Gap Hauls Westfield To Court Over Mall Expenses

Gap Inc. has taken Westfield to court, accusing the mall operator of overcharging the apparel retailer by inflating its share of mall expenses at more than two dozen properties. Gap is also suing trash collectors at those properties, alleging noncompetitive rates.

The retailer said that Westfield improperly excluded certain areas of its malls when making the calculation of gross leasable area, the Wall Street Journal reports. A smaller area increases the size of Gap’s bill for common-area expenses.

More specifically, the suit alleges a number of irregularities when it comes to calculating GLA, such as excluding vacant department stores from its calculations, counting vacant department stores as operating ones and counting movie theaters as department store space.

Gap also said that Westfield tried to prevent it from finding out about its overcharges and other misconduct. "[Westfield] prolonged this delay by providing incomplete information while purporting to negotiate a settlement concerning the overcharges,” the lawsuit said.

Disputes over how much tenants need to pay for common expenses such as maintenance or taxes aren't new, but the current sour retail climate is exacerbating tensions between tenants and landlords over the issue.

“Larger tenants are not thrilled at paying anything that they don’t have to pay," Bregman Berbert Schwartz & Gilday Senior Partner Douglas Bregman told the WSJ.

Gap, which owns Banana Republic, Old Navy and Athleta, filed suit in state court in California before the French shopping center giant Unibail-Rodamco closed on its acquisition of Australia-based Westfield. The defendant has yet to file a legal response.