[Sign Up Now] to Receive Our FREE Daily SCVTV-SCVNews Digest by E-Mail

Santa Clarita CA
Mostly sunny
Mostly sunny
Today in
S.C.V. History
August 17
1920 - Actress Maureen O'Hara born in Ireland; 1961 "Parent Trap" uses Disney Golden Oak Ranch [story]

Commentary by Carl Kanowsky, Esq.
| Monday, May 20, 2019

Carl Kanowsky, Esq.

I’m reading “Button Man,” a novel by Andrew Gross. The protagonist, Morris Raab, a successful New York clothing manufacturer, battles organized crime in the 1930s. The bad guys want to infiltrate Morris’ business by way of unionizing his workers.

On its face, given some of the squalid work conditions in place at that time, getting the employees better pay and a safer working environment seem commendable. And the costs to do this mainly come from the wages, right?

It’s only when you poke beneath the surface in the book do you find that “the mob” didn’t care about the sewers or warehouse people or cutters. Nope, the crooks took a percentage from the workers, then charged the employer a percentage for health, welfare and retirement of the employees, and then demanded protection money so the business didn’t burn down. The death knell for the businesses was that they had to buy from union-approved suppliers, some of whom were owned by organized crime and some of which kicked back percentages to the union. The costs of the raw goods and supplies skyrocketed.

All of these percentages added up to where any profit the garment companies made went to the union. The companies were staying in business to keep the crime bosses secure in their extravagant lifestyles.

Interesting story, but that’s 80 or 90 years ago, and most of that has been cleaned up, right?

I know some small businesses that feel as though they are staying in business to send money to the owners of shopping malls. How did this happen?

Like many things in life, rent in a shopping mall is advertised at what are essentially teaser rates. A retailer is told, “Rent at the mall is only $3.25 per square foot.” So, if you only need 1,000 square feet (which is more than adequate for many businesses), it looks like rent is going to be only $3,250.

That’s not cheap, but a prospective tenant looks at the number and believes fits into her budget. So, she signs a 5-year lease. Often what the retailer is most concerned about is location in the mall and how much the rent is. Some do not bother to read the 100-page or longer leases before signing them. Later they get some very unpleasant surprises.

They are surprised to learn that the $3.25 per square foot is only what is called “minimum rent.” Mall owners have several creative ways of getting much more than just minimum rent.

Here are a few of the additional payments tenants are required to make:

* Tenant’s share of insurance cost for the mall;

* Tenant’s share of entire Development Common Area Maintenance (“CAM”) costs;

* Tenant’s share of shopping center CAM costs;

* Tenant’s share of taxes;

* Fund contribution;

* Tenant’s share of food court CAM costs;

* Tenant’s share of advertising costs;

* Percentage rent.

Besides paying for her workers, her cost of goods and minimum rent, the small business owner is also helping the shopping center pay its insurance costs and the real property taxes the mall owes. And the retailer wants the inside and outside of the mall to look good and inviting and safe, right? Does the minimum rent help pay for that? No, those are all additional charges.

And if the retailers want the mall to advertise what a shopping mecca it is, then the mall’s tenants have to help pay for that. Many shopping centers also charge their tenants for shopping center personnel who oversee the entire complex. In other words, the tenant pays for the person who is sending them the mall’s invoices.

Then, to add insult to injury, many malls will take a percentage of any money the retailer receives, taking the percentage right off the top. It’s almost as if the retailer is being punished for being successful because the more money that comes in, the more the retailer must pay to the mall.

These extra charges often result in total money paid to the landlord mall each month to increase by at least 50 percent and perhaps to even double. Thus, the 1,000 square feet that were only $3,250 are now actually $6,500. Over a five-year period (the length of the lease), that’s $390,000, an increase of $195,000 over what only minimum rent would be for five years.

Prospective tenants: Read that lease carefully, get accurate estimates as to how much you will actually be sending the landlord monthly, and realistically assess if you are going to be making any money at this. Or, will you merely be staying in business to send the mall owners more money?


Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Nothing contained herein shall be or is intended to be construed as providing legal advice.

Comment On This Story
COMMENT POLICY: We welcome comments from individuals and businesses. All comments are moderated. Comments are subject to rejection if they are vulgar, combative, or in poor taste.
REAL NAMES ONLY: All posters must use their real individual or business name. This applies equally to Twitter account holders who use a nickname.

1 Comment

  1. Gordon Harvey says:

    This is a totally misleading article written with a disgusting slant that the mainstream will not understand. To open with the correlation to organized crime is reprehensible and shyster theatrics. Retail rents in malls or elsewhere are negotiated between Landlord and Tenant as to the cost per square foot and the additional charges: Common Area Maintenance (CAM), Taxes and Insurance. These combined with the sq.ft. rents make up what is called a Triple Net Lease. Or there may be a “Gross Lease” where most of these additional charges are calculated into the per sq.ft. rent number. These costs are negotiated as is percentage rent if charged. Percentage rent is not a percentage of total sales, but a percentage of sales after a negotiated gross amount of sales has been made, a sales threshold so to speak. Bottom line is that anyone signing a lease needs to fully understand what they are signing as it is a legal document that holds both parties to the letter of that lease.

