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w w w . C A N A D I A N L a w y e r m a g . c o m J U N E 2 0 1 6 25 included and what's not included ought to be clearly delineated. But that's not where the discussions end. Enforcement needs to be included in the terms of the lease as well. Negotia- tions could include whether landlords can have access to electronic record keeping or whether they can have auditing rights to ensure the proper calculations are made. But, asks Liakopoulos, do landlords really have the resources to go through all the reports that are generated to police the rent contributions? While turnover rents are common, certain sectors, such as grocery and drug stores, stay away from them, preferring to pay a set rent. Yet, for some stores that pay straight rent, the landlords' requests to audit the sales statements are starting to spill over, says Andrew Fortis, who leads Toronto-area Hummingbird Law- yers LLP's real estate and corporate/com- mercial practices. "They still ask to see your annual revenues, even though per- centage rent is not included." So, when it comes time to renew, the landlord could raise rent if the tenant has done well in the location. Fortis has thus far suc- cessfully argued that there's no merit in the landlord having access to the books if the rent isn't reliant upon the sales. But, he says, some may not bend on the issue. Like many aspects of the lease, it often simply comes down to who has the power of negotiation in the relationship. From a landlord's perspective, the challenge is using a static document today that may have to relate to a chang- ing environment 20 years down the road. "If you think about it from the landlord's point of view, they're trying to read a crystal ball as to where technology is going into the future," says Tobin. "One of the key points is technology is chang- ing while the lease is static. And that is the challenge: You've got to get the deals done and you don't know what the future holds." While lawyers grapple with old leas- es in an attempt to accommodate the changing realities, Liakopoulos ques- tions the future of percentage rents. "We spend all this time coming up with the perfect words, we have to ask ourselves: 'Hey, landlord, do we have the infra- structure in order to be able to review and confirm what we say we're going to do?'" he says. "If you are going to use them, I think you need to think hard about how it's going to be included." Harvey Haber, author of The Com- mercial Lease: A Practical Guide, expects that percentage rents will survive current and future trends, at least to a degree. Already, many larger tenants insist on a straight rent arrangement and, for sim- plicity, that might carry over to other ten- ants. But there's still a degree of attraction to sharing the risks and the rewards for other arrangements, he says. Smaller tenants, who have less negoti- ating power, may have no choice, if that's the desire of the landlord. But then the issue of risk surfaces once again. "The question for the landlord is if he puts in a break-even point, will the tenant make that break-even point, which starts them paying percentage rent," says Haber, who is now working primarily as a mediator and arbitrator with Coe and ADR Man- agement. 1991 2016 FCT Commercial or Residential. We've got you covered. FCT has been leading the charge in the Canadian title insurance industry for 25 years and still knows it best. Choose a partner that will stand the test of time. Choose FCT. ® Registered Trademark of First American Financial Corporation. X FCT.ca I 1.800.307.0370 Untitled-5 1 2016-05-12 2:25 PM

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