City Council to Hold Hearing on Bill Meant to Help Stop Small Business Closings

By Carol Tannenhauser

On October 22nd, the City Council Committee on Small Business will hold a hearing on the Small Business Jobs Survival Act (SBJSA), a bill intended, in its own words, “to give small businesses rights in the commercial lease-renewal negotiation process.” The hearing will take place at 1 p.m., in the Council Chambers at City Hall, and is open to the public.

The SBJSA has the dubious honor of being “the longest-pending legislation in New York City Council history,” noted The Villager. Yet, it is still as relevant — and controversial — as it was when it was first introduced in 1986, by then Council Member Ruth Messinger. The bill begins:

The Council hereby finds that the City’s small business sector remains vulnerable at a time when New York City is more dependent than ever on small businesses for job growth and revenues. The New York City commercial rental market has been negatively influenced by speculators for such an extended period of time that the interest of small businesses and job creation, and the broader general economic interest of the City, are being harmed.

An unacceptable number of established small businesses are being forced out of business solely as a result of the commercial lease renewal process. The present commercial rental market provides no means for tenants to mediate disputes between tenants and landlords to arrive at fair and reasonable lease renewal terms. The absence of legal protection for the interests of commercial tenants in the lease renewal process has unnecessarily accelerated the closing of small businesses and resulted in lost jobs, tax revenues and community instability.

It is the intent of the City Council, through this legislation, to be known as the “Small Business Jobs Survival Act,” to give small businesses rights in the commercial lease renewal process, and therefore, a measure of predictability of future costs through a two-step procedure of mediation and, if necessary, arbitration for negotiating commercial lease renewals and rentals. This process would create a fair negotiating environment, which would result in more reasonable and fair lease terms to help small businesses survive and encourage job retention and growth in the City of New York.

Upper West Side Council Member Mark Levine, a co-sponsor of the bill, acknowledged in a telephone interview that lease renewals and rents are not the only reasons small businesses close.

“The internet of course has changed retail dramatically,” Levine said, “and that has led to a real change in the retail landscape of New York City. But there are times when a mom-and-pop business is pushed out upon lease renewal, simply because the landlord has an ambition for a dramatically higher rent, even if the existing business was thriving and an important part of the cultural fabric of the community, paying its rent on time and in other ways a great tenant. What the bill we’re hearing will do is level the playing field in those negotiations, so that when you have an existing small business that is succeeding, they have a fair shot at renewing the lease at a cost that is not prohibitive.”

“Small businesses helped to build New York City, and they continue to play a critical role in providing goods and services, and employment,” emailed Council Member Helen Rosenthal, who is also co-sponsoring the bill. “On the Upper West Side, we have seen a number of small businesses close because they have not been able to renew their leases for a variety of reasons, and our community has really felt this loss. [The Small Business Jobs Survival Act] offers real pathways for commercial tenants and landlords to continue their lease arrangements, and for businesses to stay in their local communities.”

Levine expects the hearing to be “intense.”

“Someone from the Administration will be speaking, followed by questioning by the Council,” he said. “Then, there will be members of the public. I think we’ll hear from small business owners who are suffering from rising rents. I think we’ll hear from regular New Yorkers who are distressed at the loss of mom-and-pop businesses in our neighborhoods. I think we’ll hear from building owners, who also have an important point of view.”

John Banks, president of the Real Estate Board of New York (REBNY), recently wrote an op-ed in Crain’s, summarizing that point of view, calling “rampant” retail vacancies a “myth,” and criticizing the SBJSA.

“Beyond questions of its legality,” he wrote, “the City Council’s proposed legislation mandating 10-year leases won’t change small-business failure rates, which have been consistent for 20 years across all categories. This commercial rent-control bill ignores the growth in pop-ups and short-term leases as creative responses to the rise of e-commerce and would further restrict market flexibility.”

Proponents of the bill bristle at the characterization of it as “commercial rent control.”

“The SBJSA is not commercial rent control at all,” argued Kristen Theodos, a spokesperson for TakeBackNYC, a coalition of small business owners and residents advocating for the SBJSA, in an op-ed in Kings County Politics. “Rather, it is a bill that gives both parties rights in the lease renewal process.”

NYC Council Speaker Corey Johnson ran in part on a pledge to give the SBJSA a hearing. This will be its ninth in the past 32 years, but in none of the prior hearings did it make it out of committee to a vote before the full Council. Johnson is determined to change that.

“As Speaker, protecting and preserving mom-and-pop shops and restaurants is one of my priorities,” he told WSR in an email. “I am looking forward to the thoughtful and comprehensive hearing that this bill deserves. This hearing will provide an opportunity for stakeholders to provide testimony, so we at the Council can discuss crucial issues related to the legislation.”

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