Commercial Tenants Desperate for Relief in Greenpoint

Kate Schmitz ran a children’s clothing thrift store, Flying Squirrel, in Greenpoint for 17 years.  She missed her rent in March and April, largely due to the coronavirus shutdown.

Schmitz got a notice from her building owner’s office on April 21, demanding her unpaid rent. On April 27, she says she got an eviction notice. 

She called a lawyer asking what she should do. The lawyer told her it was probably best if she just left–despite the moratorium on evictions throughout New York State.

After 17 years of being a good tenant, she now had less than a week to empty the store she put everything into.

“It’s crazy,” Schmitz said over the phone as she packed up her store, bringing items to the curb for her masked, loyal customers to pick through. “Even though they had two months security, they wanted me to pay the money.”

She tried calling her landlord, Joshua Guttman, directly. He told Schmitz there was nothing he could do.

“That’s just what Greenpoint is like now,” Schmitz said, “I grew up in New York and there used to be, like, landlords that would work with you about things. Like, there used to be a lot more humanity.”

“He just did it because that’s the rule,” Shmitz said. “No one’s gonna be paying rent there. There are so many ways he could have worked with me.”

Pleading for flexibility

Another one of Guttman’s buildings on the shores of Greenpoint, a warehouse at 67 West Street that is one of the last remaining buildings of the Greenpoint Market Terminal, is full of more than 100 anxious tenants trying to avoid a similar fate. Most are small businesses, with a few employees each, that are unable to operate at full capacity or are closed completely due to COVID-19 restrictions.

A group of those tenants asked the landlord in April for a form of rent relief. If Guttman could accept a temporary 50 percent reduction in rent–as they had heard some other landlords were doing for commercial tenants–then they could have a decent chance of weathering the storm of COVID-19.

The landlord’s response, according to the seven tenants spoken to for this article: pay up 100 percent or you will be evicted.

Since late April, Guttman has repeatedly sent past due notices to tenants, stating that because of non-payment, “we will be forced to pursue legal action,” and has gone as far to affix lease termination notices on the doors of some delinquent units.

Is gov’s order being obeyed?

Evictions, according to the governor’s eviction moratorium, are unenforceable for tenants, commercial and residential. The moratorium has been extended until August 20th, but on June 20, it more narrowly applies to only those facing financial hardship due to COVID-19. The requirement for tenants to prove hardships, deemed odious by some, has created an expectation that many small businesses will be overwhelmed by landlords eager to clear out non-paying tenants. 

At 67 West Street tenants have also received late fees for their unpaid rent. When a tenant objected, Guttman’s office informed him that the governor’s order did not apply to commercial leases. 

While the order states that “no landlord, lessor, sub-lessor or grantor shall demand or be entitled to any payment, fee or charge for late payment of rent,” the law cited is for residential dwellings. Commercial landlords can still charge late fees, on top of past due rent, while residential tenants are protected from additional fees.

The governor’s office did not respond to requests for comment.

A building with history

Guttman’s building at 67 West Street is most notorious as the site of one of the largest fires in the city’s history, a suspicious 10-alarm fire in 2006 at another part of the Greenpoint Terminal shortly after a failed $420 million deal to sell the building. 67 West Street is one of the only remaining buildings of the formerly massive, and nearly landmarked, complex, which 100 years ago churned out over 400,000 pounds of rope daily.

Polish rope-making workers in the same building a century ago went on strike to protest unfair treatment. And today, the current tenants – including fabricators, photo studios, tattoo parlors, fashion brands, designers and various other small businesses – have gone on an unofficial, desperate rent strike. Most are withholding payment of rent in an attempt to force Guttman to negotiate some sort of COVID-19 accommodation.

“I’m expected to magically have close to $10,000 in two to three months without any sort of income,” said Ken Varas, a tenant who operates a film production company, in an email.

Another tenant, a furniture and small-goods manufacturer, was having a great year. “We’re ironically shipping our first large order to a high-end department store in China this summer,” said the owner, who asked to remain anonymous out of fear of retribution.

The irony is that her objects are largely sourced and fabricated in Brooklyn, within a 10-minute walk from her studio at 67 West Street, and products manufactured in New York are becoming very desirable in Asia, she said.  It’s a big reason why she loves her location, close to the remains of Brooklyn’s manufacturing industry,  fantastic views of Manhattan.

Since March, however, her business is down by over 80 percent. She’s been unable to secure any of the various federal COVID-19 related relief loans during this time, but did receive a small grant from the city, which she used to help keep her two employees on payroll for a month and a half. She signed a letter, along with over 70 others, asking the landlord for assistance during this difficult time and has also withheld her rent for the time being.

“If I were paying rent during this time where we have all of these projects at a halt,” she said, “I won’t be able to have a business. So, I think it’s mutually beneficial if they meet us halfway and we share the burden of the situation.”

Lawyer counsels caution

Guttman first responded by offering a deferment of rent until June for some tenants and until the end of the year for others, as long as the tenant signs an agreement to personally guarantee full payment. 

“We can not waive rent, but I have offered to defer rent with a partial payment and a signed guarantee that we will received [sic] these monies at a future time,” wrote Guttman’s son Jack in an email to a group of tenants in one of their DUMBO properties asking for similar partial rent abatement. “We also offered anyone who this doesn’t work with to let them break their lease.”

As part of a package of bills passed by the City Council last week to extend protections for residents affected by COVID-19,  such liability agreements are forbidden. One of the bills temporarily prohibits the enforcement of personal liability clauses in commercial leases. Neither Guttman nor representatives from West 71 LLC and Pearl Reality, who own and manage the building, replied to multiple requests for comment.

