How to Protect Yourself If You Are a Small Business in a Newly Posh Neighborhood in New York City: A Vastly Incomplete Set of Resources and Remedies in Law and Government Programs

By: Leonard M. Kohen, Esq.

As we emerge from a spring Mother's Day weekend, colleagues and clients will regale one another with how they honored the holiday, paid tribute to mothers, a longstanding cultural institution. But did anyone notice that last week was National Small Business Week 2016? Hey, how'd you enjoy National Small Business Week? ... Was that overheard much at your Mother's Day brunches?

Movement to Protect Beleaguered Middle Class in our City Has Left Small Businesses Behind

 The broad policy agenda themes under the current administration focus on hard-to-fault values like keeping New York affordable, preserving a middle class and, toward this end, protecting beleaguered residential tenants from eviction by market rate-minded revenue-optimizing landlords. (One major oft-reported core platform position that is the familiar rallying cry is to preserve and expand affordable housing stock while another initiative to this end is the creation of a new unit of residential tenant lawyers to protect underserved often legally unrepresented tenants from being "harassed," steam-rolled over and evicted by "lawyered up" landlords in accelerated housing court proceedings). 

Unlike for small business owners, if you are an aggrieved consumer there are any number of remedies available to you by agencies led by the City Department of Consumer Affairs. See NYC DCA website for extensive list of the types of complaints and professions/industry areas it regulates, avail. at http://www1.nyc.gov/assets/dca/downloads/pdf/consumers/Consumers-ReferralList.pdf.

Small Businesses Are Under Fire, Numerous Lists of Recent Closings Snowballing (see below), Reach Many Dozens

It is becoming an enduring lament that small businesses - even ones that are institutions* in their neighborhoods - are constantly being squeezed out of the most increasingly in-demand popular and fashionable neighborhoods especially across Manhattan and parts of Brooklyn.

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*For example, see Amanda Manning, "10 New York Landmark Institutions We Loved and Lost in 2015," N.Y. Observer, 12/30/2015, avail. at http://observer.com/2015/12/10-new-york-institutions-we-loved-and-lost-in-2015/ (including FAO Schwartz, Avignone Chemists, Hogs and Heifers and Tribeca Cinemas); Melissa Kravitz and Georgia Krol, New York City Restaurant Closings, AM New York, 3/23/2016, avail. at http://www.amny.com/eat-and-drink/nyc-restaurant-closings-1.9655294 (including Market Diner, Ruby Foo's, Carmine's Original Pizza, Charlie Mom's, Ruthie's Restaurant, Winnie's and Le Parisianne Diner).

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It is a phenomenon that is increasingly noticeable and resonating with New Yorkers. The N.Y. Post reported in 2014 that "Manhattan — theoretically one of the world’s greatest shopping meccas — has embarrassingly more vacant stores than one can even count." Steve Cuozzo, Why a Booming Manhattan Is Full of Empty Storefronts, N.Y. Post, 4/26/2014, avail. at http://nypost.com/2014/04/26/the-hidden-proof-the-economy-is-still-awful/.

The solution that some small businesses are advocating is for some form of commercial rent control. And apparently City Council members are listening and are receptive. 

Interestingly, prior to the last couple of years, the last time that this issue gained momentum and prompted high profile attention by New York City government, media, businesses and intellectuals in terms of a movement toward reforms and protections goes back to the Koch administration in the 1980s though of course the spread of "gentrification" is lamented throughout the time since which over the past two decades saw a real estate boom.**

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**See, e.g., Letter to Editor, Commercial Rent Stabilization Can Work, N.Y. Times, 11/10/1984 (citing pending bill in City Council); John J. Powers, N.Y. Debates Commercial Rent Control, Fordham Urban Law Journal, 1986, vol. 15, at 257, avail. at http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1535&context=ulj (reciting current positions on issue, e.g., that Mayor Koch categorically disfavored a commercial rent control, but that the matter was studied by a commission, and examining history, and commission conclusions which proposed various alternatives like mandatory commercial lease extensions and binding arbitration, and concluding against enactments by a Legislature based on arguments including distorting market economy). 

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Interestingly, as the Fordham Urban Law Journal details in its examination of the history of this issue in 1986, New York had in place a system of commercial rent control starting in the 1940s but that the Legislature allowed to expire in 1963. Id.

What is a Business Owner to Do?

