Community Soapbox: Battle Brewing Over Lease Agreement

Coffeeco
I have a disappointing update to our [Coffeeco’s] efforts to reach agreement on a lease extension at our Johnson Street location. For those of you who haven’t been following I’ll provide a detailed update.

We have been sub-letting space at 344 Johnson Street from a failed coffee business and abiding to the terms of an original lease signed in 2001. The original lease contained provisions for 2 renewal terms of 5 years each for a total of 15 years. We assumed the space part way through the first renewal period ending February 28, 2011. Before the renewal date, we made the landlord aware that we wanted to renew the lease but were looking for some changes which would permit us to license the location to a third party if we desired. The landlord took the opportunity to ask for a 40% rental increase, to add a provision for a personal guarantee, and to compel us to replace a broken Furnace and Air Conditioner which would both immediately become the property of the landlord. In addition to this, the landlord wanted us to be responsible for upgrading a sewer line determined by the City to be insufficient to service the building. As a show of good faith negotiating on our part, we paid the increased amount with the expectation that we would negotiate a lease and continued to pay the 40% increase for 11 months to date. Up to this point the landlord was unwilling to concede any points to us and it became clear that the cost of changing the lease was simply too high and therefore we would instead just renew under the old terms and finish off the last renewal term.

Through our lawyer we notified the landlord on November 30, 2011 of our wish to renew under the terms of the original lease and to be given credit for the 10 months of overpayment beginning January 1, 2012 and to submit to arbitration in setting a new rent amount.

The landlord, local real estate agent Hugh Mosaheb of Royal LePage on Queens Street responded December 21, 2011 by sending us an arbitrary bill for Common Costs including the cost of the City sewer inspection and a bill for $500 to be paid to Mosaheb’s 13 year old daughter for sweeping the driveway. (Seriously!)

Mosaheb turned up the heat on Friday December 23 in the afternoon by claiming through his lawyer that we did not have the right to renew the lease and that we were in fact operating on a month to month basis and that he demanded us to vacate the property by January 31, 2012. I immediately informed Mosaheb of how his actions would appear to the public should we release the details through social media. Hugh Mosaheb quickly had his lawyer phone, email and send a letter threatening a defamation lawsuit should any details of the negotiation become public, a threat Hugh Mosaheb repeated in an email.

In my response to his email, I indicated that my main concern was for the jobs of my staff at Johnson Street who deserved to know before Christmas whether they would have any jobs in the New Year. I also stated that I wanted assurances that we could stay until our new location was open so we could transition staff and avoid layoffs. Despite this sincere request, Hugh Mosaheb declined to grant that and is sticking to his demand that we leave by January 31.

The first business day of January I had a discussion with a highly regarded local commercial real estate broker who offered to intervene as an impartial participant in order to secure an extension and perhaps a new lease agreement. Mosaheb indicated to the commercial broker that he would respond in a couple of days after he was informed of the tight timeline required to give staff proper notice of termination. That was seven days ago.

Yesterday afternoon I received a phone call from my lawyer indicating Hugh Mosaheb had dismissed his previous lawyer and engaged a new lawyer to represent him, normally an indication of a bad client, not a bad lawyer. The new lawyer was asking for a meeting between all parties. When asked for clarification we were informed that our leaving the location was not negotiable. While I am eager to engage in a discussion with a reasonable and responsible person capable of making a decision, I am unconvinced that Hugh Mosaheb is capable of meeting my expectations. Mosaheb has taken every opportunity to negotiate in a less than conventional way, from altering digital lease documents without proper notation, stalling negotiations because of poor communication with his lawyer, submitting questionable invoices, showing our space to prospective tenants while we had a valid lease, changing lawyers, ordering eviction the day before Christmas Eve, raising the rent without consent 40%, expecting that we pay the HVAC replacement, and on and on. Further, Mosaheb knows that his arbitrary actions are affecting our staff whom all rely on us to pay their rents, groceries and schooling.

So where do we go from here? Given the lack of good will existing in our relationship, in order to protect my equipment, we will be closing permanently at Johnson Street on Friday January 27 at 8:30 pm.

Mosaheb has been given almost three weeks to revoke his arbitrary eviction notice, has been informed of the devastating consequences to my staff but still stubbornly holds to his demand that we leave the premises.

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Submitted to Kingstonist’s Community Soapbox by: Coffeeco.

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25 thoughts on “Community Soapbox: Battle Brewing Over Lease Agreement

  • It still amazes me that there doesn't appear to be any legal protection for commercial tenants in this situation. Rock on Rich, your customers love what you're doing and we'll follow you all over town.

  • Thank you for bringing this issue to the public's attention. This is a very well-documented and laid out discussion of your current situation. Myself and friends have often frequented your location and the business is a definite asset to the local community. Being a landlord myself, I cannot see the justification for demanding the replacement of a furnace and air conditioner, and paying for sewer inspections, and a $500 sweeping bill. However, I am wondering why it would not have been to your benefit to simply renew the pre-existing lease in the first place, as appeared to be your right. A 40 percent rental increase is extraordinary, and seems like an overwhelming increase in fixed costs for any business. What was Mr. Mosaheb's justification for such an extraordinary and burdensome increase on a current tenant? To be sure, your business seems like a fairly reasonable and orderly tenant to have for a small commercial property.

  • i need to get a job sweeping.

    all the best in your fight. your landlord sounds like a real doozy.

