[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
June 17
1890 - 18-day murder trial of Castaic's W.C. Chormicle and W.A. Gardner ends in acquittal [story]
William Chormicle

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
The Santa Clarita Shakespeare Festival is back, and continuing an expanded season with Summer Theatre Festival 2019 events through August.
Shakespeare Festival Sets 2019 Summer Theatre Events
In her latest "Director's Blog" entry, Los Angeles County Animal Care & Control Director Marcia Mayeda offers information about pet aging and tips senior pet care.
County Animal Care Director Offers Tips for Senior Pet Care
Fourth of July 2019 is only a few weeks away and, as you begin to make plans to celebrate, do not forget about all the fun activities that are happening throughout the Santa Clarita Valley.
Top 10 Tips to Make this a Great Fourth of July in SCV
The Public Outreach and Legislation Committee of SCV Water is scheduled to meet next on Thursday, June 20, at 5:30 p.m.
June 20: SCV Water Public Outreach, Legislation Committee Meeting
The nonprofit Santa Clarita Valley Committee on Aging will host its annual assembly at the new Bella Vida senior center in Canyon Country on Thursday, June 20, starting at 5 p.m.
June 20: Annual Assembly at Bella Vida Senior Center
The Governing Board of the William S. Hart Union High School District is set to approve its 2019-20 budget at a special meeting on Wednesday, June 19, at 7:45 a.m.
Hart Board Set to OK 2019-20 Budget at June 19 Special Meeting
Marking June as LGBTQ Pride Month, the Pride flag is being flown on the main flagpole of the State Capitol building​ through July 1 ​for the first time in state history.
Rainbow Flag Flies Over Capitol for LGBTQ Pride Month
The Santa Clarita Planning Commission has released the agenda for its June 18 meeting starting at 6 p.m.
Santa Clarita Planning Commission June 18 Meeting Agenda
The Lancaster JetHawks pulled off a comeback from a six-run deficit Sunday afternoon, beating the Inland Empire 66ers 11-10 at the Hangar.
JetHawks’ Comeback Win Closes Season’s First Half
The JetHawks needed an extra inning to beat Inland Empire Saturday, beating the 66ers, 5-4, in 10 innings at The Hangar.
JetHawks Pull 10th Inning Walk-off Win on Sixers
"Star Wars" weekend began Friday night in Lancaster with Inland Empire winning big, 19-5, over the Lancaster JetHawks at The Hangar.
‘Star Wars’ Weekend Opens with JetHawks Loss to Evil Inland Empire
Santa Clarita Mayor Marsha McLean joined other elected officials from throughout the region to discuss transportation at the June 13 San Fernando Valley Council of Governments Mobility Workshop.
Santa Clarita Joins SFV Transportation Mobility Workshop
Assemblywoman Christy Smith (D-Santa Clarita) invites members of the 38th Assembly District to apply to one of the Local Advisory Committees for 2019-2020.
Smith Invites Locals to Apply for Local Advisory Committees
The Santa Clarita Valley Sheriff's Station's Summer Crime Enforcement Team arrested a Eureka man in Castaic on Saturday on charges of felony narcotics sales.
Eureka Man Arrested in Castaic on Felony Drug Charges
A pilot died when his single-engine aircraft crashed in a remote area of Newhall on Saturday afternoon.
Pilot Dies in Crash of Single-Engine Aircraft
1890 - 18-day murder trial of Castaic's W.C. Chormicle and W.A. Gardner ends in acquittal [story]
William Chormicle
1950 - Dedication of H.M. Newhall Memorial Park, aka Newhall Park [story]
1957 - Lang Station dedicated as State Historic Landmark No. 590 [story]
Lang Station
A Bridgeport couple has uncovered some disheartening news for motorists who grind to a halt as they zip through Valencia, braking for a family of Canada geese, narrowly avoiding a collision with the large birds.
Guardians of Geese at Bridgeport Urge Caution
The Santa Clarita City Council and MADD recognized Santa Clarita Valley Sheriff’s deputies Chris Morgan, Tanner Sanchez and Mario Acosta Tuesday for their major role in helping keep local streets safe from drunken drivers.
Deputies Morgan, Sanchez, Acosta Lauded by City, MADD
The city of Santa Clarita’s homeless population increased from 156 people in 2018 to 256 people in 2019, according to city-level data from the 2019 Greater Los Angeles Homeless Count released Friday by the Los Angeles Homeless Services Authority.
Homeless Population in Santa Clarita Rises Again
The next meeting of the Los Angeles County Board of Supervisors is set for Tuesday, June 18, starting at 9:30 a.m.
June 18 Meeting Agenda – LA County Supervisors
A motorcycle deputy with the Los Angeles County Sheriff’s Department was taken to the hospital mid-afternoon Friday, following a vehicle collision in Valencia.
LASD Motorcycle Deputy Injured in Crash
The Santa Clarita City Council is expected to recognize June as Pride Month on Tuesday, drawing praise from the local lesbian, gay, bisexual, transgender, queer or LGBTQ, community.
Santa Clarita City Council to Recognize June as Pride Month
%d bloggers like this: