Is your business closed or damaged by the flooding? We're terribly sorry for your loss. This guide is written to help those who may have questions surrounding the process of rebuilding, their leases and how to move forward.
What to do if your business was affected by Hurricane Harvey.
The tragic flooding in Houston has displaced tens of thousands of people, damaged thousands of homes and initial estimates of the economic loss are in the upwards of 50 Billion dollars. This is a catastrophic and historic flood that has cost many families and businesses everything they have. If you are personally affected, or know anyone who this guide can help please feel free to share it.
After a tragedy like this, we see many reactions. Our first was that we need to put other’s needs above our own in times like these. I am so encouraged and proud of the City of Houston, its surrounding areas and even outside sources like the Cajun Navy for stepping in to literally band together and save lives. If this doesn’t bolster your faith in humanity I am not sure what will.
Our first priority is obviously helping those affected by this storm, donations and funds that are directly helping Houston families and businesses can be found below.
https://www.gofundme.com/help-houston-businesses Tenavox Fund for Houston Small Businesses and their families/employees
www.houstonfoodbank.com Houston Food Bank
http://ghcf.org/hurricane-relief/ Greater Houston Community Fund
https://my.reason2race.com/DNicol/HurricaneHarveyLGBTQDisasterReliefFund2017 LGBTQ Disaster Relief Fund
http://www.houstonspca.org/ Houston Society for Prevention of Cruelty to Animals
This is not the end all be all comprehensive donation lists, I’m sure other organizations have more and very worthy causes, these are just the ones we felt strongly about. Also, our Caboodling (our little nickname for our operations) team will be in Houston next week helping small businesses clean up so they can get back open and serve their customers and employees best. Please Contact us and we will be happy to come by and help your business get back up and running.
So, with the most important items covered let’s get into the business of recovery. What do you do with your space, your landlord, to get your damaged business cleaned up, rebuilt and back to doing what you intended, serving customers and clients best.
DISCLAIMER: Let’s start with the basics. If you are a Tenant in a building, you presumably have a lease with a Landlord. This lease will outline certain responsibilities and contingencies for what occurs in a disaster, casualty or major recovery to the building or center you are in. For quick reference, grab your lease and look for sections related to “Casualty, Insurance and Default” so you have an accurate understanding of what is going to occur. What we cover here is going to be general, I cannot give you specifics on your individual lease. So PLEASE read the lease and have your attorney look at it if you have any questions. Need an attorney? Contact us and we will recommend a good one, we have several top vendors who have offered to work at reduced or pro-bono rates to help businesses recover from this tragedy.
Where to Start
Now, the typical lease is going to have these provisions clearly documented. If it does not, that is a bad document and leaves things open to interpretation, not good. Contact an attorney. The Landlord is responsible for damage to the building in the vast majority of cases, you have been paying insurance costs on a pro-rata basis in the form of your annual operating expense charges.
This is what they are for, your Landlord and management person should have already contact you with a clear plan of action that outlines the following three things.
- The damage that has occurred
- The timing and plan of action over their next 1-2 weeks to assess and cure the damages
- The responsibilities of the Landlord and their Tenants during this period of reduced or inactive use of the spaces.
These types of updates should have already occurred, if they have not, contact them and ask the above. They should also occur regularly until the building is back to full working condition. Notify your Landlord and manager in writing as soon as you can safely access your space to let them know its condition so this is documented. These notifications in writing set legal timeframes, so do it quickly and formally.
Note: Please understand property managers and owners are people too and can understandably be affected by this tragedy and overwhelmed by the cleanup efforts. Please consider their efforts in this light first.
So what so you do first? When you can do safely you need to assess the damage of your space. The building damage is the responsibility of the Landlord. For your property and equipment and even interruption insurance you need to photograph and document EVERYTHING and file a claim immediately.
Don’t skip this step, it’s easy to gloss over things and be overwhelmed but proper documentation and fast filing allows for smoother processing and quicker claims. Some insurers will advance you money for the claim to speed things up, the typical process is 60 days from claim for property and contents. Business interruption insurance is suggested for all, if you have it file a claim, if not, the SBA has loans for disaster recovery.
Resources on how to file a claim can be found here:
Find out more about disaster assistance loans from the SBA here:
The Damage...and the road forward
After you have assessed the damage? It’s time to get a clean up crew in there. If safe, you can start some of this yourself but getting a professional clean up group to assist is highly recommended. www.servpro.com is a popular one, find a local franchisee and they can assist you. Also, consider coordinating this group with your building management or ownership, you may get a better deal working on the entire building together.
Your local government organizations, City of Houston Mayor’s office, chambers, etc.. may provide additional assistance to you, please look into those if needed.
If you have business interruption insurance be prepared to both file a claim and prove your sales history up, that will dictate the funding your claim receives.