  • Yikes. You've gotta wonder who'll be dim enough to do business with Hugh Mosaheb once Coffeeco vacates. It's a great location, but who can afford to have that much risk associated with their lease?

    Sounds like a pretty self-destructive strategy on his part to me.

  • Rich has been amazingly proactive and open about this situation from day one, and should be commended for doing everything in his power to keep J Street open. Not that I don't believe him, but I would certainly welcome some comments from the landlord to get a sense of why this situation exists. While it may offer little comfort for many, Coffeeco's new location is a few blocks closer than the J St location. Wishing Coffeeco and their employees all the best as they transition during this difficult but exciting time.

      • King St. on Market Square, in what was the Block and Cleaver.

        • GREAT location, the new one! I've looked for CoffeeCo on Johnson and for whatever reason, just couldn't find it. I frequent and purchase my coffee exclusively from Multituli, so having a very visible downtown site is going to be welcome!

          • It's right at the corner of Johnson and Division. That's a pic of it above.

          • I know, and it looks great. But I always thought it was closer to Ontario, and I never realized it was so far UP, near Division. Hence the relative inaccessibility, relative to being right at City Hall. :)

          • It's not so great if you think of it in terms of the university, and it's faculty and students who are probably the main customers. I wish Coffeeco luck in their new location, but they also are now just going to be adding to the existing pressure on The Sleepless Goat (which is also a Fair Trade business – and more), whereas before they were far enough apart for it not to be an issue.

          • I think that anywheres in the central core is pretty close to the University? After all, we aren't living in Calgary nor Montreal. I'm pretty sure the entire downtown core is accessible and heck, a number of students and faculty frequent the Farmer's Market? Sometimes a move from one area, while imposing burdens, can also create opportunities? There must have been some sort of market analysis done before taking the new location space?

          • I suspect that they had to move unexpectedly quickly and took what they could at short notice. The thing for me is that if I have to walk downtown to get my coffee, I'd rather support the Goat and what they stand for as a workers' cooperative that serves great fair trade coffee, rather than another standard private business that serves great fair trade coffee. However, I am really worried that this could be another nail in the coffin for the Goat.

          • I prefer the Goat for my downtown coffee needs, but it wouldn't hurt to have a few of the "buy a coffee, use the WiFi for three hours" students go somewhere else, maybe they'll take their laptops to CoffeEco.

            All said I'd rather have the Block and Cleaver back – a good local butcher is a lot more useful to me than yet another coffee shop.

  • $500 for sweeping the side walk? I am clearly in the wrong line of work.

    I wish you the best of luck with your situation, and I truly hope that if the eviction goes through, that his property will sit vacant until he is forced to sell it. Clearly this is not someone who should be a landlord in the first place.

    • It's worth pointing out that the article includes significant misinformation, specifically that Mosaheb offered to lease the space to Coffeeco until the end of 2012. Following publication, the lawyer representing Mosaheb advised Coffeeco that he was misquoted, and Mosaheb's original timeline for departure/eviction is still applicable.

  • Lee: the Landlord & Tenant Board deals with residential tenancies only. For commercial tenancies, there is very little protection pre-established in the act for either landlords or tenants – it’s essentially governed by the terms of the signed lease.

  • Most commercial landlords are at best "difficult" to deal with, and the fact that most of the properties are in a relatively few hands makes it even worse. The fact that Kingston allows them to apply for a rebate (ie not pay) property taxes on vacant commercial properties means they have no incentive to rent the properties and so rents are not negotiable. If you are not working you cannot get a rebate on property taxes, but these commercial owners, who certainly can afford to pay do not have too. Something wrong with this situation!

    • Kingston doesn't "allow" a tax rebate on vacant property, that rule is set by the ON Municipal Act. it used to be their was tax assessed on the property and separately on the commercial tenant too. Municipalities got stiffed so often on the tenant portion when they went out of business with no one to go after it was changed(by the province) to all be on the property that a tax lien could be attached to.

      Also, its only 30% (to compensate for the former tenant portion) that can be rebated on space vacant at least 3 months, so still lots of incentive to get space occupied that is paying 2/3 of the tax bill while empty.

  • Why didn't the tenant exercise their renewal option in a timely manner? Was there a mitigating factor in this or did the tenant simply not properly exercise their rights under the lease agreement?

    In 2001, the landlord granted the head tenant a option to stay for the period March 1, 2011 to Feb 28th, 2016. That right was likley assigned to the sub-tenant by virtue of the Landlord consenting the sub-lease. When the tenant failed to exercise the option in a timely manner Ii.e. the lease expired on Feb 28, 2011), the Landlord could set whatever terms they want since the tenant started occupying the landlord's space (March 1, 2011) without the benefit of a enforceable lease.

  • Greg, the landlord refused to accept our right as the sub-tenant to renew the old lease though he was informed prior to the expiration. The only way Mosaheb would negotiate was under new terms which included an approximate 40% rent increase plus plus. The path left to us now is to litigate for damages, which we intend to do, and to sue in small claims for the overpayment which he is refusing to return. A final note to all, over the past 17 years I have personally used Hugh Mosaheb on 10 real estate deals on which he was paid agents commission. Last year he shared in commission on over $1,000,000 in transactions from me personally. It says a great deal about his character and how he treats some clients doesn't it?

    • Yes, it does. It is ridiculous and I know that I, and my friends too, have filed this name away for future reference. Sorry this situation s the way it is. Simply not right, IMHO.

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