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PDF Editor FAQ

Why didn't Sears adapt?

From the perspective of a landlord, which is something I didn’t notice in the answers below, Sears was kept up - still is - by low occupancy costs. There are two basic forms of Sears stores, stand-alone and mall.Stand-alone stores are generally triple net leased, meaning Sears is responsible for all maintenance, taxes, etc. and writes you a check each month. That check is generally not large because the leases are old and very long term with lots of extensions at Sears’ option. There is an entire business of building stores for net-net-net or perhaps net-net leasing. A Walgreens, for example, or a Home Depot is typically built by a developer who hands the building over and then gets a check each month. The developer typically raises money by syndicating its interest or by borrowing money against the lease. If the tenant is very high quality, the bank will capitalize the income stream at a low discount to cover itself and make a profit, and give you its present value. If the tenant is lower quality, the bank discounts the income stream more. The difference between triple and double net leasing is generally, but not always, who pays the taxes. Sears has a bunch of stand-alone stores that are decades into leases so they’ve been paying next to nothing per square foot.Mall development is a different animal with a similar outcome: to attract financing for a mall project, you needed anchor store lease commitments. To get a Sears or Macy’s to commit, you gave them their space. In some cases, you as developer might give them ownership of the pad, tied up with lots of restrictions about how it could be used or disposed of. In general though, think of a mall anchor as not paying anything. This means their occupancy costs were like triple net except perhaps even lower. A negative for the mall business over time is that these anchors tended not to pay common area maintenance charges, meaning the cost of operating the mall itself fell on the small tenants, what is generally called ‘shop space’. In some cases, the anchors even did their own parking lot maintenance or didn’t pay for their own parking lot maintenance. That drove CAM charges up substantially over time, which made mall stores less profitable, which made them less resilient in the face of changing markets, etc. That is one reason, by the way, we see the development of ‘lifestyle centers’ - and before that, so-called ‘power centers’. A power center was a strip shopping center with a bunch of box stores, both ‘big box’ like Best Buy or Home Depot and ‘junior box’ like Bed Bath & Beyond or Petco. There might be some ‘shop space’, notably restaurants, but you could see a line of boxes behind a big parking lot. A lifestyle center is, bluntly, an attempt to reduce CAM charges, meaning a reduction in total occupancy costs, by eliminating the mall building with its enclosure, heating and cooling, security, etc., by arranging stores around a parking lot and on ‘streets’ with parking garages interspersed. The most up-to-date form has evolved to include housing, which I think all would agree is a better result.So, regarding Sears - and JC Penney, et al - a major factor in their surviving this long has been they haven’t paid much rent. The negative in that is they haven’t been paying much rent so they’ve never focused properly on operations. The old ‘divide’ you could see was between companies that managed off the floor operations well and those that did not. The classic example is Walmart: their distribution and inventory management systems were light years beyond the department stores. They learned how to make money in small towns, mostly in the South, where to be honest there wasn’t much money so they had to be careful with every dollar spent off the floor. The other classic example has become Target, which expanded out of being a traditional discounter competing against Walmart (though in another part of the country) into a discounter with a fashion/design edge. The reason for that is Target was started by and owned by a fashion retailing department store chain. Fashion department stores are not the same as Sears; they sell higher price point, higher margin soft goods as their main business, with a similar emphasis in general on hard goods. Walmart of course at times seems to sell everything but no one can say they’ve ever done ‘fashion retailing’ well. Target recognized there is a huge market for fashion retailing above the Walmart and below the Dayton’s level. (Dayton’s started Target.)Sears never got its back office operations working well and never got its fashion retailing working well. You could see the problem when they bought Land’s End: they set up separate boutiques for Land’s End and the lessons never sloshed over into the adjoining parts of the store. So they had LE quality merchandise and a bunch of labels no one knew and their store brands, all because - like Penney’s - they couldn’t understand who their customer was anymore and they were afraid to alienate one group by appealing too much to the other.Now of course they’ve sold off their major retailing assets like Craftsman. All the big box stores - which are generally smaller than full size department stores - have had to do similar things. If you go into Best Buy, you find their appliance section is now often run under some form of contract with another company. They’re using that and the branding which accompanies that to push upscale, meaning they want to sell $1500 and up cooktops, not $400 ones, and they try to offload the staffing and training issues that are hard for a retailer to pull off.So from a landlord perspective, Sears (and others) survived because they had low occupancy costs and they were unable to focus their efforts as if they had to pay higher occupancy costs, but instead tended to continue as they were with relatively cosmetic changes. An example is that Sears began selling non-Kenmore brands, labeling the appliance area ‘Brand Central’. That was sufficient for them to survive for quite a while because they not only offered various brands but also offered Kenmore - which everyone knew was generally Whirlpool or some other well known manufacturer’s product at a good price. But it wasn’t nearly enough when the market for home renovations heated up and people started to spend money on kitchen packages, not just replacing a fridge or dryer. Sears was caught, again, trying to serve multiple markets, those who wanted a basic replacement dishwasher and those who wanted something ultra-quiet and stylish. That’s a difficult customer experience to pull off well, which again is why Best Buy has moved in the direction it has taken. If you remember, Home Depot used to sell very basic home stuff. Even the shelving units were basic. Now they sell much higher quality consumer products and the idea is that you’re getting a good deal because it’s a big box store where they also have lumber and heating ductwork parts. (As a note, appliances are generally the same price everywhere, except for certain sales, and the differentiator is often service and installation expense. This has generated an industry of companies that do installs for places like Best Buy.)It isn’t just the internet. There have been massive changes in retailing over the last 50 years apart from the internet. One reason you see closures is those places have higher occupancy costs, meaning it’s just that much harder to turn a buck, or the leases are coming up on their expiration - very old leases in many cases - or to an extension option that would be more expensive and which would commit them to more years. But Sears and the others survived this long mostly because they were subsidized by the financial markets, as those markets filtered down to development: to build a mall, you need financing, and to get financing you needed a Sears, and to get a Sears you gave them a store basically for free.

