Two Real-Life Stories about Leases

Yesterday was lease story day. First I went down to this wonderful luggage store in Kendall that I’ve been going to for many years (a bag needed repair after being very badly abused by an airline) and discovered it was closing. Why? The shop next door in the mall’s lease is up, and has threatened to leave unless they can have his space. The luggage shop has seven years left on his lease. But it seems the mall management inserted a clause into his lease at last year’s renewal that gives the mall the right to unilaterally relocate the store to other, much less desirable (no foot traffic), areas — perhaps because they knew this demand was coming. The luggage shop owner, who says he trusted the family who runs the mall, had been doing business with them for more than a decade, didn’t notice this when he signed the renewal. He says he’s moved before to help them out — but only within the covered part of the small mall, not to the wasteland of the far side, where no one ever goes.

So he went to a lawyer. The lawyer told him he had a slam-dunk case, was certain to win, and charged him $7,000 plus filing fees to file suit against the mall. But after the first meeting with the other side’s lawyer, and after cashing the first check, the lawyer warned him that — although he still thought they would win — it would cost $100,000 to $200,000 to litigate to the end (a price that strikes me as absurdly high for anything except the very biggest firm litigation). The shop owner decided he couldn’t afford it, and is angry he wasn’t warned about the huge possible total cost in advance. (I wonder if the lawyer was lying: could it be that he decided he was going to lose the case after all?). He’s not real happy about closing. ‘It’s corporate America in the age of globalization,’ he sighed. (OK, he’s a luggage guy, not a political scientist.) “It’s a change in life; who knows what the next chapter will bring.”

It’s surprising how disturbing this is: both that an infrequently visited specialist shop I trusted — they may not have had the lowest prices on the planet, but they had nice stuff at reasonable discounts, and if they said it would last, it would last — is closing, and that a nice guy got done dirty by the legal system — in a way that’s so obviously painful. That to some extent it’s his own fault for trustingly not reading the fine print doesn’t help much; it might make it worse. I added my email to the list in the shop to be notified if they open up again somewhere else; I hope they do.

Later that afternoon, we encounter another similar lost-your-lease story. We’re at a street fair in South Miami (this is the magical time of year in south Florida when it’s very nice out, like spring or fall in normal places, and we have two or three outdoor fairs every weekend). I want to show the family the amusing menu at the new Zen Dog hotdog store that only opened a few weeks ago. Although I haven’t eaten there, I think the menu is amusing, and was thinking we might take the kids some day. But it’s closed. The windows are papered over. The folks at the shop next door explain that neighboring bank, which owns the land, was planning to build a bunch of town homes on a parcel that includes the shop, and stretches back for two blocks. So they evicted the new Zen Dogs, exercising a development right in the lease that the bank’s VP had orally assured the tenants was “just a formality” and could never happen. (It gets better: the bank recenlty dropped the project due to increased construction costs after hurricane Wilma.)

Law on the ground, as in the books: the parole evidence rule rules. (Landlords are not fiduciaries.)

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4 Responses to Two Real-Life Stories about Leases

  1. Sue Ann says:

    Oh MIchael, didn’t you know the unwritten business rule in South Florida. Money before loyality, money before conscience, money before all?

  2. wcw says:

    Florida? I learned in the Oakland/Berkeley residential rental market that if it’s not written down, it doesn’t exist, that if a clause can be used against you, it will be, and that the landlord/tenant relationship uniformly is the exploitative one of an imperial Roman governor taxing his populace. Sometimes worse (google “lakireddi”; the hero of that story was my wife’s landlord for a couple of years).

    If college kids can buy and read Nolo’s handbooks or negotiate the Berkeley Rent Board process, surely an actual businessman can be bothered to read his contract, negotiate to strike unwanted clauses, and insist that oral assurances appear on the page in black and white.

    If business were based on trust, there’d be no contract law.

  3. Dan Markel says:

    These are sad stories, and among them is also the recent news that the Second Avenue Deli was also going to have to close and/or move in light of problems with leasing. http://www.nytimes.com/2006/01/05/nyregion/05deli.html?pagewanted=print

  4. Andrew Wright says:

    This is a pretty common tactic, a lot of the time most firms are more than happy to part idiots with their money.

    🙂

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