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News + PoliticsLandlord tells tenant organizer to move his business

Landlord tells tenant organizer to move his business

48hillsgal2

By Zelda Bronstein

OCTOBER 17, 2014 — Last summer Jim Gallagher organized his fellow tenants at the San Francisco Design Center in their successful fight against their successful fight against displacement by social media phenomenon Pinterest

But all is not well.

Since 2008 the shop he manages, Garden Court Antiques, has been on the first floor of the building at 2 Henry Adams. From 2002 to 2006 the business was also a Bay West tenant at 5 Henry Adams. Gallagher’s been there all along.

On Monday he was shocked to learn that the company that manages the building, Bay West, is going to move Garden Court Antiques from its prime location to the back of the 4th floor of the Galleria Building across the street. Bay West manages both properties for the giant Chicago-based real estate investment firm, RREEF. He’s been given 30 days notice.

“The space they’re offering me,” Gallagher told me, “would be the death of my business.” Garden Court Antiques relies on foot traffic. People passing the shop’s ample storefront notice something unique, come in to look around, and say, “I should get that!” The first floor location in the Design Center offers “fantastic exposure.”

Not only is Bay West moving Garden Court Antiques out of its current location. The company has also told Gallagher that “there would be no change in rent, even though we pay far more for 1st floor space than one would for 4th floor space. They are basically forcing me out of their buildings.”

“I pay a premium rent for this space,” Gallagher said, “and as a Bay West tenant for the last 12 years, I have never been late.”

Garden Court’s lease, the latest of several that the business has signed with Bay West, doesn’t expire until 2016. But Gallagher and Garden Court owner Sue Coleman didn’t notice a new clause in the current lease saying that Bay West could move the shop to a different space of similar size within the two buildings and would cover the cost of the move. If, however, Garden Court was unhappy with the proposed new space, it could break the lease at that time.

Just so, Gallagher said that on Monday Bay West told him that if he didn’t want to move to the back of the Galleria’s fourth floor, he could break his lease and leave.

Gallagher added that on Monday the management company also notified tenants who had been paying down back rent that they now had three days to pay it off. “People are very afraid right now.”

He said that though “it would be a devastating loss if we were to lose this space,” he and Coleman “have every intention of continuing the business, whether it’s here or elsewhere….I have a business that can survive outside of Showplace Square.”

Meanwhile, he’s going to fight Bay West. “I am looking into what my legal options are, given that this is a clear case of retribution for doing something that was clearly legal….They can end my lease but not put me out of business.”

Gallagher has no regrets about organizing the tenants. “We did the right thing. We actually won! That’s awesome.”

And even if Garden Court Antiques eventually does have to leave the Design Center, he’s going to stay the course. “I’m 42,” he told me, “and for the next 30 years, I intend to do everything I can to keep this space [as] protected PDR [Production, Distribution, and Repair] space whether I’m here or not.”

Calls to Bay West’s Tim Treadway and Martha Thompson were not returned.

That designation would have allowed the Design Center to house office space, which is otherwise prohibited in the PDR-zoned property. Instead, on July 7 the Land Use Committee voted unanimously to continue the item to the call of the chair.

On October 9 the Chronicle reported that Pinterest is expanding into 100,000 square feet  at 651 Brannan. Four days later, Gallagher got his 30-day notice.

I asked former Mayor Art Agnos, who advocated the tenants’ cause last summer before the Board of Supervisors Land Use Committee, to comment.

“Unfortunately, “Agnos observed, “commercial tenants do not have many protections under San Francisco laws. If this were a residential tenant, there would be a public outrage. The story cuts across ideological lines; it could happen to anybody. It will require a very intensive legal fight and hopefully some support from the mayor and the Board of Supervisors, who can use the bully pulpit to send the message that this should be stopped. This is one of the times I wish I were still in public office to do some jawboning with Bay West and ask them what is behind this.”

 

 

 

 

 

 

 

 

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103 COMMENTS

  1. You need to learn how to duck a thread when you are getting squashed.

    I didn’t personally know the Evans dude but it seems he had quite a following. Interesting that you talk about him but he never talked about you

  2. Wrong. You asked me for evidence that the voters don’t want commercial rent control and no mayor has ever been elected who supported that.

