The Fitness Business School – Interview with Amy Colotti

Full Transcript

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Hey everyone, this is Pat Rigsby and I’ve got a brand new and very special episode of the podcast today. I’ve got a legal expert, Amy Colotti on to help us navigate some of the questions that we’re seeing very regularly about, you know, what happens if I get behind with my landlord or what happens if my landlord wants to evict me? And really understanding, you know, the landscape of what you’re dealing with if you do need some relief from a lease. Now, before we get into it, I will kind of set this up by saying, look, this is not legal advice. This is not you hiring an attorney too work on your behalf on the issues that you’re facing. What this is, it is more of sharing some experiences and understanding of the landscape that is commercial real estate and just giving you some common sense ways to look at things and to start to navigate this process. And at the end we will even share a way for you to follow up with Amy if you have direct questions or lean on Amy for more of an advising role. So with that, welcome Amy.

Thanks Pat. So let’s, let’s get into this. Um, you know, a lot of what we’re, what we’re seeing right now is people being concerned, you know, small business owners in the fitness, health, sports performance industry expressing a concern that, you know, if my clients freeze their memberships or if my clients cancel, I won’t be able to pay rent. And then, um, you know, I have a fear of being evicted and I don’t know what to do. So what kind of, um, feedback could you offer that person?

So my first tip is please don’t panic. Um, I’ve been saying this since last week. I understand it’s very scary. Um, I get it and I’m not at all trying to undermine or lessen the fear that you’re probably facing, but please don’t panic. The idea is, is that this is a short term problem and I don’t want you to react in a way that’s going to make it a very long term problem for you where it could also have a short term solution. So that’s the first tip. Um, and I understand it. I, you know, I’m currently sitting in my kitchen and not my office because court is closed and I’m not doing the same kind of work at the same level that I usually do. So I completely understand the feeling of, you know, to not being sure what to do. But with that being said, one of the things that you have a little bit of control control over is going to be your lease and your relationship with your landlord. So I don’t know what relationship you might have with the landlord or what kind of lease term you might have. And obviously the leases vary quite a bit. You’re going to want to take a look at the lease and figure out if there’s a force of nature contract language in there. Um, which is basically fear of God. I’m sorry, not fear of God, act of God. Um, so your Act of God language is going to say whether or not you have any liability. I thought liability is going to shift and if there’s a way that you might be able to pause or put a temporary hold on your lease or any other contract for that matter. So sometimes it works to your favor, sometimes it doesn’t. So you’re gonna want to take a look in the lease and see if that language is in there. Um, if that language is in there, you might want to talk to the landlord and see what they’re willing to do. The reality is is that they’re a business person too, some of their income is coming from your rent coming in. And if they have more than one property, they’re not really going to look to have everybody move out all at one time or try to evict you. So the first step is to go through your lease, see what the terms are, see if there’s any good indication of what may happen if you break the lease or if you’re late on the rent. And then I would go and have a conversation with the landlord and the first thing to start with the conversation would be seeing if either they could put a pause on your rent or have some sort of a plan in place.

You don’t want to just go in and say, Oh my God, I can’t afford it. What can you do for me? It should be, Hey, I am having this hard time. The state just shut me down. My clients are leaving, they’re scared. I’m not sure what’s going to happen tomorrow. Can we talk about this where I have my rent for April, but I don’t know if I’ll have rent for may. Can we pay it in payments or can you spread it out over a period of time? Or do you think maybe you could extend my lease term and I’d be willing to sign another year lease with you or extend my current lease for a year. If you can add the next month, two months, three months, six months worth of rent towards the end. Or if I could break that up over a period of time. So once you’re having that conversation with a landlord, you want to make sure that you’re having a plan, don’t expect for them to give you options which are go to them and say, this is what I can do. Would that work for you? In my experiences then a landlord is going to want some money as opposed to none. Again, most likely they would prefer to work with a tenant that they are comfortable with as opposed to finding a new tenant in these uncertain market terms. So I would be hopeful that old landlord would be willing to sit down and talk to you. But if you’re approaching them with some sort of plan already in place – Yeah. I think it’s logical for us to understand as business owners that landlords are often facing a lot of the same fears and concerns that we are. Right? We worry that, um, you know, if we, you know, go into a longer term recession, will clients be able to stay on board with us? Well, landlords have those same concerns. They don’t want to have vacant buildings. So if they have somebody that proactively wants to pay them and has a history of paying them, then you know, there’s a higher likelihood that we’re going to get some flexibility and some benefit of the doubt, especially if you can go in and proactively articulate both a plan and, um, even, you know, if they want to know, you can express how you were dealing with this, you know, are you delivering online training to people when they’re not in the facility so you have a higher probability of retaining them? Are you, um, you know, are you proactively marketing whenever, uh, you know, the, the environment’s a little bit more normal just showing them that, Hey, look, I’m working on this. This is my plan. I’m not just reacting to the news and being in a panic and, um, this is, uh, a way that I would like to navigate this with you moving forward rather than just Mmm. You know, being reactive and, and being desperate.

