder of the Portland small business advocate Bricks Need Mortar.