    I use the example of a mayoral race because it is the only high-turnout city-wide election we have.

    It is inconceivable that the voters would approve such a policy and you have failed to produce a shred of evidence to the contrary.

  3. Folderpete made an assertion as to the unintended negative consequences of commercial rent control and I responded to that. You’ve since hijacked the thread to mayoral politics because you cannot prevail on the merits of the discourse.

  4. You said “I don’t recall a mayor running for office opposed to commercial rent control.”

    That is irrelevant to my point, which was that there is minimal popular support for such an idea, even if it were allowed by state law.

  5. The statement stands for itself, you’ve done nothing to rebut it, changing the subject and jousting at a straw person of your own choosing notwithstanding. Now go away before I harvest all of your comments and reprise the Arthur Evans gibberish generator the image of your froth.

  6. Pete, i am more optimistic.

    Partly because the number of rent-controlled units decreases by a few thousand every year.

    And partly because of the demographic changes that are making SF more moderate and reasonable.

    These two factors mean that eventually a majority of voters will get that RC does more harm than good.

    10-20 years, I’d guess.

  7. I’m dismayed that RC itself will likely NEVER go away. Heck, guys like SPUR see it as a “solution” to “affordability”.

    However, as currently constituted, its keeping plenty of units off the market, and that has got to affect things enormously.

    Grandfather existing tenants Free up newer rentals (NYC has something like this in place, with income caps and no rent control on small bldgs!!). Those invested in RC (look at all the lawyers!, advocates) will resist, but, think of the greater gain. Probably just not in my lifetime.

  8. Oh, Jesus, shut the fuck up, if anyone was willing to stop using these products, they already would have. “Find out where the board of directors live”? What, do you think they all live together in a single domicile? You’re an idiot.

  9. I suspect that rent control will eventually go away via some mechanism like that. Anther example would simply be that a tenant can sell his tenant’s rights for a fixed payout, which happens a lot now anyway.

    The idea would be to make it more official such that, say, I buy out my tenant for $X and then my unit is forever exempt from rent control.

    Effectively we’d have a dwindling number of tenants who enjoy rent control and, when the last one dies, it’s done. The key is grandfathering in existing tenants but having no rent control for new tenants who, in any event, now have to pay rents that are so high that rent control isn’t such a great benefit anyway.

    That would also lead to new landlords re-entering the business once they know they can get sensible rents. And, more importantly as you note, can get their units back when they wish. I agree that eviction control is much worse than rent control.

  10. (sorry for off-topic, but …)

    My biggest bitch with RC isn’t about the price control – its the EVICTION control. So …

    Let me lease a unit at HALF the going market rate, BUT can evict with 30/60 Day Notice (state law).

    Benefits are cheap rent for tenants; and future control of unit for small prop owners. Great for those looking to rent short/medium term. Also for those who can’t afford todays’ Rent Controlled rents ($3200 – 1 BR), While landlords lose income they retain control of prop (for future relatives, nuisance tenants, or potential relocation … )

    Not so good for renters who want long term residency (at decreasing prices); but there’s always ‘regular’ rent control for that.

    I imagine it being handled entirely within the lease language (templates by legislation) – so no new bureaucracy or paperwork.

    ???

  11. My idea would work like this: 1 yr lease = $xxxx. 2 yr = $xxxx + x00. 5 yr = $xxxx + (larger). Take your pick of lease time – and price. At end of lease, everything’s up in the air.

  12. @PPod – Not sure why ‘Bloomie’ dissed your idea. I’d appreciate any help. Currently my tenant uses water that directly consumes 15% of his rent. So, yeah, I’d like some help.

  13. That is such a vague statement that it is useless. I was addressing more your ridiculous claim that there is majority support for a form of commercial rent control.

    there is not, as noted.

  14. Here’s what I posted:

    “There needs to be some counter-cyclical policies in place to protect community serving established and profitable businesses from displacement due to economic boom.”

