Water Mill Tenant Battles Cantor Fitzgerald In Court

Two years ago, at the beginning of the summer season, Tim Danser and Dave Campana leased a retail space on the north side of Montauk Highway in Water Mill.

Their store, a clothing and design boutique called Prince of Scots, would occupy the ground floor of the old two-story house, which also came with a kitchen, laundry room, office and an apartment on the second floor—providing an ideal live-work environment.

“Ten million people drive by here every year,” said Mr. Danser, who signed a five-year lease for roughly $5,000 a month for the premium spot. “Right across from the windmill and the green, it’s one of the most visible locations. Everything was perfect for marketing our brand.”

What seemed like a perfect fit to begin with has devolved into a “nightmare” for Mr. Danser and Mr. Campana over the past two years. They are now engaged in ongoing legal disputes with the owner, who is seeking more than $75,000 for unpaid rent, a claim the store owners feel is completely unjustified.

Cantor Fitzgerald, one of the largest financial services firms in the world, had purchased the property in 2008 for $2.2 million. The company also owns the property two doors down, which used to be one of its office locations, but has been vacant for more than a year.

Since Cantor bought 700 Montauk Highway, where Prince of Scots is currently located, the company’s affiliate, BGC Partners, expanded into real estate services by acquiring Newmark Knight Frank and Grubb & Ellis in April 2012 to form Newmark Grubb Knight Frank. Renting 700 Montauk Highway to Mr. Danser was one of the first transactions under the new name.

The lease started at the end of May 2012, and Mr. Danser had hopes of opening up shop the following month to capitalize on his freshman summer season. “We wanted to throw garden parties in the front courtyard and begin engaging with the community,” he said.

“There was a lot of work to be done on the house, so we prepaid the first year’s rent to cover some of it,” Mr. Danser said, “just to show we were good guys.”

However, problems started the first week of the lease, when Mr. Danser went to the Southampton Town clerk’s office to make sure his new store sign was legal. He was told that he could not occupy the building, because there was no certificate of occupancy for a commercial operation.

When a building inspector came by to check the place out, he noted that the renovation work that had been done since Cantor purchased the property had been undertaken without the proper building permits in place. The laundry room and the kitchen were not legal, fire codes were not met, and the second-floor apartment had no rental permit, according to Mr. Danser. The tenants were occupying the space illegally and could be fined as much as $1,000 a day.

Mr. Danser said he believes that it was the responsibility of the landlord to provide a space that could be legally occupied according to how it was advertised.

In September 2012, Mr. Danser moved out to demonstrate to the town that he and his company were not residing in or using the building for a retail operation until Cantor had gotten the necessary permits and brought the building up to fire code. Mr. Danser jokes that he is writing a book about this time in his life called “Homeless in the Hamptons.”

By December 2012, the landlord had obtained the necessary permits. Mr. Danser moved back in—but he wants to be compensated for the business he lost by not being able to open his store at the commencement of the lease. “Those summer months are absolutely crucial for business out here,” he said.

Mr. Danser presented several options on how to resolve the issues, the simplest of which was a reimbursement for the $60,000 he’d prepaid and a rent abatement plan for the loss of floor space in the apartment.

“We thought we were going to work this out with the landlord and the Realtor,” he continued. He eventually sent a letter to appeal to Howard Lutnick, CEO of Cantor Fitzgerald, which was met with a response from a representative who said that the details of the lease relinquished responsibility on the landlord’s part, particularly clauses stating that “before entering into the lease, the tenant has made its own observations” of the condition of the property and will rent it in its “as is” condition.

A representative from Cantor Fitzgerald could not be contacted for comment.

Mr. Danser, who is representing himself, has been to court six times already and is now facing $75,000 worth of charges from Cantor against him for withholding rent since June 2013.

“The town won’t see the case,” he said. “We’re going to have to go to [State] Supreme Court, where our chances won’t be as good. There won’t be a jury, and Cantor has huge legal teams.”

As the owner of a small store who is representing himself in a lawsuit against a major financial corporation, and if what seems to be the litigious nature of Cantor’s CEO is any guide, Mr. Danser may be right to be a little nervous. Mr. Lutnick has filed two federal lawsuits against three Southampton Town municipal boards—the Zoning Board of Appeals, the Planning Board and the farmland advisory committee—for the combined sum of $56 million. Mr. Lutnick wanted to build a basketball court and an 11,200-square-foot barn on his 40-acre property in Bridgehampton, and town officials turned him down.

Prince of Scots will be vacating its present location in the coming months and will try to find a new spot for the store in Southampton Village in the future.