Rent relief often gives tenants new lease on life

As the recession drags on, national retailers are mass mailing requests for rent reductions to their landlords. Does a small-business tenant stand a chance of getting the same relief?

It's not easy, industry experts say.

"The landlord has no obligation to reduce the rent any more than he has the obligation to increase your rent because you are making too much money," said Rafael Padilla, a principal at Par Commercial Brokerage in Santa Monica.

Even landlords open to the idea may not have the flexibility to make the cuts.

"A lot of tenants are forgetting that landlords are seeing their feet held to the fire" by lenders, said Wally Limburg, a partner in Strategic Retail Advisors, a commercial real estate brokerage in Newport Beach.

From a small-business owner's perspective, rent concessions often appear to make perfect sense these days. Sales may be down sharply. Anchor tenants may have disappeared. Too many smaller storefronts are dark. Foot traffic is lighter. New leases are being signed at lower rates.

At Whisper Cafe on Ventura Boulevard in Encino, sales are down 30% to 40% compared with year-earlier levels as customers rein in spending on its signature French macaroons, omelets, lobster bisque and other Continental fare, said owner and chef Christopher Kermani.

Since last summer, the first-time business owner said, he has made only partial payments at times on the nearly $5,000-a-month lease for his 2-year-old restaurant and bakery, as well as the building's common area.

Kermani blames his cash squeeze on the recession and an unexpected $10,000 bill last summer to replace his air conditioners. His landlord credited him $3,000 of the cost, he said, but after months of rent payments as low as $1,500, he was sued last month for $32,000 in back rent. Kermani filed for personal bankruptcy to halt the suit.

"It's becoming more and more impossible to have a small business these days," he said.

Tenants usually are on the hook for rent if they move out or shut down before their leases expire, unless they seek bankruptcy protection. Most landlords want to avoid such an outcome.

"I don't want to lose a tenant, because once somebody goes out, it is difficult to get a new tenant these days," said Tom Pashaie, a managing partner at Golden West Properties in West Hollywood and Kermani's landlord.