    Why not respond to that instead of erecting straw persons and responding to them?

  15. If you’re going to say something, you should at least know what your words mean. But I note you could not provide the name of any serious credible politician who supports any form of commercial rent control, so my case is made.

    Non starter; non issue.

  16. Rent control for commercial or residential units is not a pro- or anti-growth policy, regulation of rents is orthogonal to “growth,” whatever that means.

  17. As a landlord, I would also reject any attempt t pay more in order to secure a longer lease. The rent board could easily retrospectively rule that such payments were illegal rent increases and later demand repayment of it.

    Plus I don’t want to be locked in for long periods, just in case I decide that I want to do a no-fault eviction.

  18. Easy election wins for pro-growth mayors gives the lie to anyone claiming that commercial rent control has any material support.

    Moreover you have failed to cite a single serious and credible local politician who supports it.

    Non starter.

  19. Actually, Folderpete, a while back I suggested the idea of imposing some kind of “tax” or a one-time significant, but not exhorbant, monthly increase for tenants living in rent controlled buildings. I would gladly pay more for my apartment if it meant a little more security and would induce the current building owners to make a few repairs in my building. I proposed this to a Bloomingdale’s sales representative (who was also a landlord–go figure) about 5 years ago. The gentleman scoffed at the idea, though he wouldn’t say exactly why he was opposed to it, other than it wwould be too much paperwork to deal with. Not sure about the 5 or 10 year leases. The city has enough trouble navigating residential property issues as it is.

  20. I made no assertions of how mayoral politics played into the policy issue of commercial rent control. As usual you hijacked the thread to your own favorite place and the demand that others disprove your fallacious assertions.

  21. … and would Commercial RC have even made a difference in this case of a blind-sided lease disagreement?

    Commercial rentals typically involve extended leases (5 yr, 10 yr – often with options to renew). Their ‘rent’ is ‘controlled’ in that fashion; though when the lease is up, often times prices spike, and new businesses are able to offer their services.

    Perhaps Residential RC should be modeled similarly – give a tenant a lease that lasts for 5 or 10 yrs — instead of “month-to-month”. Of course, most tenants want the option of leaving whenever it suits them, while landlords don’t get that benefit. If a tenant were forced to commit for a long period … well, poorer tenants will be SOL – unless someone like “the City” were to guarantee their rent.

    Hey, I’m sure renters would welcome the opportunity to insure their future by kicking in an extra $50/mth to such a City fund, wouldn’t they???

  22. True, and also note that commercial leases are for much longer durations. they can be 5, 7, 10 or even 20 years. And in that period rents either do not rise at all or rise in agreed increments.

    So rent control would not make much sense in that context.

  23. You have no evidence to the contrary.

    I’d offer up the fact that the voters always elect a pro-business, pro-jobs, growth mayor.

    And of course that business owners, like landlords, are a minority in this town, many of them not even living and voting in SF. So they are a natural minority. Many who love residential rent control are anti-business.

    But again, run on that platform and then we will know for sure. Scared?

  24. But commercial rent control would make it harder to open those businesses in the first place. Why should a taqueria that opened ten years ago enjoy some city-mandated special competitive advantage over a taqueria that opened last week?

    Business space is not housing. Commercial rent control would explicitly offer protection to businesses merely for being older, not for serving the public better. Why is this a good thing for the city?

  25. Since that would be illegal under state law, and since the voters are massively opposed to it, that should not surprise you.

    But there is nothing to stop you being the first if you really believe in it. What are you waiting for?

  26. Why? I don’t recall the voters ever electing a mayor who ran on that dubious premise. But I recall the voters often voting for a pro-growth mayor.

  27. There needs to be some counter-cyclical policies in place to protect community serving established and profitable businesses from displacement due to economic boom.

  28. The unspoken suggestion is that commercial rent control would be the solution to this “problem”. Yet such a suggestion is bad in so many ways that it is unthinkable.

    Does the Bronx ring a bell?

    I can just see Hayes Valley now. A few (overpriced) boutiques, plenty of junk stores, a (really) funky restaurant, and probably a few (no, many) boarded up storefronts to boot. No, scratch the boutiques; it takes a certain level of foot traffic to make that happen. And you won’t get it with rough campers sleeping in the storefronts during daylight.

