One could liken Dianna Carlin to David — and her landlord, Thor Equities, which evicted her in a lease dispute, to Goliath. Except in this case, David fought a losing battle. Sometimes, the giant wins.
Carlin, a boutique owner in Coney Island also known as Lola Staar, was given the boot after she challenged a confidentiality clause in her commercial lease renewal that prevented her from speaking against Thor Equities’ plan for Coney Island at any public forum.
Around a dozen other commercial tenants signed the lease for one more summer season, probably without reading it, said Carlin. She moved out last month and will seek space near her old store.
Increasingly, developers are requiring tenants to sign confidentiality agreements for their projects. The new trend is to stop tenants from speaking in public about any plans at controversial proposed development sites.
In the case of Thor Equities, the company’s principal, Joe Sitt, envisions a $1 billion makeover of Coney Island with retail, a hotel, a water park, an entertainment venue, residential units and perhaps a casino. All of this, however, is contingent on zoning approvals.
Confidentiality clauses
In the past, confidentiality agreements among landlords and tenants were generally confined to situations that forbid the tenant from revealing the terms of a buyout or other financial settlement, said Neil Garfinkel, REBNY’s real estate law expert.
However, at a time when development projects face concerted, organized opposition — thanks in part to blogs, which give anyone an electronic soapbox — it makes sense to buy the silence of the people most directly affected by a development: the ones who are displaced.
“I’ve never seen this before,” admitted Garfinkel. Given that projects are becoming more competitive, he said, the practice will probably become more frequent. But he stressed that both sides in the equation are making concessions — and that it takes two parties to sign a lease agreement.
During the 1980s, when Forest City Ratner Companies displaced tenants during the construction of MetroTech Center in Downtown Brooklyn, it required tenants to sign such clauses.
Forest City Ratner has included covenants in its settlements with displaced tenants who occupy the Atlantic Yards footprint that require recipients to actively promote the project, making it more restrictive than non-disclosure agreements in the past.
The company does not comment on tenant relationships, said a spokesman.
In the Bronx, members of a task force overseeing redevelopment of the Kingsbridge Armory (see Builders head to city’s armories), which includes a U.S. Congressman and a State Assemblyman, balked when the city’s Economic Development Corporation asked them to sign confidentiality agreements barring them from talking to anyone outside the task force until the process is completed.
Coney Island confidentiality
The Coney Island issue became a cause c l bre among anti-development forces as Thor moved into a position that would allow it to alter the character of Coney Island forever. The company has already spent $100 million to piece together a 13-acre parcel of boardwalk property between KeySpan Park, home of the minor league Cyclones, and a weather-beaten amusement park.
Thor offered its tenants in Coney Island the opportunity to stay on for one year. In return, the business owners must remain silent about redevelopment efforts that “may generate opposition from other landowners, businesses and certain members of the public” for four years after signing, according to lease provisions provided by Carlin.
Violators would pay $10,000 to Thor for each infraction.
In addition to stipulating that tenants promise not to “engage in any activities intended to oppose or address the redevelopment or rezoning of Coney Island,” including public speeches, rallies, parades or marches and the gathering or signing of petitions, it also forbids them from making “any statement to any person concerning or relating to the redevelopment activities of [Thor] or its members or affiliates.”
Long-term plan
For years, Thor has assembled a checkerboard of lots from longtime owners who barely maintained their properties and were holding out, waiting to for a buyout, said Carlin, who has operated her store for the last seven years.
Thor said confidentiality requirements are necessary because the developer is providing information to bought-out tenants that it does not want made public.
“Thor offered all of the tenants, licensees and operators on the Boardwalk the opportunity to remain for an additional season and to be a part of the permanent project moving forward,” said Lee Silberstein, spokesman for the company. “In the process, it became clear that Thor would be sharing confidential information with them and therefore decided the confidentiality clause is needed.”
Winning the PR war
David Brooks, vice president at Beckerman Public Relations, which handles many real estate clients, noted that developers further their interests by preventing displaced tenants from appearing before any government agency considering redevelopment proposals. He pointed out that “the most relevant potential objectors didn’t object.”
But a confidentiality clause can backfire if the public perceives it as a strong-arm tactic by the developer, Brooks said.
“These days, developers tend to wear the black hat, and a confidentiality clause plays into the hands of those who want to charge them with railroading people,” said Brooks.
“Developers always face an uphill battle in the PR war, but for them, the more important target is whatever city agency has to give them the thumbs up or thumbs down. Both sides made a business decision that they think makes sense and, at the end of the day, this will be a footnote if any major project comes to fruition,” he said.