Lockdown #2 Manual

Originally Published : November 17, 2020


The Governor is rolling down the gate on our restaurants and it seems that closing time will beset us all again soon.  I heard from so many of our dear clients this week all asking the same things:  “When do you think we will be shut down?” always followed by: “How the f@#! are we gonna make it through winter?”  

Alas, there is no good answer or magic formula but there are some things you can do to increase your odds of survival.  If, after assessing the situation, you decide to close it down, that is also understandable but we have to plan for that as well.  Whatever your situation, you should start deciding now how you are going to handle it when indoor dining is shut down so you can minimize your losses. Because for so many, that’s gonna be the game from here until we emerge from the cold rain and snow into spring and vaccine land. And let’s not poo poo the excellent vaccine news from Moderna and Pfizer that shows an effective and safe vaccine that should be distributed widely next year.  When you look at that timeline, we just have to survive until, let’s say July, before things start getting back to normal.  That’s a seven month survival plan.  We can do that.

First things first.  You need to address your rent situation and also make sure you are prepared to deal with your employees when we go into lock down.  Mayan and Lee are going to give you the basics.

So here’s Mayan Bouskila, the Chair of our Real Estate Group, with some wise words about the Landyscape.  I can’t imagine that any other attorney in this city has been more involved in Covid- Landy negotiations than Mayan.  

Landy Deals by Mayan Bouskila

Tenants should approach their Landy now to start working out new deals to get some rent relief.  These discussions tend to take some time as there is usually more than one person who needs to sign off on the rent relief proposal.  Once the deal has been agreed to, this should be memorialized by way of amendment of lease signed by both parties – until this occurs, the terms of your lease prevail.  We have found that some Landys are motivated to keep their hospitality tenants in place so don’t be afraid to ask for what you need! 

Here are some examples of rent relief deals – remember, one size doesn’t fit all: 

1. Percentage Rent – Tenant either to pay a % of gross revenue or a lower base rate than the rent under the lease, plus a % of gross revenue.  This should stay in place until business returns to pre-pandemic levels; the goal is to phase out the percentage as business improves.

2. Abatement based on capacity – The base rent schedule stays the same, and a mechanism is inserted to provide an abatement (take-out only, 25%, 50%, 75%) based on capacity restrictions.  If you are negotiating this sort of deal, consider the maximum amount of rent that can be paid if you are at take-out/delivery only (which is the equivalent to the strictest lock down at the start of the pandemic) and a provision should be agreed that if your business is doing take-out/delivery only, that is the amount of rent you pay for that period.  

3. Abatement and extension – 100% of the base rent is abated and the term is extended by a period of time.  This is tailored to shorter abatement periods – for example, 3 months full abatement and the term is extended by 6 months. Tenants like the free rent and Landy likes the longer term.

4. Deferral – This is a last resort. Rent is deferred to the end of the lease and the amount is spread evenly.  If you are nearing the end of your lease term, this is unlikely to provide you with the relief you need. 

If you want to talk more about Landy deals, you can email Mayan at: [email protected]

David here again….

Whatever type of rent relief you think will work with your Landy, hit  them up now and let them know that a shutdown is coming and that you need to rework whatever deal you have with them in case it does.  They will ignore you until the shut down is official but then they will start negotiating.  It doesn’t matter if you already made a Landy deal post-Covid.  Make another one because your old deal was based on a different reality and your survival depends on a new one to get you to July.

Oh, and that federal  stim money.  How’s that going?  Well, to recap, Nancy and Mnooch were getting close before the election at around 2 Trills.  Nancy wanted more to help out the states and to fight Covid and she held out and it didn’t happen.  A classic case of overestimating one’s leverage resulting in nada.  She should have taken the deal when they were only a few Bills apart but she got greedy, like all politicians do.  Now, since DT’s defeat, Mnooch is out of the picture and Mitch and The Sideparts have taken over the stimulus negotiations and, as expected, they are going nowhere fast with Mitch as the expo.  It’s maddening to watch our Dearly Elected maneuver for political capital while they play with our livelihoods.  Every day that they fart around results in the unnecessary deaths of so many small businesses.  Such egocentric, heartless fools, all of them.

