Hudson’s Bay Co. has been granted an interim order to re-enter its Coquitlam Centre location only days after it was served an eviction notice for defaulting on its rent.
Only five days after the Coquitlam HBC location had been shuttered, by Wednesday, Nov. 26, it had re-opened for business following a ruling handed down by B.C.'s Supreme Court.
In her ruling, Justice Shelley Fitzpatrick ordered the iconic retailer to pay 50% of the rent it owed to the landlord and 50% of rent going forward. The other half of unpaid and future rent is to be placed in a trust fund held by HBC’s lawyers until the matter is resolved in the new year.
“Hudson’s Bay is grateful that the Supreme Court of British Columbia has recognized the extraordinary challenges of the global pandemic and how the burden can be shared fairly and lawfully,” said HBC president and CEO Ian Putnam in a written statement.
“The majority of Canada’s leading landlords share this view and have reached mutually acceptable agreements with us.”
Morguard Investment Inc., which runs the mall and its subsidiary Pensionfund Investment Ltd., was not immediately available for comment.
HBC has been at the Coquitlam Centre location since 1979, and in the last 41 years, it claims to never have missed a rent payment. But that all changed when the pandemic hit in March.
On March 17, HBC closed its 120 stores across Canada, including at Coquitlam Centre. Court documents show that the store's sales bottomed out in April to less than one per cent of 2019 levels. And while that improved slightly as the summer wore on, by October, sales remained roughly 42% below last year’s monthly total.
The retailer just celebrated its 350th anniversary, but despite its staying power, the pandemic has strained the company’s viability and this isn’t the first time HBC has refused to pay its rent.
Court records show the company has leases valued at $20 million a month and hasn’t paid any rent to eight landlords across Ontario, Quebec, British Columbia and Florida.
The legal wrangling highlights the challenges facing both commercial landlords and retailers as foot traffic in brick-and-mortar stores continues to lag after widespread closures last spring.
How the termination of the lease in Coquitlam will play out is not yet clear.
In arguments that echo a similar case against another Toronto-area mall, HBC claims Coquitlam Centre has failed to maintain a “first class” shopping centre as stated in the lease.
That includes not upgrading the HVAC system to reduce the transmission of COVID-19, improving pedestrian control, upgrading washrooms and increasing the number of people responsible for health and safety at the mall, claims HBC.
HBC added that the landlord did not to provide “an environment that attracts substantial numbers of customers and encourages them to stay at the centre for an extended period of time” nor had it taken steps “to adequately market the shopping centre to respond to COVID-19.”
According to court documents, HBC claims that in terminating the lease agreement and seizing control of the Coquitlam Centre retail location, the landlord failed to give notice, putting 106 employees “at risk.”
“COVID-19 is a once in a century type event,” reads court documents filed this week. “It was as unexpected as it has been economically disruptive.”
HBC claims it shouldn’t have to pay rent until the landlord has resolved the alleged breaches, or that it should be compensated for its lost sales because of those breaches.
In the end, the Justice Fitzpatrick's interim order found both sides should bear a portion of the financial fallout until the case can be heard in full.
The interim order will expire Jan. 22, 2021, unless HBC gets a renewal of the order allowing further relief or a more permanent solution is found.
As the litigation moves forward, Putnam said the company “will continue to ask for a fair sharing of the burden of the pandemic with respect to this lease and each of our other leases across the country.”