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NYC Council Hearing Exposes Opposition to Commercial Tenants’ Rights, Impacting Artists and Galleries

The proposed Small Business Jobs Survival Act (SBJSA) would help commercial leaseholders bargain contract terms with their landlords on equal footing, but the bill has some strong detractors.

Mayor Bill de Blasio in 2010, when he served as New York City’s Public Advocate (image via Bill de Blasio/Flickr)

On Monday, New York’s City Council held a hearing about the Small Business Jobs Survival Act (SBJSA). Council Member Ydanis Rodriguez (D-Manhattan) has cosponsored the bill, which would require landlords to tell commercial tenants 180 days before their lease expires whether they intend to renew it or state a valid legal reason why they won’t; enable the tenant to get a 10-year minimum lease; and empower tenants to demand arbitration if they believe the rent increase is too much. There are no current restrictions on commercial rent increases or security deposit amounts in the city.

The legislation’s advocates believe the SBJSA would support small businesses — including artists, galleries, and nonprofits — who struggle to compete with the high rent prices of a cutthroat real estate market. The impact of rampant rent inflation is evident in most Manhattan neighborhoods. CityLab recent named the city one of the world’s richest ghost towns, noting the empty storefronts that now blight even the wealthiest of neighborhoods, like the West Village. Last month, The New York Times published a photo essay documenting the overwhelming amount of shuttered businesses, from Times Square to Williamsburg.

There is a consensus between the Mayor’s Office and proponents of the SBJSA that something must be done to save New York’s small businesses, but the two parties are split on how to proceed. This fight for equality in property negotiations between tenant and landlord is unfortunately nothing new for the five boroughs. A version of this bill was introduced to the City Council in 1986 and has been reintroduced many times since, never passing into law. As Hyperallergic previously reported, the proposed legislation was initially struck down in 1987 by Mayor Ed Koch after its introduction by then-councilwoman Ruth Messinger. The bill resurfaced in 2009, when it actually received more than enough votes from City Council to pass, before former Speaker Christine Quinn pulled it from the floor.

And like those past iterations, the SBJSA today faces considerable doubts from representatives of the real estate sector and the Mayor’s Office, which announced its opposition of the bill at yesterday’s hearing.

During his testimony, Commissioner Gregg Bishop of the Department of Small Business Services (SBS) enumerated the administration’s misgivings about the bill. He points to a lack of protection for businesses without formal leases, which includes many long-standing, immigrant-owned shops. Bishop claimed that the SBJSA may make it harder for those businesses to secure leases because landlords may be less inclined to execute contracts that could incur additional costs of arbitration. Commissioner Bishop also worried that such guidelines would preclude new entrepreneurs from a market that already prefers to give contracts to wealthy clients and multinational corporations. (New businesses often require leases to get financing and begin operating.) He noted that third-party arbitration would also advantage landlords in negotiation, as such procedures often favor the party that is able to provide more resources and information in the process. Closing his testimony, Bishop stated that the Mayor’s Office wanted to work further with the City Council for small businesses, but that the SBS already offers services like the Commercial Lease Assistance Program.

The Commissioner did admit that although there are 230,000 small businesses across the city, only 250 actually used the assistance program this year.

Jane Meyer, a spokesperson for the Mayor’s Office, reiterated the Commissioner’s stance to Hyperallergic when asked for comment:

The City supports efforts to help small business owners secure a fair lease. Just last year, SBS launched a program to provide free legal assistance to tenants in lease negotiations. However, we are concerned about potential unintended policy consequences of this bill that could result in harmful outcomes for all commercial tenants, existing and new. We look forward to working with the Council to figure out ways to provide more support to small businesses.

However, advocates of the SBJSA noted that Bishop failed to offer any details on how an alternative to the bill might work. TakeBackNYC, a lobbying group in support of the bill, notes that between 1,000 and 1,200 small businesses lose their lease because of drastic rent increases every month. “We seek only to ensure that every successful small business is able to continue operation, employ people, and make reasonable guesses about the future of their continued successful operation.”

Dozens of small business activists, including Messinger, gathered outside City Hall in support of the bill. “Huge rent increases put small businesses out of business, damage quality of life, and take away jobs — threatening the fabric of life in this city,” she said.

For years, the bill’s proponents have also struggled to dispel mischaracterizations of the guidelines as overregulation. “This is a pretty good bill, although it’s not a panacea,” Jenny Dubnau, an artist and activist with the Artist Studio Affordability Project, told Hyperallergic in 2015. “Commercial rent control would be the best solution, but we don’t have the political power at this point to get real commercial rent control passed.”

Commercial rent control actually did exist in New York until it ended in 1963, when a state law mandating it expired.

Two weeks ago, McNally Jackson, one of Manhattan’s few remaining independent bookstores, announced that it would shutter its Prince Street location because of a rent increase from $360,000 a year to $850,000. Such drastic increases in rent represent the state of the city’s real estate market for small businesses. Historically, artists and galleries have also grappled with the impact of these surprise financial burdens, hopscotching across Manhattan in search of affordable leases from the Bowery to Soho, to Chelsea, and back again.

William Powhida, an artist and critic based in Brooklyn who attended the SBSJA hearing, believes the proposed legislation would greatly benefit galleries and artists who often hold commercial leases. “I think this would give both artists and dealers tools and rights they don’t currently have to negotiate commercial leases,” he told Hyperallergic over email, noting that the bill “would provide long-term stability and mitigate some of the effects of gentrification by allowing galleries and artists to stay in neighborhoods instead of constantly moving on in search of ‘cheaper’ spaces.”

“I know of several artists who took on ten-year leases, built out studios even adding sprinkler systems to the space, only to be kicked out at the end of the lease.  SBJSA would slow down the commercial leasing process and give leaseholders some tools and rights to make the case that they should be allowed to renew and stay in their spaces.”

Supporters of the SBJSA have noted that resistance to the bill from the Mayor’s Office closely mirrors the sentiments of the real estate lobby. The New York Building Congress, which represents the construction industry, echoed Commissioner Bishop’s concerns.

“This legislation severely limits property owners from making independent decisions, which would affect every landlord, including co-ops, condos, and small mom and pops,” Carlo Scissura, who heads the organization, wrote in a letter to Johnson on Monday.

“You cannot focus solely on the landlord portion of the equation, to try and single them out as the reason why retail is struggling,” John Banks, president of the Real Estate Board of New York, remarked during the hearing.

Based on his own observations, Powhida believes that the mayor’s alignment with lobbyists for the real estate industry hints to the sector’s power in New York. “We are dealing with the negative externalities of capitalism right now,” Powhida said. “And even an imperfect bill would be better than the status quo, which is nothing. “

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