Once you have assessed and cleaned up your business’s space, you have some decisions to consider. Ask yourself
- Is this location still viable? Has the building or center been damaged beyond repair?
- Is the timeline for construction and reopening acceptable, what do I do meantime?
- What are my options if I don’t want to continue leasing here.
Let’s take these individually. In the first scenario be aware, the Landlord will control whether a building is truly condemned or will not be reconstructed. This is rare, most buildings have both insurance and a mandate to repair during damage issues like we have just suffered. Bottom line, they will want you to continue your lease there as soon as possible. If not, they have a usual responsibility to assess within 30 days and then release you from any obligations to go find a new location for your business. So what if they are repairing, do you still have to pay rent?
The situation is not cut and dry. Landlords have a few standard options here, and yes, the decision lies with them on how to handle.
- If the building is being repaired, Landlords have a responsibility to notify you of their intentions and start repairs within a reasonable time period (30-60 days usually). They can “demand” rent for these periods and it’s a bit of a legal gray area on what they can collect, your attorney will be able to tell you how your casualty section reads and your recourse here. In most practical cases, if a building is uninhabitable it's pretty hard to collect rent, tread carefully here and work with your attorney and manager to see what is equitable. Rules are different than residential and commercial contracts are typically strong and pro-Landlord. They should be willing to work with you, consider social media platforms and a CRE feedback site (www.tenavox.com) to encourage Landlords to be both transparent and fair.
- If the timeline seems unreasonable, what then? Well, unfortunately most leases leave that in the court of the Landlord to decide and the lease to outline. You may not agree with the casualty section in your lease, but if you signed it, it's a contract.
- If you truly don’t want to remain a tenant and intend on leaving you should first ask the manager or owner for their plans and let them know your intentions. They may be willing to create a mutually agreeable path to terminate the lease, this is a clean and good way to exit. If you decide to “break” your lease, without termination documentation (mutual or otherwise) or a path in your lease to do so legally, be aware there is a potential for your Landlord to pursue legal recourse. Contact your attorney and take good legal advice before doing anything.
Rebuilding and Staying
If the building and you are both in agreement you want the space and building restored that is good, a mutual plan can be put in place with timelines for construction, milestones, rent abatement, etc.. to work out a fair path forward. I would strongly recommend you have your own contractors assess interior damages to your space and give you timelines, oftentimes the contracting community is overwhelmed by events like these and the Landlord's preferred vendor may be too slow. Be careful when selecting a contractor, scam artists like to prey on the desperate in times like these. Contact us for some recommendations in your local area, we verify every vendor we work with here at Tenavox.
Once you have selected a contractor or have one provided by the Landlord consider notifying your customers of your planned re-opening. If you can serve them at other locations or online during this time, let them know about that as well. Business may be affected but it does not have to come to a grinding halt. Oftentimes your customers may even be willing to help you rebuild!
Many other items to consider….
There are many other items to consider, employee health plans, taxes, benefits that are all able to be mitigated by disaster assistance programs. There are MANY rules associated with each one of these, consider using this resource as a start
We’re here for you!
At Tenavox we are believers in our mission to help small businesses in their lease decisions. We know this hurricane has affected so many great people and organizations and want to offer our help. Please reach out and contact us if you need assistance in clean up or have questions associated to leases, resources for construction or legal needs so we can help connect you with the services to move your business forward.
For those of you who may need help relocating your business after this tragedy or have more lease/market questions, consider our main site www.tenavox.com to get you started on your journey and answer any questions you may have, as always it is free and your resource and advocate to a better lease experience. We can help you make sure your going into a good building with a fair Landlord, and paying a fair rate. If you need representation or formal help, contact us and we can connect you to a local, qualified representative to formally represent your interests.
Our leasing guides can be found here as well.
On a personal note, we are all willing to answer questions, provide resources and just talk if you need us. Our team is local and we care about this city. Just reach out and we will do our best to answer your questions and/or get you connected with the resources who can. Our social handles are @Tenavox on Twitter and https://www.facebook.com/Tenavox/ for additional avenues to contact us.
Tragedies can bring out the best and worst in us all, consider documenting your experiences so other business may learn how certain Landlords, Managers and Owners have reacted to this catastrophe. If we can all learn from the good, bad and experiences of our local business community we can help mitigate this disaster. Our review form is located here https://docs.google.com/a/tenavox.com/forms/d/e/1FAIpQLSeCcnt1_FvaoWctw-FsgxLBF6sWxr0QuNvtU--9KoloX64chg/viewform
Your feedback is 100% anonymous and safe, and used by other local businesses to make better decisions.
About the Author: Josh Feinberg is a longtime Houstonian with over a decade in commercial real estate experience. He currently resides in The Woodlands, TX.