And 1932A?  Still a valid and enforceable law in New York City.  The federal case has gone nowhere and that’s fine.  The law still stands and, under certain circumstances, a guarantor can walk away from a personal guaranty and 1932A remains solid leverage for tenants when negotiating with Landy. For questions about 1932A and terminating your lease, email Joe Taylor at: [email protected] or Maya Petrocelli at: [email protected]

Here’s our partner Lee Jacobs, Chair of our Employment Group with what to do with your employees if we are ordered to close…

Layoffs, Furloughs and Firings by Lee Jacobs

Unfortunately it appears that we are in many ways right back to where we started almost a little over eight months ago.  As we face an impending shutdown, now is the time to finalize your employment practices and prepare all contingencies—limited hours, cut schedules, extended shutdowns and layoffs.   When doing so, we urge you to consider these the three C’s:Communications. Promptly communicate with your employees regarding any schedule changes or cuts to their hours.  Communicating clearly with your employees can help prevent future issues with them, but don’t overextend yourself.  Remember, you can be open and honest with your employees, while not making any promises about continued employment, layoffs, future re-hires, unemployment eligibility, etc.  You can try to answer all their questions and it’s ok to say “I don’t know”. Let your employees know they have been heard and tell them you will get back to them and make sure to follow through. 

Complete.  As you know, every employment practices step you take includes necessary paperwork.  So, if you are changing your employee’s hourly rate, complete the wage acknowledgment form now.  If you have to terminate your employees, prepare the termination notice now.  Should you have to terminate more than 25 employees at once, draft your WARN notices now, so you can act quickly when (and if) the time comes.  Calculate your employees accrued sick and vacation time that is due to them upon termination, now.

Care.  If you haven’t done so already, complete and implement the mandatory NY Forward Plan. The plan should have been fully implemented by now as it covers both your patrons and employees during your continued operations. 

We’re here to help and remember, proper preparation today will save you time and money later.

Please don’t hesitate to reach out to me at [email protected] or Megan Shaw at: [email protected] for any questions and concerns.

Joey Regs says….

Effective Friday at 10 p.m., bars, restaurants and gyms or fitness centers, as well as any State Liquor Authority-licensed establishment, will be required to close from 10 p.m. to 5 a.m. daily.”
Not many more details than that; no statewide coordination whatsoever; not enough of a grace period for a prayer of this being implemented well.  We’ll break this new edict down for you and tease out all of the necessary details below.  We’ll also supplement it with the new information that is now out there from the State Liquor Authority, which provides a bit more color.
I continue to be amazed by the clumsy, half-assed implementation of Covid actions by the Governor.  Do you know how the State Liquor Authority found out about the new curfew?  BY WATCHING THE NEWS!  No head’s-up from the Gov’s office; no coordination; no corresponding press releases; no sharing of information whatsoever.  How on earth are our State agencies expected to perform well, given these circumstances?
The Brass Tacks:

  • This is a hard close of 10:00 PM for all “on-premise activities” – this includes indoor and outdoor dining, and applies to those establishments with liquor licenses as well as those without.
    • Yes, prior iterations of curfews have included a 30-minute grace period beyond the curfew time, for patrons to finish their meals/drinks, but this version specifically does not. 
  • You are able to fulfill delivery and curbside take-out orders post-10:00PM each night.  However, these orders may NOT include alcoholic beverages. 
    • These food and non-alcoholic beverage orders can continue until the stated “close time” on the liquor license.
  • On-premise activities (indoor dining, outdoor dining) and alcohol service may resume at no earlier than 5:00 AM each day*
    • *Alcohol service is also subject to any previously negotiated “start-time” or any pre-existing restrictions by the county or municipality
  • Off-Premise retail wine and spirits stores will also be required to close at 10:00 PM each day now.
    • Reopening the following day cannot occur until the county’s stated off-premises opening hour.
  • Grocery Store and Drug Store license-holders are NOT required to comply with the 10:00 PM curfew.
    • These establishments must just simply comply with State and Local guidance
    • If you are a hybrid general store/café model and you have an “on-premise” class of liquor license (OP, RW, TW), you MUST comply with the curfew
  • The 10-person gathering restriction ONLY applies to gatherings at private residences – NOT licensed, commercial establishments
    • Same guidelines apply though re: max seating of 10 per tables, etc. 
  • If you are conducting an off-premise catering event, this too must abide by the new curfew restrictions
  • Movie theaters, bowling alleys and casinos with liquor licenses must all also adhere to the 10:00 PM curfew.
    • Movie theaters must have their last showing end prior to 10:00 PM, so all patrons can exit prior to the deadline
    • Bowling alleys must turn off lanes and have all patrons out of the establishment by 10:00 PM
    • Casinos must also begin their closing operations early enough to have all patrons out of the premises by 10:00 PM
    • None of the above establishments can reopen the next day prior to the 5:00 AM time.

