Rent obligations in a pandemic – new tricks/ desperate efforts

MACs may be all the rage in the Covid times for getting out of M&A deals, but are there any tricks for retailers trying to getting out of rent obligations?

This week’s Canadian Business Law Blog has reported on an interesting “doing business in the midst of a pandemic” issue. Hudson’s Bay Co. (HBC) filed a lawsuit against Oxford Properties Retail Holdings, the landlord of several of its department stores, alleging a failure to operate and maintain “first class shopping centres.” HBC argues that Oxford “has refused to deliver suitable premises since reopening after COVID-19 shutdowns”…”and no longer provides a retail environment viewed as safe or attractive by the public”. HBC is not only seeking a declaration that it does not have to pay rent until these issues are fixed by the landlord but also asking for the “disgorgement” of rent paid to Yorkdale Shopping Centre Holdings Inc., Square One Shopping Centre Holdings Inc. and other Oxford subsidiaries since April of this year.

The other side of the story is that HBC has not paid rents owed to Oxford for seven months and according to Oxford, “recurring attempts to engage the company in a constructive dialogue were repeatedly ignored” by HBC. Retail stores have struggled to pay rent in the post Covid world. In the UK, many high street companies are using restructuring and other insolvency processes to deal with the situation. HBC seems to have decided to find other avenues to handle its non-payment of rent.

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