header image

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

Inside
Weather


 
Calendar
Today in
S.C.V. History
April 4
1893 - Large earthquake centered in Pico Canyon; locals believed oil drilling caused it [story]
map


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
Explore the world by traveling to the Canyon Country Community Center for the Celebrate event series. Experience different customs and cultures, no plane ticket needed.
Travel the World in 2025 with the Celebrate Passport
After three successful years guiding the Teton Ranch Conservancy, Executive Director Jaron Cramer will be stepping down from his position effective Friday, April 18.
Tejon Ranch Conservancy Leadership Transition Announced
The Santa Clarita City Council will meet in open session on Tuesday, April 8 at City Hall to consider sending a letter, signed by all city council members, to the Los Angeles County Board of Supervisors regarding Los Angeles County Sheriff's Department deputy vacancies and encouraging the board to make investments in enhancing LASD retention and strengthening recruitment efforts.
April 8: City Council to Discuss Letter on LASD Vacancies to County Supes
1893 - Large earthquake centered in Pico Canyon; locals believed oil drilling caused it [story]
map
California State University, Northridge’s Department of Theatre will host Native Voices, the only professional theatre company in the United States devoted to bringing Indigenous playwrights, 7:30 p.m. Monday, April 7, to perform “To Indigeneity and Beyond!”
April 7: Native Voices to Perform at CSUN
The William S. Hart Union High School District has announced that Anthony Eslao, a senior at Golden Valley High School, has been awarded the distinguished California Scholarship Federation Seymour Award. Additionally, Matthew Thomas De Guzman, also from Golden Valley, has been recognized as a Seymour Award finalist.
Golden Valley Student Wins CSF Seymour Award
Assemblywoman Pilar Schiavo’s bill, D-Chatsworth, the Expediting State Housing Permits Act (AB 301) was passed as part of a major package of housing legislation aimed at tackling the state’s housing crisis.
Schiavo Joins Forces with Rivas to Expedite Housing Development
The Department of Water Resources conducted the all-important April snow survey on Wednesday, April 2, the fourth measurement of the season at Phillips Station.
DWR April Snow Survey Shows California at 110% of Average
The Santa Clarita Master Chorale invites you to an elegant evening of wine, dinner and song atthe annual Cabaret & Cabernet benefit “The Beat Goes On,” on Saturday, April 26, 5 p.m. at the Hyatt Regency Valencia.
April  26: ‘The Beat Goes On’ Master Chorale Cabaret & Cabernet Benefit
Visit the Santa Clarita Public Library Valencia branch, 5:30-6:30 p.m. Tuesday, April 8 for a "Alice's Looking Glass" crafting session.
April 8: ‘Alice’s Looking Glass’ Craft Session at Valencia Library
Join the Santa Clarita Valley Chamber of Commerce for a Grand Opening Ribbon Cutting at Monarch Beauty Academy, Thursday, April 24 at 4 p.m.
April 24: Monarch Beauty Academy Grand Opening Ribbon Cutting
For the third year in a row, The Master's University's basketball player Kaleb Lowery has been named an NAIA All-American, this time on the First Team.
Lowery Named First Team All-American
Lief Labs, a premier formulation and product development innovator and manufacturer of dietary supplements, has announced the launch of its 2025 Brand Boost Guide which offers tips, guidance and resources to support dietary supplement brands in identifying potential sales growth and risk management strategies.
Lief Labs Launches 2025 Brand Boost Guide
The Master's University men's volleyball team completed the sweep of its old rival with a 25-11, 25-21, 25-19 controlling of the Arizona Christian Firestorm Saturday afternoon, March 29 in Glendale, Arizona.
Mustangs Complete Sweep on Arizona Trip
Arbor Day is more than just a celebration, it’s a commitment to our future. Every year, communities across the world come together to plant trees, promote environmental stewardship and enhance the landscapes that make our cities and towns more beautiful and livable.
Jason Gibbs | Celebrate Arbor Day in Santa Clarita
April 30 will be the final day for submitting comments regarding the updating of Los Angeles County Floodplain Management.
April 30: Deadline for Comments on Floodplain Management
Among several important issues presented at its Tuesday, April 8 regular board meeting, the Los Angeles County Board of Supervisors will hear recommendations on establishing a unified permitting authority for the Altadena One-Stop Recovery Permitting Center relating to properties impacted by the Eaton Fire.
April 8: Supes to Consider Altadena One-Stop Recovery Permitting Center
1917 - Castaic post office established inside Sam Parson's general store [story]
General Store
April is National Distracted Driving Awareness Month, a nationwide initiative that highlights the dangers of distracted driving and promotes safer driving habits.
April 7-14: CHP MEP for National Distracted Driving Awareness Month
One of the things that makes the city of Santa Clarita such a great place to live, work and play, is the wide range of amenities we offer our community.
Ken Striplin | A Library Without Walls for a City Without Limits
Los Angeles Health Services has released its 2024 Annual Report, showcasing a year of exemplary achievements in patient care, innovation, and community health.
County Health Services Releases 2024 Annual Report
The ability to put nutritious food on the table is one of the most important and pressing matters that low-income families face daily. 
CSUN Family Kitchen Project Gives Food Coupons to Families During Summer
American Sports Entertainment Company and the LA Kings, collectively referred to as JV Ice at The Cube, are seeking proposals to license restaurant and bar space at The Cube – Ice and Entertainment Center, powered by FivePoint Valencia.
The Cube Ice, Entertainment Center Seeks Restaurant Partner
The College of the Canyons Foundation will host its third annual 3-on-3 Basketball Tournament from 9 a.m. to noon on Sunday, April 27, in the college’s West P.E. (WPEK) gymnasium, located on the Valencia campus.
April 27: COC Foundation to Host Third Annual 3-on-3 Basketball Tournament
SCVNews.com