Can a landlord give you only a few days to decide if you want to renew a lease when the original lease ends 60 days from now?

This is for discussion/information purposes. I’m not your lawyer and this isn’t legal advice. Anyone with this problem should consult an attorney in that state/municipality before taking action.Without knowing all the details (residential or commercial tenancy? Specified termination date with no lease option (or state/local law) allowing Tenant to extend/renew? Rental market “hot” or “cold”?) the short answer is “Yes generally, and tenant would generally be lucky to have a few days to make a decision”.Although (from Tenant’s viewpoint) such an offer can seem harsh, consider how it looks from Landlord’s perspective: Landlord’s income depends upon that property’s income stream. Landlord has a little more than 60 days to get a new tenant (moved in and paying rent) or that income stream will be disrupted.Although landlords must be prepared to quickly deal with unavoidable vacancies, they can profit only when they are receiving rent and they profit the most if they avoid needless vacancies.When landlords can’t avoid a vacancy, they must quickly change gears and quickly spend money to find a new tenant (at a hopefully increased rate that will cover the newly incurred retenanting costs).No matter how harsh this might appear, Tenant is wise to take Landlord’s extension/renewal offer seriously; it may well be Landlord’s last attempt to avoid this vacancy.From Landlord’s perspective vacancies are expensive and those 60 days can pass in the blink of an eye. Because of this, in commercial contexts it is common for Landlord to require much earlier notices of renewal (often 90–180 days).In residential contexts 60 days is also often insufficient time, A selective residential Landlord can easily take more than 30 days to find the right tenant, who may then need another 30 days to give notice to their current landlord.If Tenant does not extend within the time period Landlord has given, many Landlords will immediately switch gears and commit money (fix-up, advertising, perhaps hiring a broker, perhaps signing with a prospective tenant) to get that new tenant in and paying rent as soon as possible.Once these arrangements begin, landlord’s mindset may solidify and Landlord may not later be able or willing to accept the old ter,s or any terms from the old tenant.

What can I do if my landlord is saying that I cannot renew my lease? Please see my comment below for my explanation…