So, all right. So could you maybe spend a little bit of time, hopefully most of the people listening to this have never gone through an eviction process, but could you help, um, the listeners maybe understand that side of things a little bit and just know that yeah, they’re not going to just walk in tomorrow and have the locks changed?

Yeah, sure. So ideally you have a lease and I’m just working under the assumption that everybody should have some form of lease and hopefully it’s in writing. Um, so there should be at least a term that says that the landlord can’t simply change the locks. Even if there is no lease term that says that the law most state that landlords can’t simply just go and change the locks that they have to engage in the eviction process. I will also sort of premise this in that gyms in New York state are closed and they’re closed for at least the next two weeks. I’m expecting that to be longer, um, sort of in line with schools and businesses being closed. So with that being said, what would normally happen is a landlord would have to give you a three day notice that you’re late on your rent. The three day notice is going to tell you that you owe X dollars. It may add some reasonable fees, whatever your late fees may be in the lease. If your late fees and lieus aren’t reasonable and you’ve never had to pay them before, there could be some conversation about whether or not they’re appropriate. But for argument’s sake, in this conversation, we’ll assume that there might be some late fees that are being added that are appropriate and you would have to pay. They also might add some other administrative fees to it, depending on what the lease term says or what the laws of the state are. So they’ll give you a three day notice, which has not been filed by the court. It’s simply a notice that they draft themselves, that they serve upon you and they say that you have three days to cure, so typically three days starts running the day after you’ve been served with the papers and they should be personal service. It should be handed to you, or at least an attempt is made to have them handed to you so that you at least have knowledge that it’s happening. Once those three days run, if you’re able to cure the default and you’re able to pay the amount that they’re telling you that you need to pay, or in the interim, you’re able to go in and say, Hey, I can’t pay all of this today, but I can give you whatever amount you can give them. Can we work something out for the balance? And if they say yes, that’s as far as it goes or if you paid in full, that’s as far as it goes.

Once you get through your three day period, then the landlord is free to go and file with the court of appropriate jurisdiction. Most of the time it is a town court, some sort of a lesser jurisdiction. It’s not necessarily the normal everyday court that you might be thinking of when you see television shows and they’re usually smaller, easier access courts that are small claims, um, that handles dollar amounts that are under a certain jurisdictional limit, usually less than $5,000. Um, so assuming your rent’s less than that, you’re just going to go to one of these small claims courts, the landlord file a petition, they would serve you once it’s filed and they get a court date and you would have a court date with everything explained to you of how much you owe, why you owe it, any acceleration there might be on the lease, any additional rents that you might owe, any other fees you might know. So you’ll go to your court date. Usually it’s a couple of weeks out from when you get served. You have the ability to mount any defense that you might have. So you could try to use this Act of God as a defense I don’t know if that’s going to be a viable defense in the future because at this point the laws aren’t really contemplating this. They’re not dealing with what could happen in the future. They’re dealing with what’s happening today in the midst of the crisis, so maybe they act of guideline, which is going to be a defense for you. You also could say, I have the money here, I can pay it. You can tell the court that you have a reasonable plan, that you have some of the money to pay and that you can pay the rest of it and whatever term you might be able to pay it and the court will accept that or not. They’ll ask the landlord if they accept it or not. The landlord also might be able to say yes, they’ll accept a portion of it, but they still want to have a hearing on the rest and the court most likely is going to schedule another hearing date. In addition to whatever you’ve already made for your appearance, it’s going to give you a little bit more time to be able to either mount a defense or the reality is probably free to be able to come with more money. So if any point during this process, you’re able to pay it off in full, then the proceeding goes away and you get to keep your space.