More stuff you should know…

The DOT released some new “seasonal” guidance for those participating in the Open Restaurants program. 

By December 15, 2020, anyone with an Open Restaurants permit must make the following adjustments:

  • Barriers must have interior walls and bottoms to hold filler materials (i.e. soil or sand), to ensure that they are sturdy enough to hold up in the inclement weather;
  • There must be reflector tape on all barriers in roadways and on curbs.  Snow sticks must also be added to the corners of the barriers facing traffic;
  • The DOT will be reaching out to certain restaurants in specific high traffic areas, to ensure that they have the proper plastic water-filled barriers.  It’s recommended that all restaurants have water-filled barriers;
  • Sandbags, reflector tape, snow sticks, and plastic barriers will be available to all participants, free of charge.  Limited deliveries of plastic barriers will be made to “high priority restaurants,” which will be contacted separately; all other distribution and pick-up details will follow;
  • Restaurants that have partially enclosed outdoor dining are allowed to have awnings, roofs, or plastic domes as long as they allow for adequate ventilation;
  • Restaurants are NOT allowed to set up outdoor dining when there is an active snow alert for the city.

Finally, there will be another NYC town hall event, this coming Wednesday, from 12:00 to 1:30.  It will cover a variety of topics, and has been organized by the NYC Office of Nightlife.  Registration Link: Register Here
Joey Regs out.

Lastly, we have Alanna Morgan, our bankruptcy counsel, with a few words…

Winding Down and Handling Debt by Alanna Morgan, Bankruptcy attorney

What to do in the event of another shut-down: is it finally time to pick up the phone and consult with a bankruptcy attorney?
Regardless of your current situation, I wouldn’t be surprised if the question elicited a snap response. Maybe you thought: I’ve made it this far, don’t you dare start using the word “bankruptcy” now. Or maybe the months and months of uncertainty, creativity, reinvention, outdoor dining, and the unfulfilled promises of a second stimulus package have finally started to wear thin, and you thought: walking away doesn’t sound so bad. Can I do that? How does bankruptcy work? Is it right for me?

If you are looking to wind down your business, we can help you negotiate with creditors such as lenders, your landy, or credit card companies, whether it be out-of-court, after they’ve initiated a lawsuit, or through the bankruptcy process. While no outcome is ever guaranteed, we may be able to work with creditors or their attorneys to understand that creditor’s realistic ability to recover funds from you or the business in order to reach a resolution. 

If you want to continue operating your business and fight another day, we can also help you manage and negotiate with your creditors with that goal in mind, or to strategize creative solutions, including using the Chapter 11 bankruptcy process to restructure your debts if possible. Finally, if you aren’t sure what the future holds for your business, we can help you weigh your options and walk you through what they are.
No matter what your situation is, know this: bankruptcy is just one item on the menu. We don’t order it every time. And while there is no magic time to pick up the phone and consult with a “bankruptcy” attorney, remember that we’re in the middle of an absolutely unprecedented moment, when probably most if not all hospitality business owners could benefit from a check-up. If not now, when? 

You may contact Alanna at [email protected] with any questions.

Editor’s Note:  We are going to start publishing this newletter again at least once per week and more if needed.  This is going to be a tricky next few months so we want to be sure that you know as much as we do about how to deal with all the moving parts.  We will continue to share our knowledge with you and give you some tools, ideas and strategies as the circumstances develop.

Breaking News!  We have established a forum where you can send any questions that you might have about all things Covid.  Landy, employment, lawsuits, city regs etc.  Just email us at: [email protected] and we will get back to you with answers.

R.I.P. – Alex Trebek,  a lovely and beloved man and father of a NYC restaurant owner.  We will miss his good humor and professionalism and we were all fortunate to have him educate and entertain us for so many years.