Some of the individuals that personify the discussion include restaurant owners in the West Village, some that are institutions in their own right that border the relatively newly posh Meat-Packing District. These include members of the Greenwich Village Chelsea Chamber of Commerce. One restaurant that opened its doors in the late 1970s started with a monthly rent of $450/month and its current rent is nearly 70 times that number, a figure deep into the five figures. (The proprietor is fond of recalling a "croissant clause" in a prior lease at a different location that pegged increases in rent to the price levels of their croissants, which reflects a bygone era). Their landlord is among the more infamous offenders in harassing residential tenants in buildings throughout the city, and is quick to resort to threats and bordering harassing conduct that might cross the line of legality if it was a residential rather than commercial tenant. Another restaurant cites the problem of a "bus delay" which is a de-facto bus rest stop area that has settled in front of its location which wreaks havoc on the block because it prevents the city sanitation trucks from collecting trash which in turn goes uncollected and sits and accumulates. As part of promoting and purportedly easing "red tape" for small businesses, officials from the Small Business Services appeared on local news (e.g., NY1, Inside City Hall) promoting Small Business Week and the city government agency services but without offering much to advocate for these businesses or help to troubleshoot these problems.

Existing Resources

NYC Small Business Services

This department is supposed to be a "one stop" shop within the city government to help businesses - especially restaurants open mainly by helping them to navigate the permits/approval process. It has a process for asking the city for a devoted "account manager," purportedly one of its services is helping to navigate government. But it is not for troubleshooting community/regulatory/landlord issues, instead focused on permits/approvals, employment practices etc and thus inviting a representative from city government to "help" one's business seems to predominantly invite fear of "red tape," and more problems/challenges than remedy existing ones. Here are links:

http://www.nyc.gov/html/sbs/html/business/business.shtml

http://www.nyc.gov/html/sbs/nycbiz/html/running/running.shtml;

Protections / city agency procedures against "tenant harassment" cover residential but typically not commercial tenants 

Under rent stabilization and related laws protecting tenants, there are certain prohibitions against "harassment" that apply but the list for enforcement against complaints either applies primarily to residential but not commercial tenants or does not squarely cover cases as yours, for example, taking every opening or opportunity to threaten eviction for minimal lease infractions or even no occurrences. For example, this is the list of harassment conduct against which the city protects residential but not much less readily commercial tenants, https://www1.nyc.gov/site/hpd/renters/harassment.page 

In Interim, Comply with Lease and Attempt "Retail" or Associational Lobbying

What remains in the interim are makeshift survival mechanisms: In terms of living through a lease extension where the landlord engages in menacing and borderline harassing conduct, threatening legal actions unjustifiably, compliance by the tenant business with the material provisions of the lease is the best defense for pushing back against threats. If the landlord oversteps its rights and happens to sue unjustifiably, where the alleged delinquencies can be disproven, there are judicial remedies for abuse of process. For another restaurant owner trying to rid the storefront of a menacing "bus delay," it becomes faced with having to navigate the city agencies (like the Dept. of Transit) just to have clean storefront. 

Pending Legislation in City Council: Small Business Jobs Survival Act

Rent control in the commercial rent context, is seen as too big a reach to overcome opposition by owners of commercials real estate but there is a measure pending that a personal source in the City Council expects will again be moving soon: A recent bill from 2014 gained the support of a majority of the City Council but was not passed. It stops short of proposing full commercial rent stabilization, but it would enact mandatory lease renewals for tenants at rates that are either agreed about or as otherwise fixed by binding arbitration. (As the Fordham Urban Law Journal details, supra, these are some of the same policy proposals that the city examined in the 1980s.) It is called the Small Business Job Survival Act: 
http://hyperallergic.com/233848/why-the-small-business-jobs-survival-act-is-good-for-artists/

For a primer of the legislation, see http://takebacknyc.nyc/sbjsa/. For more information on the text, history and supporters of the bill, see the bill on the City Council website, avail. at, http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1825175&GUID=AFE9C183-5929-43FB-80AE-C7595CB610BD&Options=&Search= .

The emergence of this bill, potentially in the current session, signals a critical shift in public opinion since the last era in the 1980s when these issues were debated but did not have the support to materialize. Since that era, it is hard to miss the drastic scales of rent increases by exponential multiples since that time in commercial rents. 

What remains at this current moment though are imperfect set of resources and tools. But this overlooked constituency would welcome inclusion on more policy platforms in the city, and as citywide officials look toward 2017 reelection season, it is an opportune and "win, win" time for officials or candidates to think more about helping small businesses.