    In fact, I could envision SF – if it were the only town with CRC – to be commercially a ghost town. There would be no new restaurant, cuz all the spaces would be taken by the greasy spoons of yore.

    But I suspect that conservative ole San Francisco would somehow relish the nostalgic possibility of not having to confront change.

  29. Correction, should read:

    A competent lawyer will tell the tenant that he has NO cause of action if (and only if) . . .

  30. A competent lawyer will tell the tenant that he has cause of action if (and only if) the lease explicitly allows a landlord to switch the unit with 60 days notice, which it does.

    The tenant evidently did not realize that he had agreed to this provision, which is not contrary to any law (and if you know differently please cite the statute).

    The fact that ideologically you would like there to be a law preventing this does not mean there is one. That is called wishful thinking.

  31. The only thing I will say further that the fellow ought to consult a competent lawyer rather than go by what people are writing on the internet.

  32. The curse of over-regulation and over-taxation is the fault of all politicians for no reason other than that politicians of all hues cannot help themselves and constantly feel they have to “do something”.

    Add to that that people respond to everything that they don’t like with a phrase like “they oughta pass a law against it”, and it all means that we have largely abandoned the founding fathers’ idea of a loose federation of loosely-regulated states. In fact, we generally admire politicians who pass a lot of laws.- they get commended for “achieving” a lot.

    But SF goes much further than most and reflective souls understand that we must look to Sacramento and the courts to bounce the most egregious examples of excess, at least until demographic changes render the problem moot.

  33. Wrong, for the simple reason that the tenant’s lease specifically allows the landlord to switch the tenant’s unit with 60 days notice. The tenant agreed to this possibility and so has no cause of action here.

  34. Marcos,

    You must be new to SF politics to make statements like this.

    “Yet “Iminitforme” now asserts that progressives are solely responsible for the “over-regulation” of San Francisco and by extension, all of the downsides of market failure…….Most of these regulations were enacted at the ballot box by San Franciscans or signed into law by the Mayor.”

    Never forget San Francisco is a one party town. And in this town, progressives come in all shapes and sizes. It’s only in the last few years of this past decade that we have seen a softer progressive voice in City Hall. Prior to that we saw Chris Daly, Aaron Peskin, and their ilk making short sighted policy decisions which now infect the lives of most San Franciscans to this day.

    I don’t disagree that most of the stupid regulations were won at the ballot box and others either never vetoed by the mayor or signed by the mayor because not signing was political suicide.

    All progs.

    You really should spend some time hanging in the corridors of city hall. See first hand which trolls slinking from one supervisors office to the next. You’ll get a better idea on who really controls policy decisions at city hall. Who do you think pushed for tighter regulations on…..landlords, chain stores, office development caps, etc? Conservatives? Republicans? Libertarians? Independents?

    Progs all progs.

    Marcos if you can tell me who the conservative voices are at city hall I’ll buy you a ham sandwich.

    And yes, I do assert that progressives are solely responsible for the “over-regulation” of San Francisco and by extension, all of the downsides of market failure……

  35. It appears that he has a strong case.

    The LL’s conduct is intended to interfere with and disrupt the tenant’s business. This is a tort and it is compensable in damages. In addition, because it is malicious, it is likely that the jury will also award him punitive damages.

  36. “Sam” likes to say that progressives never win the Mayor’s race because people don’t support the progressive platform. Yet “Iminitforme” now asserts that progressives are solely responsible for the “over-regulation” of San Francisco and by extension, all of the downsides of market failure.

    Most of these regulations were enacted at the ballot box by San Franciscans or signed into law by the Mayor. Your quarrel is as much with San Franciscans and the Mayor as it is with what is left of “the progressives.”

  37. Campos can only function at all somewhere like the BofS where there is only one straight white male out of eleven supervisors, and he can endlessly play envy, race and victim cards..

    How effective will his divisive and polarizing identity politics be in a forum where straight white males hold the power? It will be an exercise in futility and frustration for him.

