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Lawsuit Reveals Potential Financial Exposure Tenants Face When Vacating Property Before Leases Lapse
Brixmor Property Group, owner of Rockland Plaza in Route 59 in Nanuet, is seeking $1.6 million in damages for both back rent and future lost income from former tenant B. Good in a lawsuit filed last week in Rockland County Supreme Court.
This marks the second time the landlord has sued the small food chain, which has already vacated the shopping center. In the first suit, filed during COVID-19, the tenant ultimately paid six months of back rent to Brixmor by satisfying an outstanding judgment. But now, the landlord is suing once again for back rent, and for prospective rent through the end of their ten-year lease which was due to expire in 2027.
This suit highlights the potential financial exposure a defaulting tenant faces when it vacates leased property before the end of the term.
B. Good, the Massachusetts-based chain, had leased 3,492 square feet at 44 Rockland Plaza in September 2017 for 10 years with several options to renew. The chain, which has shrunk from 60 locations to 22, sells bowls, burgers, sandwiches, smoothies, and shakes.
The food retailer was paying $14,550 per month for the first five years of its lease, and was obligated to pay $16,005 per month for the second five years, plus more than $10 per square foot in triple net charges, or about another $3,000 per month in common shared expenses, according to the lease.
The tenant lapsed into arrears again after the original legal dispute was resolved in September 2021. Subsequently, Brixmor terminated B. Good’s lease in January 2022 for failure to pay rent and other obligations under the terms of the lease, according to the recent suit.
The lease had an acceleration clause, a provision that entitles landlords to sue for the rent it would have collected through the remainder after a tenant defaults or vacates before the end of the lease term. B. Good, the suit alleges, is on the hook for future rent due through 2027. This amounts to roughly half of its term, even though they are no longer in possession of the space.
The lease also has a provision that required the restaurant to remain open or pay triple the rent required under the lease. However, there was also an exception if the tenant was forced to close “through no fault of its own.” In the earlier suit that was satisfied in 2021 with a payment of $127,029, the landlord did not penalize the tenant because of COVID-19 closures. B. Good was one of many tenants that suspended rent payments during the pandemic.
Responding to a shifting retail landscape, Brixmor is planning to change up the mix of tenants with an emphasis on food and a grocer. The REIT, which owns 400 retail centers nationwide, has told the Town of Clarkstown’s Technical Advisory Committee (TAC) that it is has a prospective grocer slated for a 43,000-square-foot to-be-constructed space in the center.
In recent years, Rockland Plaza has suffered the loss of Modell’s, Destination Maternity, and other retailers as big boxes fell on hard times due to a mix of internet sales and saturation in the marketplace. Other large tenants such as Barnes & Noble are struggling. But it has added the popular food chains Chipotle and Shack Shack.
The shopping center plans to demolish three buildings including the former Modell’s and potentially razing the Nanuet Diner. A new vision would add a bevy of restaurants and food retailers to the center.