The Bay location in Penticton.

Image Credit: Google Maps

Canada's oldest company has agreed to pay 50% of its rent in 2021 to a Penticton shopping centre amid a legal battle.

In a consent order filed Jan. 5 in the Supreme Court of B.C., the Hudson’s Bay Company agreed to pay 50% of its ongoing rent amounts as they become due under the store and Cherry Lane Shopping Centre’s lease agreement, which totals $38,489 for 2021.

The other half of the rent will be held in a Bay trust account which is subject to a subsequent agreement or further order of the court, according to the order.

The Hudson’s Bay Company filed a lawsuit against Cherry Lane Shopping Centre Holdings Ltd. in November 2020 in the Supreme Court of B.C., the same day the shopping centre filed a petition to evict The Bay from the mall.

The shopping centre said in a response to the lawsuit that the tactics used by The Bay are “false allegations to justify non-payment of rent that is duly owing.”

READ MORE: The Bay suing Penticton's Cherry Lane Shopping Centre as mall tries to evict

“Cherry Lane has become concerned about HBC’s financial status given its failure to pay rent for its Cherry Lane Store and numerous other stores throughout Canada. Recent sightings of low stock levels in HBC’s Cherry Lane Stock have greatly amplified Cherry Lane’s concerns,” according to Cherry Lane’s response.

The Hudson’s Bay has been operating at the mall’s location since 1996. The company must pay an annual rent of $936,437 to the mall, according to court documents. 

The Hudson’s Bay Company owes $733,286 to the mall and refuses to vacate the property after being served a demand for possession letter Nov. 10, according to the shopping centre.

READ MORE: Hudson's Bay permanently laying off more than 600 workers across Canada

As of March 2020, Cherry Lane Mall alleges that The Bay has not been paying the rent at its location, nor at other store locations. 

Other similar lawsuits have been filed by The Hudson’s Bay Company to various landlords across Canada. Last week, the company announced it would be laying off more than 600 employees but a response from the Bay via email said no store closures were planned for Kelowna, Penticton, Vernon or Kamloops.

READ MORE: HBC sues landlord of Yorkdale, Square One claiming failure to run 'first class' malls

In The Bay’s lawsuit, it alleges the shopping centre took no meaningful steps to respond to the “changed circumstances and needs of HBC and other tenants as a result of the pandemic.”

The suit alleges the shopping centre insisted on the full rent payments when the value of the spaces they were providing had “drastically declined,” and after the reopening of malls, the landlords refused to adapt their shopping centres to the pandemic and that it failed to maintain standards of a “first-class regional shopping centre.”

The Bay’s lawyer Robert Cooper said via email “there is no direct connection between this action and the situation with other stores but they relate to the common circumstance of how to manage retail operations during the pandemic.”

In the shopping centre's petition, Cherry Lane is seeking a declaration that the tenancy of Hudson’s Bay Company at the mall's location has been terminated. The Bay opposed the petition, Dec. 7, 2020.

The shopping centre also alleges in its response to the suit that The Bay has made more than $752,799 from the Cherry Lane location, not including online sales.

Vacancy rates at the mall during 2020 were extremely low and that most of Cherry Lane’s tenants had reopened by June 2020 and that weekly foot traffic throughout November 2020 was only down between 15-26% compared to 2019 numbers, according to the mall.

The Bay’s lost profits were unrelated to the mall as they’re inconsistent with the sales figures reported by other tenants, according to the shopping centre.

The mall also alleges The Bay’s decline in sales is because it's no longer devoting “necessary resources to retail sales” and that a news release from the Hudson’s Bay has said it is shifting focus away from retail sales to real estate development and online orders, according to the mall’s response to the suit.

The Hudson's Bay is seeking an order relieving the company of any forfeiture of the lease agreement with the shopping centre, and an injunction preventing Cherry Lane from terminating the lease. 

An interlocutory injunction hearing will be scheduled in March, 2021, in Vancouver, according to the consent order.

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