Judge rules in favour of landlord Oxford Properties over mall dispute with HBC

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An Ontario court has ordered Hudson’s Bay Co. to pay its outstanding rent at a mall location in Richmond Hill, marking another blow to the department store chain that withheld lease payments because of the pandemic’s retail closings.

In a Thursday ruling, Ontario Superior Court Justice Cory Gilmore said HBC was a model tenant until the pandemic hit, but said the retailer’s decision to withhold rent from landlord Oxford Properties Group was a grave breach of its lease terms. HBC is “not entitled to any abatement or reduction of rent,” Justice Gilmore said.

Since the pandemic started, HBC has been battling landlords across Canada and the United States, refusing to pay rent at certain locations after government restrictions forced malls and non-essential retail to close their doors. The owner of the department store chain has been trying to reinvent itself amid a global shift to e-commerce, turning its Saks Fifth Avenue and Saks Off 5th digital operations into separate businesses. The company recently sold minority stakes in those digital operations, using the proceeds to improve its e-commerce offerings and to strengthen its balance sheet.

Thursday’s ruling comes one week after the Supreme Court of British Columbia ordered HBC to pay all the rent in arrears for the store at the Cherry Lane Shopping Centre in Penticton.

Justice Gilmore said the Ontario case raised the question of whether the court should intervene and change the lease to allow relief from forfeiture or rental payments in the face of the health crisis, or whether the court should uphold the terms of the lease.

In the end, Justice Gilmore said the court would not “rewrite private contracts between the parties even in the face of unforeseen and disastrous circumstances,” but also said Oxford should not lock HBC out of its Hillcrest Mall location for missed payments.

“It does not benefit either HBC or the landlord to disallow re-entry,” she said in the order, given that HBC is the major tenant that is supposed to attract shoppers to the mall. “During this period of gradual reopening, Hillcrest needs model tenants, not more vacancies.”

Justice Gilmore ordered HBC to immediately repay Oxford for the first seven months of unpaid rent and said the remaining eight months of unpaid rent had to be paid by January, 2022.

Until June, HBC has been paying 50 per cent of its rent as part of a previous court order that allowed HBC to remain at Hillcrest after it had withheld full rental payments for months.

Thursday’s ruling provided a schedule of monthly lease payments, increasing the amounts in co-ordination with the province’s reopening. It said by March, 2022, HBC will have had to made Oxford whole. The order does not provide the total amount rent owed. Oxford would not provide the amount.

In an e-mailed statement on Friday, HBC spokesperson Tiffany Bourré said that the company’s leadership is disappointed in the decision.

“This is another example of non-essential retail bearing the brunt of government lockdowns in Ontario and an approach that is arbitrarily creating winners and losers,” the statement said. “HBC maintains that retailers and landlords should equitably share the burden of the pandemic, and we are reviewing all our available options from that perspective.”

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