Leave a Comment

Latest Additions to SCVNews.com
1920 - Actress Maureen O'Hara born in Ireland; 1961 "Parent Trap" uses Disney Golden Oak Ranch [story]
If The Master's University women's volleyball team was looking for an opportunity to fold to Rocky Mountain on Thursday, it had options.
TMU Women’s Volleyball Takes Down No. 13 Rocky Mountain
The Master's University men's basketball team has signed Sam Boone, an NCAA Division 2 transfer who will add to the squad's frontcourt depth.
TMU Men’s Basketball Signs Sam Boone, NCAA D2 Transfer
A Canyon Country woman stands accused of going after a family member with a chainsaw, albeit one that was turned off, after two failed attempts to hit her intended victim with steak knives she allegedly threw.
Woman Accused of Throwing Knives, Wielding Chainsaw
Master's head coach Dan Waldeck hopes Stephanie Soares brings "immense confidence and drive" back with her after she played with the Brazilian women's national team at the Pan American Games in Peru last week.
TMU’s Stephanie Soares Wins Gold at Pan American Games
One thing volleyball player Jane Cisar appreciates about The Master's University head coach Allan Vince is his recruiting philosophy.
Vince Earns 100th Win at TMU Women’s Volleyball Coach
At nationals last year, The Master's University women's volleyball team learned what it would take to make a deep post-season run.
2019 TMU Women’s Volleyball Preview
Proving just how necessary Narcan has become in saving the lives of SCV heroin addicts, local sheriff’s deputies dispatched Thursday for an unresponsive man feared dead in the bathroom of a Stevenson Ranch restaurant watched signs of life return to the man after paramedics administered the drug.
Narcan 2 Years Later: Still Saving SCV Lives
Dante Acosta, former state assemblyman, former Santa Clarita City Council member and a director of the Santa Clarita Valley Water agency board, is moving to Texas to begin a position as district director of the U.S. Small Business Administration for the El Paso region.
Acosta Resigns from SCV Water, Moving to El Paso
Bridge to Home, the primary homeless services provider in the Santa Clarita Valley, invites the community to its premier annual fundraiser, "Soup for the Soul – Sera in Italia," at the Bella Vida senior center in Canyon Country on Saturday, Oct. 12, at 6 p.m.
Oct. 12: Bridge to Home ‘Soup for the Soul’ Fundraiser
A six-run first inning for the Lake Elsinore Storm was too much for the JetHawks Thursday, as Lancaster lost 13-8 at The Hangar.
Lake Elsinore Storm Start Too Strong for JetHawks
Los Angeles County Sheriff’s Department detectives seek the public’s assistance in locating Willie Paul Davis, a 70-year-old Valencia resident.
Missing: Willie Paul Davis of Valencia
Five people were hurt, two seriously, in a multi-vehicle pileup on Interstate 5 in Castaic early Friday morning, according to county fire department and CHP authorities.
Five Hurt in Early Morning Castaic Pileup
The County of Los Angeles Department of Animal Care and Control will join Los Angeles television stations NBC4 and Telemundo 52 in a "Clear the Shelter" pet adoption campaign on Saturday, Aug. 17, from 10 a.m. to 5 p.m.
Aug. 17: ‘Clear the Shelters’ with Pet Adoption Discounts
Two parolees from Bakersfield arrested in Valencia last week were arraigned on multiple charges including burglary on Monday, the Santa Clarita Valley Sheriff's Station reported Wednesday.
Burglary Suspects Arrested After Mall Chase Are Arraigned
Painting it as an economic threat and a cruel attack on immigrants, California sued Friday to stop the Trump administration’s new "public charge rule" that allows the government to deny green cards to people relying on some forms of public assistance.
California Sues to Block Feds’ ‘Public Charge Rule’ for Green Cards
Friday air quality is unhealthy for sensitive individuals in the Santa Clarita Valley, according to the latest South Coast Air Quality Management District forecast.
Friday Air Quality Unhealthy for Sensitive People
The Santa Clarita Valley Sheriff’s Station's COBRA Unit detained two juveniles and one adult during a gang suppression operation on Monday.
SCV Deputies Tag 3 Suspected Gang Members in Newhall
1956 - Battle of Palmdale rages over the skies of Santa Clarita [story]
A vegetation fire near Valencia Boulevard and Interstate 5 prompted the evacuation of College of the Canyons’ Early Childhood Education Center Thursday afternoon.
Vegetation Fire Prompts Evacuation of COC’s Childhood Education Center
Would you like for a family member or caregiver to be able to call Medicare on your behalf? Would you like a way to store all your health records in one place online, so you can quickly share them with a new doctor or other healthcare provider? How about an easy way to print a new Medicare card if you lose yours? You can do all that and more by creating a free, secure MyMedicare.gov account.
Create a Personal Medicare Account | Commentary by Greg Dill
The Transfer Rules Committee held their culminating meeting Wednesday.
Message from CIF Southern Section Commissioner of Athletics
The second bond issuance of Measure E, the Santa Clarita Community College District general obligation bonds, were sold on Aug. 7, yielding $85 million to assist College of the Canyons in building out the Canyon Country campus and upgrading the Valencia campus.
Second Bond Issuance of Measure E General Obligation Bonds Yields $85M
Boys and Girls Club Alumni, Kacey Umanzor and Nikola Macovksi, have been awarded scholarships to attend College of the Canyons this fall by the Boys & Girls Club of Santa Clarita Valley.
Boys & Girls Club Announces 2019 College Scholarship Recipients
%d bloggers like this: