puptrait t1_iw4qste wrote
The cost of commercial leases have gone through the roof across the city and have only gotten worse since the pandemic shutdown.
I've been actively looking for a new location for our studio and it is absolutely unreal how many of the spaces we looked at in 2015 and 2018 have remained vacant, but are suddenly somehow 2x - 5x the cost.
Another big issue many businesses have been dealing with lately are the consequences of deferment arrangements they made with landlords during the pandemic.
In most commercial leases, rent automatically escalates when you're in breach (ie the entirety of your lease is immediately due, often at a premium). Which in itself isn't normally an issue if you pay your bills, but these deferment agreements often contain stipulations guaranteeing they remain tenants until the deferments are repaid, effectively committing tenants to (usually quasi-punitive) overstay terms or blindsiding them with TBD market rate renewals. That combo can incentive LLs with larger multi-property portfolios to force tenants into bankruptcy.
I'm not a lawyer or tax expert, but just to relay how it was explained to me by two business owners that were forced to close recently...
Say you've been on a 5 year term at $2,500 a month ($30k a year) and your rent was deferred for 6 months. You agree to pay that $15k back over 30mos as a manageable extra $500 a mo. Business returns mostly back to normal and you manage to pay the $3k as agreed. Things are tight, but doable. At least, until your lease comes up for renewal.
Suddenly rent is 2x the cost and now you're paying $5.5k - maybe even have to put down an additional $2.5k, just so your deposit equals a months rent. But you don't have $8k laying around, so you have no choice but to close.
But remember, not only is the back rent of $15k due, the remainder of the now $5k a mo 5 year lease you were forced into just escalated. Meaning, you now owe your LL $300k plus interest / fees / legal costs incurred from collection. At which point, you have no choice but to go into bankruptcy and your LL can then write off the bad debt against whatever they would otherwise owe in capital gains.
Considering by most accounts we're nearing the end of a massive real estate bubble, now isn't exactly the worst time to sell property. And if your immediate plans are to cash out, losing $30k in speculative revenue to save $300k in taxes is a no brainer for some.
TLDR: Commercial landlords with larger portfolios can often net more forcing restaurants out of business than from collecting rent
shebang_bin_bash t1_iw50snl wrote
This sounds like an excellent reason to break up large landlords and then implement limits on how much any one entity can own. Right now we have feudalism but with all of the benefits to the lords and none of the obligations.
puptrait t1_iw52rng wrote
A vacancy tax might be easier to implement on a local level. But I love where your head's at
imperaman t1_iw5k2wq wrote
Why doesn't Baltimore have a vacancy tax? It would seem like a no-brainer, and a popular thing for a politician to run on, or to have a referendum for. DC charges 5% for vacant buildings, and 10% for blighted buildings. Baltimore charges the same 2.3% regardless of the state of the building. If Baltimore raised the tax rate on vacant/blighted buildings, they could afford to lower the rate for everyone else.
SaveFailsafe t1_iw5l8bo wrote
One need only look into who owns the most vacants to discover why the city won't entertain a vacancy tax.
fredblockburn t1_iw6tkg4 wrote
Who’s that?
SaveFailsafe t1_iw75mwc wrote
The city government itself owns roughly 10% of the vacants. The rest are privately owned, but behind all the various LLCs are a few big money institutions squatting on property for speculative reasons. Institutions with lobbying power. Like Hopkins.
WildMikeGreen38 t1_iw9fx58 wrote
> vacancy tax
Renting out places and making them rentable isn't an easy task. It takes money, time, effort and patience that people don't always have. It also ignores lawsuits, issues with the house that you don't know of and millions of other things.
If people are leaving a rentable place that can make them money empty, there's probably a real good reason for it. This is coming from someone who had all kinds of issues with mortgage companies, repairmen and bad tenants.
[deleted] t1_iw6h09r wrote
[deleted]
wbruce098 t1_iw7tzqe wrote
Everything’s impossible to enforce in Baltimore. Just, uh, not in any other city. It’s an excuse I’m tired of seeing. We are better than this!
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