COVID-19 and shopping malls in Quebec: clarity at last!

Written by Aubie J. Herscovitch and Audrey-Ann Trudeau [en]

Recent announcements concerning Guzzo Cinemas, threatened with eviction due to payment defaults resulting from financial difficulties during the pandemic, raise questions about the recurrence of such situations. A recent legal decision on this subject deserves particular attention, as it represents a crucial turning point for commercial landlords and tenants in Quebec.

The COVID-19 pandemic has placed lease agreements in an exceptional situation, often characterized by a lack of clarity for both parties involved. The dispute between Hudson’s Bay Company (HBC) and Cominar Real Estate Investment Trust illustrates this complexity.
HBC defaulted on rent payments from April 2021 to October 2021 due to government measures, including the closure of shopping malls. Despite attempts at negotiation, HBC refused to pay the rents claimed by Cominar, leading the latter to take steps to terminate the leases.

After a period of uncertainty, the Court concluded that the pandemic constituted a force majeure that prevented Cominar from fulfilling its obligation to ensure the peaceful enjoyment of the shopping centers’ common areas. This decision has important implications, particularly with regard to maintenance costs for common facilities. Tenants now have the possibility of obtaining a rent reduction correlated to the fees paid for common areas, in the absence of peaceful enjoyment.

In our view, this decision has several advantages. It clarifies the legal effects of exceptional situations such as the COVID-19 pandemic on commercial leases, which was necessary given the complexity of the circumstances. In addition, it provides an easier-to-understand framework for both parties, informing them of the possible measures that can be taken in the event of force majeure.

As a result, the Quebec real estate market for commercial property will be able to take on a new lease of life thanks to this legal ruling.
It should be noted that this decision is recent, dating from January 16, 2024, and may be appealed. If you have any questions on this subject, please do not hesitate to contact the members of our firm.