A major landlord in old Ellicott City is terminating leases at the request of tenants who don’t feel safe reopening businesses in the flood-prone area.
Waverly Real Estate Group, which is an owner and manager of several properties on Main Street and Columbia Pike, has so far honored requests from five tenants to be let out of leases.
“We love our tenants. We don’t want them to stay if they don’t want to stay (because of safety concerns),” Donald R. Reuwer Jr., president of Waverly Real Estate Group.
Agreements with lenders such as Howard Bank have allowed Waverly Real Estate Group’s payments for flood damaged properties to be tacked on to the back-end of loans. This arrangement has provided the company flexibility to let businesses, such as Culture Lab, out of their leases and to temporarily reduce rents for tenants trying to come back.
“The banks have been really excellent,” Reuwer said.
Landlords generally don’t let tenants out of leases, even in cases involving safety concerns, according to a commercial real estate professional with retail leasing experience, who spoke on background to avoid the perception of being insensitive to safety issues.
Lessors often stand firm in enforcing contracts, the source said, because of difficulties in defining safety in a legal document or because the landlord has fixed expenses, such as real estate taxes, mortgages, insurance, and utility payments. In many cases a landlord may be in default on a loan if a lease is terminated because credit evaluations examine whether income from a building is sufficient to cover a mortgage.
On May 27, a storm drenched historic Ellicott City with more than 8 inches of rain in a matter of hours. The storm created a flood of muddy water that rushed down Main Street, killing one man, sweeping away cars, and damaging properties and businesses. The flood came less than two years after another storm, which deluged Ellicott City with roughly 6 inches of the rain in two hours, creating a flood that killed two people and caused $22.4 million in damage.
Ellicott City dates back to the 1770s and was established as a mill town. Its Main Street section is a thriving retail area featuring an array of small businesses, including clothing stores, antique shops, and restaurants. But the properties would not be permitted under current building standards.
Some environmental activists have urged Howard County officials to bar businesses from reopening. Those groups argue the area is in a flood plain and that no amount of infrastructure improvements can ensure the area won’t be inundated again.
Reuwer said the firm plans to invest in its properties and bring them back better than they were before. Businesses remain interested in opening in the area, he said, and the firm has already filled some of its vacancies.
In the aftermath of the Memorial Day weekend flood, a handful of business owners expressed concerns about reopening in order to pay rent because they don’t feel safe. Business owners during a town hall meeting last week urged the county to consider legislation helping tenants avoid having to pay rent while recovery efforts are underway.
“My building looks like it’s hanging over a cliff, and I’m being forced to open back up again,” Brianna Volatile, owner of Simple & Feminine Boutique, said during the meeting.
Howard County Executive Allan H. Kittleman previously said he was unsure if the county could intervene in a dispute over a commercial lease. He told businesses and property owners he would seek guidance from the Howard County Office of Consumer Protection about whether that agency could get involved.
On Thursday, Rebecca Bowman, administrator of the Office of Consumer Protection, said her agency does not have standing to intervene in commercial disputes. But Maryland law, she said, requires some commercial tenants be released from a lease following a serious accident or disaster, such as fire or flooding.
Under the law, tenants are only responsible for the rent to the date of the incident. But there are limitations to the statute, such as it only applies to leases up to seven years in length. Courts have also ruled, she said, that contingencies in a lease overrule the statute.
“We really can’t represent (businesses) or get involved in mediation,” Bowman said.