With the COVID-19 pandemic continuing to have a negative effect on many businesses throughout the country, some are seeking creative ways to avoid paying large expenses, such as commercial rent. In one example receiving a great deal of attention this week, the Hudson’s Bay Company (HBC) has brought a claim against one of its main landlords, Oxford Properties Retail Holdings (Oxford), for failure to run first-class shopping centres. The claim is directed at seven shopping centres across Canada, including two of the province’s largest and most prominent shopping centres; Yorkdale Mall in North York and Square One in Mississauga.
The claim comes after HBC began withholding rent from Oxford at four locations in April of this year. In this new claim, the retail giant also seeks reimbursement for rent paid at the other three locations since that time. HBC is already the subject of an action by Oxford, seeking payment of the withheld rent. HBC, in this most recent action, claims that Oxford is in breach of the lease agreements between the two parties and maintains it is not required to pay rent until the breaches have been remedied. HBC is also claiming for millions of dollars in lost revenue since earlier this year.
Placing Liability for Loss of Sales on Landlord
At the heart of HBC’s claim is that Oxford has failed to maintain a “first-class shopping centre” with high foot traffic, thanks in part to its failure to implement initiatives to assure consumers it is safe to return to malls in light of COVID-19. Among the steps HBC claims Oxford should have taken are:
- Automating doors to reduce the need to touch handles
- Increasing staff to better monitor physical distancing and the wearing of masks
- Improving shopping centre ventilation systems
HBC claims that Oxford’s failure to implement these fixes has “deprived [HBC] of the benefits of the leases and [resulted in] a significant drop in sales”. HBC claims that overall since malls were permitted to reopen in Ontario in recent months, they have seen a 70% drop in sales, which they attribute to the fear consumers have about returning to a shopping environment where they feel they may not be safe. HBC places the blame for this squarely on the shoulders of their commercial landlord.
Daniel O’Donnell, a spokesperson for Oxford, had this to say in response to HBC’s claim:
Oxford has been able to work constructively with hundreds of other retailers across Canada, including HBC’s peers, to partner on rent relief packages and restructure leases…These complaints are clearly without merit and we are confident we will prevail.
It remains to be seen how this case will be handled in court, but if HBC is successful, it would open the door to thousands of retailers across the country to make similar claims, which could have a devastating effect for commercial retail landlords.
Hotspot Regions Returned to Modified Stage 2 in October
While there were several months where malls were closed as part of stricter stages of provincial regulations, they have been open since the summer. Parts of Ontario where infection rates have begun to climb significantly, such as Toronto, Peel and York, have recently been placed back into a modified version of Stage 2. Under this stage, indoor malls remain open, however certain conveniences, such as food court dining, are not permitted.
Given the increase in infections, it is likely that many people are avoiding enclosed retail environments out of an abundance of caution. There is also a requirement that all shoppers and employees must wear face coverings at all times in retail environments, which may also be contributing to people choosing to stay home and perhaps do their shopping online for now.
The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes or real estate matters. We provide practical advice and experienced representation to corporate and individual clients in a wide variety of matters. If you are facing a legal dispute and you’d like to discuss your options with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.