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Mercer Island gym owner unable to pay rent due to COVID, being sued for $350,000

A Mercer Island fitness studio owner assigned the lease of the studio to an employee, while remaining on the lease, and as a result of the COVID pandemic wound up being sued by the large managing property company due to unpaid rent. She joined the Dori Monson Show to recount what happened.

“I kept in close contact with this person and she’s a very good friend of mine, and still is. … Business was going great, and growing. And then, of course, last year we had to shut down for two weeks, and we all know what happened. So without going into details, she had tried to negotiate with the landlord, who happens to be a very large real estate investment trust that’s located out of California,” Michelle said.

Even with the small capacity opening, business was not sustainable, and the ownership company was unwilling to budge from its position.

“It wasn’t getting a great response,” she described. “They basically were getting back to her and saying, ‘Well, we can differ rent for you or we can discuss different rent deferment but we are not in a position to renegotiate your lease.’ We were able to reopen in a small capacity in the summer of last year. But because of the square footage requirements, that would have meant that she would have only been able to have maybe three or four people in class — it just wasn’t financially workable.”

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The situation only got worse and the business had to close, and because Michelle was still technically on the lease, she become liable when a lawsuit emerged.

“I had to stay on the lease but was able to assign it. But I was still held liable. And I knew this,” she said. “None of us could have predicted that this pandemic would happen, and it was not our intent to walk away. It was certainly not my friend’s intent to walk away at all — she tried everything she could to get them to renegotiate her lease from her. She lost more than half of her clients within the first 60 days.”

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“She had said (to the property company) ‘if you don’t agree to my terms, I have will have no choice but to close.’ So she did move out at the end of November, and we received a letter in December, right before Christmas, that said that we were in default,” she said. “We had essentially abandoned the premises and defaulted on our lease, and that if we could pay them $250,000 by January 1, that they would drop everything. Well, we didn’t have $250,000, and this was December 22 that they sent this letter. So then on January 17, that was when they served the lawsuit to us.”

The full lawsuit is for $350,000. Michelle says she is working several jobs to try and deal with the legal fees from the lawsuit, and her lawyers sent an email pleading with the company to drop the lawsuit, but to no avail.

“They did respond, and they said, ‘My client has every intention of prosecuting this case to its fullest to all liable parties.’ So they have no intention of dropping it. Best case scenario, as I understand it, is they could give a judgment of default, which would follow me for 10-20 years, based on how long they decided that would last,” she said.

“The other option is to file bankruptcy, but that’s not even a guarantee,” she added. “I am working several jobs because I’m trying to fight this, and they have hired one of the most high-profile law firms in town.”

Listen to the Dori Monson Show weekday afternoons from noon – 3 p.m. on KIRO Radio, 97.3 FM. Subscribe to the podcast here.

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