    So like others here I almost want him to win so that he can be an epic fail and so Lee can appoint a more appropriate and consensual Supe for his district.

    But I think Chiu will win and we;ll be stuck with Campos until he is termed out into obscurity.

  38. While I am happy to see that you are a part of the majority who support Prop 13, I fail to see that that has to do with this issue.

  39. Tim is the one here claiming that the landlord is somehow misusing his power to punish a tenant who created problems for him.

    But that landlord only has the power vested in him by the lease which, it seems, disadvantaged the tenant. Either the tenant got a cheaper rent in return for that concession, in which he cannot complain. Or the tenant was negligent in not properly reading his lease before signing it.

    We don’t know which is the case but either way, the tenant created his own problems here.

    But more generally, yes, it isn’t prudent to piss off someone who you have granted power over you.

  40. “Let’s start giving an address to the people who are destroying San Francisco.”

    Look in the mirror…….

    You progs have no one to blame but yourselves for the current situation in SF. You have over regulated and ruled yourselves into a corner…..now you have to live with the untended consequences of stupidity. High rents and lack of affordable housing and commercial space.

    Agreed….please send Compos(t) to Sacramento…..maybe he can share the same closet with Newsom while we all play where’s Waldo for the next few years. I like freshman assemblyman……harmless nobodies wandering the halls of the Capital looking the closest restroom with a GH so they can begin making friends.

  41. Maybe, maybe not. We could speculate but…

    “Most people know that if you piss off someone with power over you (employer, lender, landlord, benefactor, etc.) then there will likely be repercussions.”

    “Sam” how exactly does a business agreement/contract turn into a power based relationship in the 21st century?

  42. Boycott Pinterest. Just don’t use their stupid shit. Find out where the board of directors live and stage protests on their doorstep. Let’s start giving an address to the people who are destroying San Francisco.

  43. Amazing. That manages to be neither a coherent sentence or a helpful sentiment. I literally can’t discern what it is you are trying to say, thanks to your garbled text. It literally frightens me to think that people like you have access to a voting booth but I guess we have to take the agony with the ecstasy.

  44. Why does anything need to be remedied? Unlike a residential lease, a commercial lease is something negotiated between two business entities and it is incumbent on both of them to negotiate the best deal possible. They do not need hand-holding in the way that a residential tenant might. Both sides are professionals who should be experts at this stuff. It is simply a case of caveat emptor (and read the small print).

    For the city to introduce some form of commercial rent control would involve changing a host of state laws and the odds of that happening are negligible. Moreover it would make commercial landlords very wary of entering into new leases in the same way as we currently see with the owners of rent controlled housing units. That would lead to less supply and higher rents.

    It will not help business to interfere with their free ability to negotiate contracts with each other.

  45. I agree 100%. And that’s why, despite not liking his politics, I’m tempted to vote for Campos. Get him into Sacto where he can’t do much harm, and out of SF where I think he does plenty of damage

  46. No matter who goes to Sacramento, the rest of the legislature not to mention the governor are nowhere near on the same pages as San Francisco progressives. The opportunities for success are thus minimized although the opportunities to do transactional harm are amplified. But I doubt that a San Francisco assemblymember could do that much more harm than the rest of the lege.

  47. So, how do you remedy the situation? Can city authorities pass laws that protect historical businesses as Campos is investigating, or is this a problem that needs to be addressed at the state level? In that case which of the two David’s will be most likely to support efforts to protect small businesses in Sacramento?

  48. Maybe the rent was set lower by the landlord specifically because the landlord knew he could downgrade his space at any time. If the tenant accepted that lower rent then he really cannot complain regardless of whether he was too lazy to read the small print or not.

    Most people know that if you piss off someone with power over you (employer, lender, landlord, benefactor, etc.) then there will likely be repercussions.

    Agnos says: “If this were a residential tenant, there would be a public outrage.” Maybe not. If it were a home then if there were rent control the landlord could not do this anyway, without compensation. While if the home was not under rent control, the situation would be the same as with commercial – the tenant would have to move with 60 days notice.

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