Turning Point Austin 2020: Venue Lease Relief

It’s beginning to sink in–ever since the cancellation of SXSW due to the City of Austin’s declaration of a local emergency, it’s becoming apparent that Austinites have to stick together like never before.  The consequences of failure are dire–a city that’s bills itself as the Live Music Capitol of the World better be sure to have some live music.  That’s why we call this series “Turning Point Austin 2020.”  It’s not just Austin, by the way, but that’s where I live so that’s what’s on my mind.

It’s time for policymakers to step up and get shoulder to shoulder with the artists, venues and music business folk who in large part make Austin what it is.  If that goes away, it will be just another college town with a WeWork and Starbucks.  Like its counterparts in San Francisco, New Orleans, Toronto, Memphis, Tulsa or Seattle, the Austin music economy is very fragile.  We can’t dial up an intracompany transfer from New York or Silicon Valley to cover our overhead.  And a good place to document just how fragile it is would be the Austin Music Census, a document that has driven music community public policy in Austin for the last five years.

Over 100 venues participated in the Census.  People often think that the Census is about Austin musicians, which it is.  But it is also a comprehensive data driven needs assessment of venues and other music industry workers as well.  We’re going to focus on the venues in this post.  The venues are an integral part of the beating heart of the Austin music community.

There’s lots of things that the City of Austin could do to fix some of the financial problems that venues will have to fix out of pocket as there’s no insurance to cover their losses in all likelihood (but a very qualified maybe–see Pandemic: Force Majeure Contracts and Insurance in the Music Business.)

I discussed the situation with Nikki Rowling who was the Project Architect and Lead Author of the Austin Music Census.  Nikki pointed out that applying these rent multipliers in the context of SXSW cancellation seemed a lot like price gouging, and she’s right.  One idea we chewed around is to temporarily ban rent multiples as price gouging and look into reversing rent acceleration clauses.   The Austin Music Census uncovered instances where landlords charge higher leasehold rents to venues during SXSW (sometimes double) and leases may contain rent acceleration clauses that raise rents prospectively based on a benchmark of increasing economic activity in Austin.

It will be important to take a close look at rent acceleration clauses–very hard to say in the abstract, but there is an assumption that a rising tide lifts all boats.  That’s obviously not the case.  It will be a heavy lift to have a rent acceleration clause apply in the reverse to lower rent, but it’s a thought.  It might be possible to at least keep the clause from increasing a venue’s rent.

Leases that increase rents during SXSW when SXSW is actually happening is one thing.  If those clauses collect higher rents when SXSW would have happened but didn’t happen is another, particularly due to the present situation.  Sometimes this increase may be expressed as simply as “double rent in March.”  That’s not acceptable after the Mayor decided to declare an emergency that he knew had the effect of cancelling SXSW–if you think it sounds like price gouging during a hurricane, that’s because it does sound like price gouging during a hurricane.  And we don’t like that stuff in Texas.

Under Texas Business & Commerce Code §17.46(b)(27), it’s possible that those rents could be a “false, misleading or deceptive acts or practices” that are “unlawful and are subject to action by the consumer protection division” including:

(27) taking advantage of a disaster declared by the governor under Chapter 418, Government Code [to declare “a state of disaster”], by:

(A) selling or leasing fuel, food, medicine, or another necessity at an exorbitant or excessive price;  or

(B) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, or another necessity;

“Another necessity” surely would be rent.  (Or utilities.)  It is worth exploring whether paying double for rent so the landlord can profit from an event that never occurred due to an act of government beyond the control of the tenant is actually unlawful.  It’s also worth noting that approximately 34 states have comparable laws.  Even if the lease is silent as to why rent might be doubled in March, it would not be hard to show that the reason for the double rent wasn’t because the month was spelled with first letter M but had everything to do with the letters “SXSW” as a condition of the double rent payment that cannot be met.