Canadian Lawyer

22 A p r I L 2 0 1 5 w w w . C A N A D I A N L a w y e r m a g . c o m selling its leases is the fit of the incoming tenant or tenants to the shopping centre. Any assignment of the lease needs to respect any existing covenants. But also other leases could be tied to Target's. Target may have served as a magnet, attracting other stores to the shopping centre. Other retailers' agreements to lease in the same centre might well hinge on Target's presence there. The fear is the departure of one could result in the departure of others. Among the few possibilities for mul- tiple Target locations are Wal-Mart and Loblaws, as both chains continue to expand in the Canadian market. But a supermarket already existing in the cen- tre may well have a restrictive clause, preventing other grocery stores from set- ting up shop in the same location. As a grocery chain, Loblaws could prove to be a conflict in such a scenario, as could Wal- Mart, which now has substantial food sections. Landlords, fearing conflicts with other tenants, might well buy out the leases to maintain control. "The landlord is, in effect, negotiating for all the other stores," says Daoust. One option is to subdivide the space to attract several different shops once occupied by Target. That approach might actually be advantageous for the centres, says Michael Leroux, the leader of Richards Buell Sutton LLP's commercial real estate group. "Those locations are sometimes beneficial to the landlord," he says. Often it all comes back to the original lease. In addition to ensuring the backing of the parent company where possible, Leroux suggests letters of credit be includ- ed and that there be sufficient security deposits and additional rents at the outset. Once a business is in trouble, it's tough to recover any money. Negotiating a termi- nation clause in the lease is also an option, although a landlord is more interested in a business planning for success, not one planning for possible demise. If the relationship between the land- lord and tenant is strong, there is always the possibility of negotiating terms to get out of the lease for a tenant that is having trouble paying the rent. "That means the tenant has to go cap in hand to the land- lord," says Leroux. Much of the landlord's stake lies in leasehold improvements conducted on the space for the tenant, adds Michael Kennedy a partner in the corporate/com- mercial group of Patterson Law's Halifax office. Those expenses are typically built into the tenant's rental payments. One option is for the landlord to separate the improvement costs from the rent by offer- ing a loan instead. But that still leaves the landlord as an unsecured creditor in the event of insolvency. Kennedy likens CCAA court-moni- tored proceedings as something close to receivership, leaving landlords — often the largest creditors — with limited rem- edies unless they've secured financial backing. "Most of the landlords would never have had a thought [Target would] go insolvent," says Kennedy. "Unless you have monetary controls outside of the lease . . . there's nothing you can do." If such a large company can end up insolvent, the lesson is that nothing is too big to fail. As such, much hinges upon r E A L E s tAt E By combining comprehensive legal content with effi cient ways to search and organize results, WestlawNext Canada gives you confi dence you've found the most relevant documents. That leaves more time to fi nd new business, or better service the clients you already have. Discover more at westlawnextcanada.com 00227MO-A48603 IT'S THE CONFIDENCE YOU NEED TO STOP SEARCHING AND START DOING WHAT'S NEXT.

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