Hudson’s Bay Company v. OMERS Realty Corporation , 2016 ONCA 113

In finding that the assignment of leases by a tenant (“HBC”) to a limited partnership of which a subsidiary was a general partner, but in which a third party (“RioCan”) held substantially all the partnerships interests qua limited partner, qualified as a transfer between affiliates so that consent of the landlord was not required, the Court agreed with the following findings of the applications judge (as summarized by it at paras. 19-21):

First, any property in which a limited partnership has an interest can be held only by the general partner. In the case of a lease, there can be no assignment of the lease to the limited partnership – it must be assigned to the general partner.

Second, it is not simply a matter of the general partner acquiring legal title to the property. The general partner has control over the property and is solely responsible for the operations of the limited partnership. The limited partner, as a passive investor, is restricted from taking part in the control or management of the business. To do otherwise would jeopardise its limited partner status.

Third, from the perspective of the other contracting party, the general partner is solely liable for all payments under the contract and performance of all obligations thereunder. The limited partners have no such liability. In this case, once the Leases are assigned, the legal relationship will continue to be between the Landlords and HBC. There will be no relationship between the Landlords and the limited partner. HBC alone will be liable for rents and all amounts owing under the Leases. HBC alone will be responsible for compliance with all obligations and covenants under the Leases. Thus, there will be no change in the legal relationship between HBC and the Landlords following the assignments.

Before finding that the assignment of leases by a tenant (HBC) to a limited partnership of which a subsidiary was a general partner, but in which a third party (RioCan) held substantially all the partnerships interests qua limited partner, qualified as a transfer between affiliates so that consent of the landlord was not required, the Court agreed with the following findings of the applications judge (as summarized by it at paras. 19-20):

First, any property in which a limited partnership has an interest can be held only by the general partner. In the case of a lease, there can be no assignment of the lease to the limited partnership – it must be assigned to the general partner.

Second, it is not simply a matter of the general partner acquiring legal title to the property. The general partner has control over the property and is solely responsible for the operations of the limited partnership. The limited partner, as a passive investor, is restricted from taking part in the control or management of the business. To do otherwise would jeopardise its limited partner status.