Businesses and their landlords are dividing responsibility for rebuilding, case by case

John Mayfield, owner of Julio’s Cantina in Montpelier, is busy coordinating flooring, electrical, plumbing and the reconstruction of his restaurant with his landlord, who also happens to be his insurance agent.

Mayfield had to strip everything to the subfloor because the July floods filled the first floor with 3 feet of water, and flooded the basement to the ceiling.

As he spoke to VTDigger on the outdoor patio of the restaurant last week, sheetrock was being installed, electricians and plumbers were working on the utilities, and the bathroom areas were being reworked to make them more accessible.

But not everybody’s landlord is an insurance agent.

As Vermont businesses struggle to recover from the devastating floods, does responsibility for rebuilding rest with the business tenant or the landlord? It depends, business owners, landlords and contractors told VTDigger.

“Commercial leases are completely a creature of contract in Vermont,” said Nicole Killoran, director of Vermont Law and Graduate School’s Legal Laboratory. “There’s no default legislation or regulation to dictate what goes in a commercial lease.”

Some leases spell out who is responsible for reconstruction after a disaster, Killoran said, and some are silent.

“It’s a mess,” Killoran said.

Nicole Whittemore, a landlord in Johnson, another town devastated by the July floods, has worked out her own arrangement with her business tenant, THC Sisters Dispensery.

Neither Whittemore nor her tenant had flood insurance to cover the damage done by the Lamoille River when it spilled over its banks. The water filled the basement and rose to 8 to 10 inches on the first floor.

So after the flood, Whittemore and her tenant made an informal deal. She would provide the materials. He would provide the labor.

“What they couldn’t do, my husband and I would do,” Whittemore said. “I have to be good to my tenants. If they pay their rent, I’m good to them.”

After the flood, she and her husband ripped out the old floors and dried the space out. Then the tenant brought in two carpenters, who were working in the store when VTDigger visited Thursday. Whittemore had just returned from the lumberyard with material for them.

Whittemore expected that her tenant would be able to reopen within a month.

In another part of downtown Johnson, Norm Stanislas was fixing up Sterling Market, a grocery store the entire community depends on. He said he had never seen flooding so deep.

“When I arrived on site as the water was finally receding and I looked into the supermarket, all the gondolas (shelves) are tipped over, all the refrigeration and freezers are all tipped over, mangled up and all over the place, and at the liquor store, the crazy part was the bottles were still on the shelf even as they were under 7 feet, 8 inches of water,” Stanislas said.

The landlord hired Stanislas, a general contractor, to do all the necessary work on the liquor store, the supermarket and the post office, which all share the building.

Who’s paying the bills?

At Sterling Market, landlord and tenant were negotiating how they would move forward with rebuilding, Stanislas said.

“There are no two deals that are always the same,” said Stanislas, who has worked on rebuilding after floods for more than 40 years.

For instance, his client owns the premises but not the businesses. He said he was hired to empty out the supermarket — all the shelving, the food, the condensers and the coolers. In addition, he has been gutting the walls to the point where they can be dried out and the spaces disinfected.

The tenant has insurance for the personal property and equipment inside the store, he said. The landlord has insurance for the shell of the building, the walls, the floors, the ceilings and other structural components, such as doors, and systems such as heating, ventilation, air conditioning and lighting.

Specifics on who must fix what are determined by the lease between the landlord and tenant, he said.

At Vermont Law’s Legal Laboratory, Killoran said she sees many leases that say the landlord has 90 days to assess damage and 180 days to repair, which could keep a business out of business for nine months. For a business on the margins, that could be curtains.

The Legal Laboratory offers 10 hours of free legal help to small businesses affected by flooding.

Killoran said Thursday that 13 or 14 small businesses had sought help thus far. She said the clinic also plans to be at the Barre Farmers Market from 3:30 to 6:30 p.m. next Wednesday to answer questions from business owners.

Back at Julio’s, Mayfield, who had flood insurance, is using it to replace the contents of the restaurant, such as refrigeration, fryers, chairs and $20,000 worth of food. His insurance covers a small amount of rebuilding to cover most of replacing the hardwood floors, wall coatings and the bar (which is largely intact).

The building owner’s flood insurance covers the rest, he said.

“I’m blessed,” Mayfield said. “I have Steve (Everett) for a landlord. He has flood insurance. I don’t know his limits, but he and I are working it out.”

For instance, tearing out the flooring and replacing the plywood subfloor is on Everett, Mayfield said, but the hardwood floor on top is on Mayfield. Everett will put the sheetrock walls back up, Mayfield said, but Mayfield assumes responsibility for installing new beadboard.

Some of his employees are collecting unemployment, he said, but the vast majority of his full-time staff is working on reconstruction. “They are learning how to do plywood and sheetrock and building walls,” Mayfield said.

And on this day, some of Julio’s employees were across the street, helping out at Capitol Grounds Cafe.

In all, seven people, plus the plumber and the electrician, are working on the restaurant, Mayfield said, including a retired state trooper who does carpentry on the side and is a friend of the landlord’s handyman.

The insurance adjusters for his and Everett’s insurance policies have written their reports, Mayfield said, but he had not yet received a check from his insurance company. In the meantime, he is drawing on cash reserves to pay for the work.

He’s fortunate that “business has been stellar” since April 2022, he said. After the pandemic waned, “people want to be out having a good time.”

Given its history, Montpelier is likely to flood again, so an electric panel in the basement is being moved up to the first floor and raised 4½ feet above the ground, Mayfield said. Nearly 95% of the things he stored in the basement will have to come out.

The key to working with a landlord, Mayfield said, is communication.

“I talk to him,” Mayfield said. “If I’m going to need to spend money on something that I think is on his side, we communicate.”

Mayfield wasted no time in starting to rebuild. He said he contacted electricians, plumbers and cleaning crews before the flood hit. The day after the flood, he ordered food, figuring it would take some time for it to arrive and he’d be ready for customers to return.

“I didn’t realize just how bad it was going to be,” he said.

Correction: An earlier version of this story misstated changes being made to Julio’s Cantina to prepare for future floods.

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VTDigger's economy reporter. More by Fred Thys