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Adam Leitman Bailey, P.C. Creativity and Open Communication with Landlord Helps Commercial Bakery Survive/Profit During COVID-19

Our client is a very popular baker and seller of bread, bagels, and croissants. The bakery was founded in 1992 in Cape Cod, Massachusetts, just as a broader awareness and appreciation for quality artisan bread was blossoming on the East Coast. Its goal was to recreate the Old World traditions by using baking techniques and recipes that have barely changed in centuries; Not relying on preservatives or artificial ingredients, but on high quality, and the belief that bread is best enjoyed in its most simple and authentic form. It has been recognized for its dedication and quality by numerous well-respected publications.

After we negotiated a lease in mid-2018 for a central Midtown location, the bakery got off to a very strong start. Unfortunately, a few months later COVID-19 began its virulent spread and the absence of Manhattan office workers and tourists devastated our client’s sales.

Almost no one was visiting the store, or buying pastries and coffee. The landlord knew that the tenant-client could exercise its good-guy guaranty that the firm prepared when negotiating the lease. I knew that they had to stop paying rent with the consent of the landlord in exchange for staying open. I knew that an open means of communication between the landlords and tenants at this time would solve most problems, and in this case, it did. The landlord took a percentage of the profits, and the tenant only had to pay rent to that extent. The tenant had to produce quarterly financials. This kept the bakery in business by giving the landlord whatever the bakery could afford to pay in rent.

The deal got better. As a result of the open communication and the honesty between both sides, over time, the landlord offered the tenant the corner storefront. The landlord also offered the tenant other locations, as well as it having the tenant be the exclusive baker for its nearby hotel. This was a COVID-19 love story between a property owner and a commercial tenant.

But two and a half years later my client, the tenant, desired a new lease on fair terms based on the brave new world that had changed Midtown—the workers had not come back to work like it was February of 2020. The landlord was shrewd and expected New York to come back in force and would not sign a long term lease with our client. Since our client could not predict the future, and despite my arguments that they should have guaranties in rent numbers, they agreed to a shorter term and a lease modification where we negotiated a lease modification whereby rents, instead of a fixed number, were adjusted for a certain time period to a percentage of sales. This strategy seems to be paying off, as our client’s sales are encouraging and there is high likelihood that this location will succeed.

As a sign of our client’s strong revival, we are in the process of negotiating two other leases in very prominent locations, both of them with rents at fixed dollar amounts rather than based on a percentage of sales.

Adam Leitman Bailey handled the negotiations of the terms and the communications during the dark times of COVID-19 and Thomas Furst of Adam Leitman Bailey, P.C. drafted the modifications, leases, changes in terms and amendments.

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