If you can’t, after the hearing, the court is most likely going to issue a judgment against you and a warrant of eviction. Um, typically the warrant is served by sheriffs and those schedule a date to have you removed from your property all in all from three day notice that served on you. So when the sheriff actually comes and removes you probably looking at two or three months, if not longer than that, depending on your jurisdiction. So you have some time really to be able to come up with your funds. And again, we’re hoping that this is a short term problem where you’re not without clients, you’re not closed for months and months and months where you realistically would be able to come up with some more money. Um, my advice to some of my clients do has been, you have to realize that we’re in the middle of the month, so I’m working on what I’m hoping is the correct assumption that March’s rent has already been paid. So now we’re dealing with April. And I would hope that you had a plan to pay, since we’re more than halfway through the month of March. And so we might not even be talking about April’s right? We might not be talking about rent until May. So ideally you’re able to sort of put something away and make a plan for that. But the, the long term process of eviction versus probably not starting anytime soon until the courts reopen. But once it does, you’re probably looking at two to three more months before the sheriff actually comes in, is removing you from the property.

So, you know, hopefully that, that offers you, uh, use the listener a little bit of, I don’t know that peace of mind is the right way to look at this, but mmm, you know, so much of the role that we need to be playing as business owners right now is the role of being a leader? The role of, um, kind of being proactive rather than reactive too. The multiple daily news conferences that come our way. I mean, yes, there, there are updates coming very regularly, including some economic updates that may potentially offer us or landlords a little bit of relief. Uh, you know, I don’t know that we’re at that point just yet as the recording, you know, at the time of the recording of this podcast, but, um, you know, we can control how we’re proactively approaching this on both sides, right. The, the side of staying connected with our clients, doing a great job in serving them, uh, virtually if we’re unable to serve them in person, which is, uh, the case with most of the listeners at this point. And really maintaining a strong community, being able to stay connected and provide, uh, perhaps a little bit of calm in the storm when everything else is probably in disarray in their lives. They can still be in control of their fitness. They can still take, um, a proactive approach to being healthy. And you can be the leader in their life for that. So if you’re doing a good job with that, that’s probably the best course of action you have in the moment at maintaining as much of your revenue that you would have been receiving prior to now. And then the flip side of this is proactively, um, communicating with your landlord and having, uh, you know, a plan in place to, um, navigate any, you know, any loss of revenue that you may have and seeing if you can work together to come up with a mutually agreeable plan that allows you to, you know, get back in good standing. And if that means extending the lease, if that means, um, spreading out what you owe and tacking it on top of current payments down the road. I mean, there are certainly options available and, uh, the, you know, this, this fear of Hey, everything’s going to close up, you know, on April or May and the door, the locks are going to be changed or whatever else is probably an irrational fear that’s causing you even more stress and making it tougher for you to navigate an already challenging landscape. So Amy, I mean I think you covered all the high points for sure. Is there anything else that our listeners should be aware of? Anything else they should be thinking about? Is there, I’m trying to best navigate their relationship, their landlord or their, uh, you know, the, the lease situation that they’re in.

Okay. I think I covered most of it. Um, you know, you had mentioned to me about personal guarantees. Um, I don’t want to use that as any means to cause any more fear than might already be out there. Um, a personal guarantee usually come into effect when the, um, business who’s running the space is a LLC or corporation and the landlord wants to make sure you can’t shut down the business and they can’t recover any damages. So what will usually happen is that the business itself will get a judgment and then the individual will get a judgment. Um, you’re going to want to try to have everything run through the business anyway. So I really wouldn’t let the fact that there’s a personal guarantee become problematic for you. It’s not going to change any of the things I said before this. So I don’t want you to feel a panic because you feel like you’re on the hook for something and you’re going to have to pay out all this money. Um, that’s unlikely. And it’s unlikely that the court would even order that. You would have to pay out more rent or lost rent for the landlord and they’re probably only going to make you pay whatever’s owed in the past. And then if they decide that they want to rent something else in the future, they can deal with that. Um, so I wouldn’t let the personal guarantee it’d be a cause of worry or concern and it’s just going to be an added piece of paper where you might have a personal judgment against you, but most likely it’s going to be absorbed by the business. Um, so that’s something that we had talked about. What besides that, I am hearing rumblings of some economic stimulus pack just

