HUNTINGTON BEACH : Compensation Lost in Fire, City Rules

Seven months ago, the city planned to pay downtown business owner Michael Chainani for having to relocate his T-shirt shops to make way for a redevelopment project.

But because of a January arson fire that partly gutted three of his shops, he is no longer entitled to the reimbursement, according to a legal opinion by City Atty. Gail C. Hutton.

Chainani said that ruling, which the City Council formally accepted this week, may put him out of business.

Since the Jan. 14 fire torched one of the shops and destroyed the attics of two others, Chainani’s business has dropped by 80%, he said. All of his income now comes from his only remaining shop, next to the now-demolished building that used to house his other shops on Pacific Coast Highway.

Hutton’s ruling cited two previous cases, which apparently indicate that Chainani is an unfortunate victim but is not entitled to city compensation because of it.

Business tenants may be reimbursed for relocation costs only if they are forced to move as a result of redevelopment. Although Chainani’s shops would eventually have been forced out by redevelopment, it was the fire that placed him in his current dilemma, Hutton’s opinion said, so he lost his status as a “displaced person” eligible for compensation.

“It just doesn’t make sense,” said Larry Sakhrani, Chainani’s business partner.

The agency “had agreed that when redevelopment came, we would get compensation. But now, because of the fire, we’re not entitled to any relocation money. We were going to have to move either way, with the fire or without the fire.”

Hutton’s ruling applied to three other business tenants besides Chainani, all of whom rented space in the block bounded by Pacific Coast Highway, Walnut Avenue and Main and 5th streets.

Two of the business owners rented shops in the Jack’s Surfboards building, which is being rebuilt under an agreement between the agency and owner Mike Abdelmuti.

Hassan and Mike Ali, owners of a pub in that building, were to be evicted for non-payment of rent, so they are not entitled to compensation, Hutton said.

Leia Cha, who ran a beach accessory shop in Abdelmuti’s building, has since moved across the street to the Pierside Pavilion complex. Because of a clause in Abdelmuti’s contract, she will not receive reimbursement for moving costs, Hutton said.

Diane DeChellis, owner of a novelty shop in the demolished building, is not entitled to reimbursement, Hutton said, and is looking for a new location.

Abdelmuti’s building is being rebuilt as a three-story structure designed to include an expanded Jack’s Surfboards shop, plus offices upstairs.