Julian Hill, an attorney with TakeRoot Justice, has been providing legal assistance for small businesses. He says that all business owners should try to reach out to some sort of legal counsel before signing any sort of agreement with a landlord. 

Personal guarantees, Hill emphasized, can give the landlord the power to seize not just commercial but also personal assets to fulfill obligations. Business owners should also talk to a lawyer before moving out, Hill says, because every lease is different and could contain or lack certain protections.

Hill also said he’s only heard about very few commercial landlords offering any sort of relief. “I think part of the reason folks are asking for the city to provide relief is the fact that these small businesses,” Hill said, “can’t depend on the landlord to do that.”

A lack of relief

Many of the city’s nearly 220,000 businesses are facing a similar dilemma as Schmitz and the tenants at 67 West Street. Unable to conduct business in person during New York’s PAUSE, business owners are expected to meet their expenses while earning little to no revenue. Federal, state and city loans are available, but funds have been difficult to secure. 

The largest program, the federal Paycheck Protection Program, offers loan forgiveness only if 75 percent of the loan is spent on payroll. This leaves rent, the largest business expense for tenants at 67 West Street according to their own reports, lacking a comprehensive relief package. 

State legislators passed a rent relief bill last week, but it applies only to residential property.

The city’s Department of Small Business Services said in an emailed statement that they understand the anxiety small business owners are feeling, emphasizing that business owners who are concerned about their commercial lease can reach out to their office to be connected with free legal services.

Sixty-two percent of all businesses in the city have fewer than five employees, the department said. “They’ve told us that one of their major hurdles are their operating expenses – especially rent,” said SBS press secretary Samantha Keitt. While the statement was unclear on specifics, Keitt said the mayor and his small business advisory council, announced May 8, are working on solutions. 

At the state level, Assemblyman Joe Lentol, a Democrat who has represented Greenpoint and Williamsburg since 1973, is supporting state efforts to help ease the pressure on small businesses in the city.  One bill that Lentol cosponsors seeks to reduce litigation for commercial tenants by encouraging landlords to negotiate with tenants prior to involving courts.

In Jack Guttman’s email to his DUMBO building, he states that most tenants he spoke with had applied for and received government assistance, “which part of it is to cover rent,” Guttman wrote. 

Many tenants have applied for assistance but not one interviewed for this article reported assistance beyond a month and a half of payroll coverage.

“If the government would help me, I would pay my rent with that, you know, but I can’t completely deplete my savings to run a business that is shut down,” one tenant, who asked to remain anonymous, said.

With property taxes making up nearly 40 percent of the city’s tax revenue, according to the Comptroller’s office, not paying rent can have larger implications for not just landlords with mortgage payments to make, but for the city as well. 

A spokesperson for the Real Estate Board of New York stated that “Property owners are looking to help many small businesses that are struggling to pay rent while at the same time grappling with their own burdens including mortgages, building maintenance, and property taxes,” James Whelan wrote in an email, “which help fund New York City’s essential services.”

Law targets harassment

Another bill passed in the City Council package extends harassment protections to businesses impacted by the pandemic, and could result in fines up to $50,000. Harassment, as redefined in the commercial tenant harassment bill passed last fall, is any action taken by a landlord which could “reasonably cause a commercial tenant to vacate, or surrender or waive their rights under a rental agreement.” 

Elizabeth Adams, legislative director for Greenpoint’s Councilmember Stephen Levin and a candidate to replace his soon-to-be-open seat, says she’s been hearing from constituents with the same problem. One business owner told Adams that they have been receiving daily calls from their landlord and now fear picking up the phone.

“The number one issue that we hear from people is the issue of rent, the inability to pay rent, especially when businesses are closed right now,” said Adams. “And the harassment of tenants.”

Even with the new  legislation, there remains a concern that it won’t address the dilemmas faced by tenants facing harassment and threats of eviction. The hardest part may be “actually making sure that we’re holding people accountable who are using scare tactics right now against small businesses,” said Adams. “I think that’s the responsibility of the government to protect against situations like that.”

A ticking clock

Early last week, the tenants at 67 West Street suddenly received a notice that any offers that were on the table for deferral have now been rescinded. 

“The mayor mentioned last week that the city will most likely reopen EARLY JUNE,” read an email from Pearl Reality sent on May 26. “The offers we made previously to our tenants, during the crisis, are no longer available.”

Some tenants at 67 West Street think the city’s new laws are too little and too late. The tenant thinks the bill is missing what really matters: rental support for small businesses.  

“If I’m shut down by the city, then his business is–he’s a landlord. He’s in this too, you know,” said the tenant, “He is shut down as well. If I can’t make money, he can’t make money.”

Willy Chavarria, who runs a men’s apparel company in the building, agrees that the city efforts fall short. 

“I have fabric liabilities because of customer cancellations and samples that cost a fortune that have to be redeveloped with another factory because that factory closed,” Chavarria said. “Rent seems like the most practical thing to come to an agreement on.”

Some landlords are offering forbearance.

Mark Kleback sub-leased a space at 67 West Street for his circuit board fabrication business and is moving out. He also has a bar in Bushwick.

The landlord for the bar came to Kleback and his wife with an offer of a 50 percent rent reduction, even asking them if that was something they could handle financially.

“We’re grateful for our landlord, for the bar, offering us rent relief without a question,” Kleback said, “he said: this affects everyone.”

“I think a lot of them are drawing a hard line,” Kleback said of other landlords, “unless someone forces them to do it.”