The Gap sues Inglewood mall owner, seeking to void lease

Lawsuit against Haagen Company is latest filing by retail chain against landlords over Covid closures

Gap sues mall REIT Haagen & Co. regarding rent (Credit: iStock)
Gap sues mall REIT Haagen Company to void its lease at Village at Century. (Credit: iStock)

Six months into the pandemic, the Gap is still refusing to pay rent at any of its stores and is still suing its landlords — big and small — over that refusal to pay rent.

In the latest litigation, the Gap and subsidiary Old Navy filed suit last week against real estate investment trust Haagen Company over its lease at Village at Century mall in Inglewood.

The storefront (Credit: Google Maps)

The storefront (Credit: Google Maps)

The Gap contends state government orders to close Los Angeles County indoor malls voids the 2016 lease the company signed with the Los Angeles-based firm. An anchor tenant, The Gap and Old Navy occupy most of a 30,000-square-foot space at the mall, according to Haagen’s floor plan of the property. The mall is about 200,000 square feet.

According to the Gap suit, the coronavirus “frustrated the express purpose” of its lease at the mall. “Shopping for apparel in physical stores looks nothing like what was contemplated by the leases when they were executed. Without the ability to operate their retail stores at the premises, the transactions between tenants and landlord that were embodied by the leases make no sense.”

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The mall landlord said it will fight the Gap in court in order to recover what is now five months of lease payments, pitting itself as David to the clothing chain’s Goliath. Neither side would say how much the Gap and Old Navy pay at its approximately store.

“The huge conglomerate that owns the Gap and Old Navy seeks to use the Covid-19 pandemic as an excuse to enrich the company,” said Haagen’s attorney, Dawn Coulson. “While the landlord had wanted to work things out with these tenants and proposed deferred rent and payment terms, Gap and Old Navy were determined to do whatever they wanted. It is an attempt at bullying.”

Coulson added that the retailers can now operate the stores with curbside pickup. She added that “other landlords will be leery of leasing to the Gap in the future” due to their uncompromising stance on not paying rent amid the pandemic.

But in a statement, a Gap spokesperson said the company is “being subject to restrictions that no one foresaw before the closures, much when the leases were entered. While we had hoped the infection rates would plateau and drop quickly all over the country, the reality is, infections are spiking and regulations are evolving.”

The Gap said in April it would stop paying rent at all 2,785 retail stores. Since then, the mall mainstay has sued and been sued by REITs, from giants Simon Property Group and Brookfield Property Partners to small landlords in Orange County and
New York City.

In July, a Manhattan judge ruled that the Gap must keep paying rent at its Time Square location, though how that decision will influence other lawsuits is to be determined.