‘Time’s up’: The economy is back open and landlords want their rent money

In Somerville's Union Square, Elliot's House Doggie Daycare is in a legal dispute with its landlord over back rent.Jonathan Wiggs/Globe Staff

It’s easy to forget, amid the packed patios and crowded streets, but just a few weeks ago Boston was still pretty shut down. And while the reopening has brought a return to normalcy and a bit of psychic relief to a lot of people in Massachusetts, many small-business owners are confronting a mounting sense of dread over debts coming due.

The government programs created to keep businesses afloat are winding down. The moratoriums protecting commercial tenants from eviction have ended. And now, business advocates say they’re hearing more cries for help from companies whose landlords are pushing for back rent, sometimes in court.

There have been some high-profile legal disputes already: Last month, J.P. Licks owner Vincent Petryk was sued by his ex-wife, Kimberly Goldstein, for past-due payments on the ice cream chain’s flagship store on Centre Street in Jamaica Plain. Major landlords on Newbury Street and in Harvard Square have taken big-name tenants to court. And last year, coffee chain Caffe Nero won a landmark lawsuit when a judge decided it did not have to pay back rent to its landlord, Urban Meritage, for months when the state ordered indoor dining to close.

But for every high-profile case, there are scores more quiet disputes boiling over, putting business owners on edge and underscoring how the relationship between retailers and their landlords has changed since last summer.

The start of the pandemic was “armageddon” for the retail industry, said Thomas J. Phillips, a partner at law firm Brown Rudnick. Many commercial tenants and their landlords saw survival as a mutual affair, and made a good-faith effort to cut deals and restructure leases for the new reality. But not everyone.

“The ones that didn’t get worked out, most people continue to kick the can,” said Phillips, who represents both tenants and landlords in lease negotiations. “But I have been noticing lately a lot of landlords saying: ‘Time’s up.’ ”

Yet business is hardly back in full swing just yet.

Despite an uptick in consumer spending, revenue for many retailers remains well below prepandemic levels, and many storefronts are struggling with the chicken-and-egg dilemma of not having enough staff to meet demand. Meanwhile, retail vacancies continue to rise: 1.4 million square feet of space emptied last year in Greater Boston, according to real estate firm Avison Young, with high vacancy expected to persist well into 2022.

How landlords cope with that may hinge on their size. Big institutional landlords of mixed-use developments often see retail as a loss leader for apartments or office space upstairs, and cut deals with their tenants, said Gustavo Quiroga, the director of neighborhood strategy and development at real estate firm Graffito SP. In many cases it’s now smaller family-owned landlords imposing the squeeze.

They’ve got bills to pay, small-business advocates acknowledge, but that leaves many mom-and-pop businesses caught in the vise.

Some community development agencies are trying to help. Dorchester Bay Economic Development Corporation, for instance, last week released a Rapid Resilience loan program to help businesses pay back rent, utilities, and other bills. But Alison Moronta, Dorchester Bay’s director of economic development, worries that’s not enough.

“In Massachusetts we have great protection for residential tenants, but when it has to do with commercial tenants, there’s very little protections,” she said, arguing that the state needs to create stronger guardrails to protect against the eviction and displacement of small businesses. Legal clinics don’t often extend pro bono services to cover eviction proceedings for businesses, she said, and if a small-business owner “can’t afford to pay their rent, they can’t afford to pay $250 per hour” for a lawyer.

The pressure is intense in neighborhoods such as Union Square in Somerville, where despite an uptick in activity, more landlords have been leaning on small businesses to catch up on rent, said Jessica Eshleman, executive director of Union Square Main Streets.

“I’m deeply concerned that we’re going to see continued closures,” she said. “There’s a real split between perception and reality.”

One business now facing legal action is Elliot’s House, a doggie day care that opened near Union Square in 2018. Operations director Taghi Shaw said he approached the landlord, George Moussallem, shortly after the pandemic hit, seeking rent relief. Moussallem seemed amenable, but then changed his tune, Shaw said. Elliot’s House operated on a restricted basis and took in Paycheck Protection Program funds to keep employees on the payroll, Shaw said, but it wasn’t enough to stay in the black. Even so, Shaw said, they continued to pay half their rent all through the pandemic.

As soon as the eviction moratoriums were lifted in October, Moussallem began to seek back rent. He and the company are now in a legal dispute, and while Shaw said he can’t discuss specific details of the case, he said two neighboring tenants, Bantam Cider and Achieve Fitness, have already vacated. Shaw said he doesn’t want to do that.

“We just want to be left alone and live out the terms of our lease and be able to move on,” he said.

Moussallem did not respond to a request for comment.

Some businesses simply fell victim to bad timing.

In 2019, Hermela Belachew opened Adorn Boutique Studio in Norwood, a birthday party venue offering mani-pedis, facials, and other mini-spa sessions for kids, paired with pizza and cake.

“It was skyrocketing,” Belachew said, with multiple bookings lined up every weekend. But Adorn proved no match for COVID-19, when spa services, indoor dining, and children’s activities all ground to a halt. And because Belachew had been open for less than a year when COVID hit, it didn’t qualify for federal PPP funds.

After cutting a deal early in the pandemic to pay a portion of the rent, Belachew began eking out full rent payments last fall. Early this year she asked her landlord to restructure payments, and was met with an eviction notice. Now her landlord, Doctors of Norwood LLC, is suing her for $50,000 in back rent, fees, and to pay out the remainder of her three-year lease. Doctors of Norwood did not respond to a request for comment.

Belachew has already moved out, to a new location in Walpole. And after maxing out pro bono hours from Small Business Strong, a public/private assistance program from the state, she’s now hired an attorney. She fears losing in court could cost her $100,000 in legal fees and back payments.

“It’s so stressful,” she said. “It’s really taken a toll on our family.”

And for other businesses that were already struggling, the pandemic has pushed them into an abyss.

Patricia O’Keefe arrived at her store, Community Fire & Police Equipment in Walpole, earlier this month to find an eviction notice in the mail. She’s been falling behind on rent ever since a stroke three years ago. Then COVID hit, business suffered, and now she owes her landlord $57,000. All of it, she said, has led to crippling stress and anxiety that make it difficult to even operate her store. Now she’s looking for a waitressing job to bring in some additional income. “My family isn’t happy, but I’m a big girl,” she said. “I need something to boost my ego, to bring back my self-esteem.”

Tales of small-business owners like O’Keefe who are stressed and out of options, or worse, facing eviction, have only grown since the state reopened, said Iván Espinoza-Madrigal, executive director of Lawyers for Civil Rights. Calls to the organization’s BizGrow hot line have picked up, with some saying they owe six or more months of rent.

“I think we are still at just the beginning of the wave,” Espinoza-Madrigal said. “We are seeing an increase week by week.”