An attorney representing the landlord of Eastside music lounge Stay Gold threatened its operators with a breach of contract suit totaling roughly half a million dollars. The warning, following strained negotiations, arrived after the tenants were five days late on August rent.
Dan Castro of Castro & Baker LLP sent an email on Aug. 5 informing Stay Gold owners Nathan Hill and Will Tanner that their landlord, David Contreras of El Leon Cantina, Inc., “has chosen to accelerate the rent due for the entire term of the lease.
“You now owe in one lump sum the entire amount that would normally be spread out over the entire length of the lease, plus attorney’s fees,” Castro’s letter specified.
Hill estimated rent for the remaining four years of the lease totals around $500,000. He and Tanner paid full rent April through July while staying closed because of COVID-19. During extended attempts at renegotiating the lease amid the pandemic, both sides drafted offers the other found unsatisfactory.
Each potential lease addendum involved reducing monthly rent during state-mandated bar closure, though to significantly variant amounts. The landlord’s initial offer involved the Stay Gold partners paying the reduction back in full. Castro says he convinced his client to forgive roughly half of that unpaid balance in a followup offer.
Hill described that offer as merely “extending the possibility of us shutting down later.” He and Tanner, meanwhile, sought an overall rent reduction that would scale back between 28 and 33% over the next four years. Hill, who co-owns a neighboring bar called High Noon that pays a far lower rental rate, has devoted much consideration to how much debt is worth taking on to sustain a venue during shutdown.
“What really matters is how much time you have left to pay back the debt,” he reasons. “At the White Horse [which he co-owns], I still have 10 years [on the lease], so I can still take on debt because I have time to make that back. For Stay Gold, with four years, I have to hope for the best, but plan for the worst, which is that we won’t be open until 2021 and maybe we can’t have bands.
“By that time, we have three years left and I’ll be in as much debt as it took to open the bar originally, when I had 10 years of lease to look forward to and no global pandemic looming.”
As Austin’s small-business community awaits a wave of evictions, Castro’s letter provides a glimpse into possible future scenarios involving landlords.
“Mr. Contreras may not be able to evict you right now, but he certainly can sue you personally for breach of contract, and file a motion for summary judgment for a quick win,” Castro wrote in the missive.
Read the post in the Austin Chronicle