filing bankruptcy in Canada retailer bankruptcies and co-tenancy introduction I read one article and watch over this past weekend. The article was about the large US jewelry and accessories retailer. It’s 2018 filing the retailer shed almost. Unfortunately, that was not good enough to save them. They have now filed again in an ounce. They are closing their remaining stores. Canada incorporated in town center Incorporated 2019 ons 3740 This decision of the Ontario superior court of justice was released on June 21st, 2019. This case involves a retail tenants right to put into playwrights and as a result. What is co-tenancy provision? simply put Alcoa Tennessee clause in retail lease agreements permits retail Shopping Center in produce traffic for themselves and the other tenants. Those types of tenants are called anchor tenants. A retail tenant agrees with a landlord to specific lease terms, especially the amount of rent to be paid. Commercial tenant agrees to those terms expecting a certain level of traffic in the mall or shopping center. Anchor tenants leave a co-tenancy provision allows at 10 to decide if it wishes to remain or not. If it decides to stay then the lower amount of rent to be paid when a co-tenancy provision comes into play as meant to compensate the tenant for the lower traffic volume. the players Navy is a famous retailer of clothes. Run stores throughout Canada the United States and worldwide. Old Navy corporated gap which is headquartered in San Francisco, California Operations and stores are owned and operated by Gap. Gap is the biggest specialty retailer in the USA. It is roughly 3,700 locations globally consisting of 240 shops in malls in strip / powers that are throughout Canada. also owns the Banana Republic brand Are the three Banana Republic is taken to be on the top end of the Gap household at brand names level affordable or budget brand name? bored in town center Incorporated in Toronto, Ontario Among others it owns and runs The Power Centre situated Atkinson opportunity East the center. the Old Navy Canada lease The Old Navy Canada lease of course had many terms in it. It included a co-tenancy provision. Klaus name the key retailers key shops and their square footage The key shops are the following retailers with the flooring area indicated. key shops square footage Cineplex 68000 SF Rich 6545 SF globo shoes 12084 SF 6548 SF Although the co-tenancy Claus at various alternative for the purpose of this blog. It is important for us to know that the code section consists of three main parts. The number of key shops to a gross leasable area test and 3 a requirement for the landlord to advise the tenant in writing when a co-tenancy failure has actually happened. simply put Difficult tenancy provision kicked in Old Navy Canada have the option to either. shut down at store leave on proper notice to the landlord or remaining issue remained unresolved the danger leather bankruptcy Leather danger was a prominent Canadian items. landlord entered into a lease with danger for a preliminary 10-year term from June 10th 1999 to June 9th 2009 Yours lease was renewed in 2009 and a deer continue to be a runner of the center up until 2016. De Vere’s premises of 6548 square feet of space was out of a total of 285425.37 square feet of gross leasable area in the center represent 3% of the gross leasable area. Then there was a public company. Its shares were traded on the Toronto Stock Exchange. Nonetheless public filings show the danger had been battling Financial issues since 2014. unfortunately Negative operating results were thought to have been attributable to a change in the preferences of the buying public. There was a sentiment among some people to stop wearing leather items and apparel. on February 4th, 2016 SC 1985 C B3 certainly He was publicly reported in the Nationwide media. At the time of the north filing operated 84 stores throughout Canada. Every one of the shops was least. Ultimately, nonetheless. Dandy are determined not to submit a proposal and instead made an assignment in bankruptcy. A receiver was also appointed over danger to liquidate the shops. continue running in 2016 Definitely every one of the occupants at the center including the shop would have recognized the danger was conducting going out of business inventory sale. It was unclear if anyone from Old Navy, Canada. The various other retailers at the center. We’re growing. The center’s construction had long been completed in the time of danger is insolvency. Cineplex was drawing. The remaining stores in the portion of the center in which the Old Navy shop was located across the parking area from the danger Outlet. We’re all operating. There was no proof. They were not operating well and profitably. dispute The landlord the closure of daycare have no material impact whatsoever on traffic at the center or on Old Navy sales. Given its interpretation of the co-tenancy requirements the landlord had actually occurred. Therefore did not provide any notice to the Old Navy care of Gap. By September 15th 2016 Gap asserted. They had ultimately found out about Davio’s filing bankruptcy in Canada. Old Navy issued a notice of co-tenancy failure to the landlord bankruptcy constituted release As a result exercising. It’s right above the lease to pay the Lesser rent to the landlord retroactive to May 1st, 2016 the landlord or tenant see failure as a result of the closure of danger in stated that if the current lease was not paid the landlord would declare Old Navy Canada to be in default. Various Communications took place between lawyers for the landlord and Old Navy Canada. discussions who was hitting with various potential retailer One such retailer was a global party supply store chain. Another that ultimately entered into a lease and began operating in the center was a retailer of pets and pet products. Old Navy, Canada It also stated that it got a corporate policy not to be located in shopping centers that had a pet retailer. It turns out that assertion was untrue. landlord producer There is an Old Navy store operating shopping center along with a PetSmart retail outlet. This contradicted Old Navy Canada is in the gaps position on suitable co-tenants. The landlord and continue to agree to disagree. Continue to pay the normal rent, but under protest. Ultimately, Old Navy Canada launch the litigation against the landlord looking for reimbursement of rent. the Court’s decision The court went through a complex analysis. After careful consideration of the lease the issues involved in personal case law the judge decided. Old Navy’s interpretation of the provisions of the lease for the coat He accepted the landlord. It was not sensible for Gap. / Old Navy to anticipate to be able to occupy the facility for the rest of it. commercially reasonable summary What this case shows is the bankruptcy of the retailer may very well be right. However, it is not the bankruptcy. That is the determining Factor. weather As seen in this example, the breach was not just because one of the key shops no longer operated. The terms of the Old Navy Canada has also forced the gross leasable area calculation to be performed. Is the gross leasable area test was not met then there was no breach. Is your company experiencing financial problems? Are you on the brink of insolvency?