coming out. I don’t know what those look like at the moment, I’ve heard a whole variety of rumors and none, nothing has been released yet, but from what I’m gathering, it’s coming soon. But what I will say that is out there and it’s available to you today are SBA loans. So if you go to sba.gov you’ll be able to figure out if that’s the right fit for you. If it does seem as if your space is actually closed and your client tell us not able to be online and whatever the problem might be, or if they are and you just simply need supplemental income coming in, you could try for an SBA loan. The rates are even lower now than they were last week. So you could try that as a means to stop some of the, the fear that you’re in right now or you’re feeling right now. Um, it, depending on whether or not you’re in the right areas that the disasters have been declared in your specific jurisdiction, it’s worth a shot. It’s the one thing that’s out there for you right now and there’s a lot of funds available. So it’s possible that that also could help you to have a plan in place for your landlord to be able to tell them, Hey, I can give you most of April I’ve applied for this loan, I’ve been approved for this loan and I can pay you the rest of April and I can even pay your may and June for you. Um, as soon as those loan funds come through. So that could be an option for you as well. So that could also help you with some of the panic that she might be feeling right now. Um, and this is also a really fluid situations. So you want to keep that in mind too. I don’t know if they’re going to change the laws on the books about eviction and what the landlords have to do for you or if they’re going to allow this Act of God to become a defense. Or if they’re going to say, look, it’s not really realistic that you’re expecting these people who we just closed down to pay rent on time in full. So there are things that I am anticipating going to come out and you have to keep in mind that it’s very, very fluid. So if you can work something out the landlord down, but it’s going to give you peace of mind. If you can’t, you understand the process and I’m imagining that things are going to change to respond to the crisis today. We’re just not going to get that out until probably sometime in the, hopefully not so distant future, but not anytime in the near future that’s going to give you a real picture of what it’s going to look like. Yes. So, you know, I think that was a great addition mentioning the SBA loan. I think that, you know, depending on your relationship with your bank or even through places like PayPal, I mean, you can secure a lines of credit, uh, with, with reasonable interest rates, um, if that’s something that you need to do. Not, I, you know, I’m not suggesting that everybody runs out and goes and opens up a line of credit tomorrow, but I do think that, um, exploring what options are available to you is very prudent. Yeah. At this time.

So Amy, if somebody wants to get in touch with you and seek your, uh, advice or even potentially, um, pay for your time as an advisor, as they try to navigate this, what would be the best way for them to contact you?

Sure. I have a website that’s set up specifically for fitness professionals.

It’s www.ingramlaw-fitpro.com. And on the website they’ll be able to find my email address, my phone number, and there’ll be a button to click for them to schedule time with me if they want to do an hour where they can talk to them about whatever legal concerns they have. Um, and they feel like we need some one on one attention. Um, I charge just my one hourly rate, um, which is two 97 and they’ll be able to talk to me and I’ll give them as much information as possible. We can exchange documents where I can actually review your lease for you or whatever other contracts you might have. Um, what if, uh, whatever other questions might be coming out of a legal nature. Does this apply to me? Is this something that I should be concerned about? What options do I have? Um, things of that nature I’m happy to talk to them about. And if they’re in New York state, I can give them more advice. If they’re not, then, um, it would be really a consulting level, but I would be happy to help them. Um, if they just have a brief question, they can always send me an email and again, they can find that on my website and I’m happy to give them an answer to their question if it involves reviewing things or getting more into it. Um, I can’t really do that over an email, but if it’s a, just a quick, simple question based on some of the stuff we talked about here today, then I’m happy to, to send out a quick answer them to if they want to communicate with me that way.

Okay. Well that’s awesome and I appreciate you making the time. I mean, I know this was kind of short notice when I reached out to you, but I think the, uh, the, the input that you had today was wonderful and for all you listeners, hopefully you’ve gained a little bit of peace of mind and you also now have an a, another resource to help you and advise you, um, you know, as you navigate some of this moving forward. So Amy, thanks a lot everybody listening in. Thank you as well. And this is Pat Rigsby signing off on another episode of The Fitness Business School podcast .

Thanks for listening. I’m giving away a bundle of my bestselling books, the ideal business formula, the fitness entrepreneur handbook in the path. All you have to do is go to patrigsby.com/podgift to get it. Also, make sure to subscribe to The Fitness Business School with Pat Rigsby so you don’t miss an episode and you get yourself on the fast track to creating your ideal business.