You don’t want to hear this but you need to move out. You signed a one year lease which was a contract between you and your landlord. It was only for one year. You committed to pay for one year and they committed to let you live there for one year. They are not obligated to renew and do not need to give any reason why they don’t want to renew. You said that no one had told you this until you asked but you mention that they were sending you notifications that your lease was ending. They were going above and beyond what is required and were more than a 30 day notice. Technically, you have known for 10 months that this current contract would end in October.No judgements but if you step back and read what you wrote you may have a better idea of why they are not renewing your lease. You first mentioned that you had been late 1–2 months when your roommate moved out. That in itself is not a dealbreaker on renewing a lease. Especially if you gave forwarning to your landlord that rent would be delayed. If you didn’t notify your landlord that you’d be late with the rent prior to when the rent was due that could have created an issue. Most likely your landlord has a mortgage as well as taxes, insurance, and maintenance fees that still needed to be paid even if you didn’t pay the rent. You could have caused a financial hardship for your landlord.But the reason most likely they did not renew your lease is you said that you complained a lot and you were not polite to your landlord. You had every right to notify your landlord about bugs, frogs and anything else. Please understand that I said notify. There is a big difference between notify and complain. It’s not what you were saying but how you were saying it.I don’t know where you live, if this is a current post, but if you had been experiencing frog or bug issues during the covid pandemic then waiting three weeks to get an exterminator out to fix the problem is actually pretty good! So many businesses have closed or are running a skeleton crew and are short staffed. You also don’t know what’s going behind the scenes with your landlord. Did he lose his job? Does he have other properties other than yours where tenants have not been able to pay rent? If so, he might be more concerned with feeding his family and paying the mortgages than frogs or bugs in your place. And the fact that you were upset because of the short notice made you appear to be ungrateful That your landlord was actually trying to fix the problem and make you happy. I understand your concern about getting your pets out without having much time. In a perfect world you’d be given a 48 hr notice. But right now we are not living in a perfect world. Your landlord did get someone out there to your place. Give him a little credit.Your post gave the impression that you assumed you were entitled to be able to renew your apartment on a month to month because it is convenient for you. That you have two big dogs and a cat and want to save money by living there until you save enough to move out. For some reason you feel owed the option of being able to live there longer. That’s not how it really is. Your landlord has been giving you the privilege of a place to live. His place. And he/she can make the choice not to continue doing business with you if they don’t want to.To help put things in perspective say you had this very nice custom dog bed that you paid a lot of money for. You have a lot of pride in this bed and it has treated your dogs well. You love it but you paid a lot of money for it and are still making payments on it. Your dogs recently outgrew it and, until you get another puppy, you don’t have a need for it. Instead of selling it you decide to rent it for $10 a month for one year to help defer costs that you are still paying on the bed and you find this nice gal that would like to rent it from you. At first, things are great. She pays on time. She is pleasant. But then, a few months later, she is late with her payment. And then she is late again. She also starts complaining about about bugs she saw on the bed. Not just Informing you that there are bugs, and asking for help to get rid of them, but having an attitude and being a bit demanding that you need to get rid of them ASAP. Now, there were no bugs when you gave her the bed but they are there now. You have no idea how the bugs got there, or even if the dog belonging to the gal renting brought in the bugs by mistake, but ultimately it’s your dog bed and you need to take care of your property. So you call around trying to find someone. It takes you days/weeks of constant calling and you find out last minute that you can get a specialist to go to the gals home to take care of the bug issue that day. You are excited that you finally have someone and when you let the gal know the good news, instead of being happy, she is pissed that you didn’t give her more of a notice. How could you have? You just found out. Instead of being grateful, she is more agitated. Her behavior and attitude would probably wear you down. Her lease on your dog bed is coming to an end and she now assumes that she will continue on a month to month because it’s convenient for her. What would you want to do? Would you want to continue doing business with her? Or would you want to conclude your business with this gal and then do business with someone new that will appreciate what they are renting from you, how you try to help when issues arise, and will treat you with respect? Probably a bad analogy but I hope you understand the pointSoooooo…….if you truly want to stay at this place then there is something you can do that has a slight chance of changing their minds of extending your lease. It may not work but if you don’t try you will definitely need to be out at the end of October. You must eat some humble pie. You ask for a face to face meeting with the person in charge of renting your apartment. This could be the landlord or a property management person. You own and acknowledge your bad behavior and you appear to be very humble. you apologize for any bad behavior. You tell them all the good things about your apartment, how it’s become your home, and how much you appreciate the fact that they were able to get an exterminator over to your place, even if it was short notice. And you nicely ask for an extension. If your behavior was an isolated incident or two it can be chalked up to you having a really bad day. And hopefully they can see the real you at this meeting. If you have a history of bad behavior then you should start looking for a place now. Nothing will get them to change their mind.If they do extend you on a month to month please be aware that they only need to give you a 30 day notice to vacate. You will need to continue to be humble and kind. Even if you don’t want to.

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