Canadian Lawyer

24 J U N E 2 0 1 6 w w w . C A N A D I A N L a w y e r m a g . c o m that began a decade or so ago, the issue of online sales has only recently become more of a concern for both landlords and tenants as they work out how to calculate the cost of renting commercial premises. "It hasn't been one of those top-of-mind issues that people have had to pursue or disagree over. But I would say it is definitely becoming more of an issue," says Dennis Tobin, a commercial leasing lawyer at Blaney McMurtry LLP in Toronto who mostly acts for mid- and large-sized retail tenants. "It's on the new crop of leases that you see a much more sophisticated approach." While the turnover or percentage-rent model has been around for as long as working lawyers can remember, just how online sales fit in from the practical per- spective can be tricky. Montreal lawyer Mason Gordon, an associate in McCar- thy Tétrault LLP's business law group, says past drafting of turnover-rent clauses often didn't foresee online sales and that could present a challenge for the landlord to get what's expected. So conversations on rent renewals and new leases now often focus on what the percentage rent includes as well as clearly defining what gross turnover and gross profits are. But even for leases that do take e-commerce into consideration, there is a question about how that is calculated. "A well-drafted turnover lease arrange- ment will consider and deal with certain issues that weren't really issues in the past," says Gordon. "You really have to look at the specificity of the client's busi- ness. Draft these leases with very careful wording to clearly define gross turnover and gross revenue and foresee these situ- ations that weren't necessarily business practices 15 years ago." The issues could include situations where a shopper uses the physical store to check out the item but makes the purchase from the store's web site. The calculation isn't so simple if the store is part of a chain with a centralized order- ing and warehouse facility. The tenant might want to make accommodations for returns and exchanges, so they're deducted from the revenue tally. But the situation can be further complicated if an order is made from a chain's central hub but the item is returned to the store. Loss leaders — products that are priced to attract customers but don't generate revenue for the retailer — as well as frequent purchaser rewards programs or giveaways that don't contribute to the bottom line are additional factors. "The wording in the landlord's provi- sions tends to be so generous and wide that without these types of clarifications there can be an argument made that all these be included in gross revenue, that you would be paying rent on that amount," says Greg Liakopoulos, a com- mercial real estate law partner with Ben- nett Jones LLP in Calgary. "The tenant, their job, really, is to take a scalpel to that approach." Internet sales provisions in percent- age-rent leases could vary from captur- ing too much to capturing too little, Liakopoulos adds. And if some of the store's traditional sales are falling into the online sales category, landlords will be concerned about measuring the total gross revenue adequately. So what's R E A L E S TAT E Because business issues are legal issues. So if you want to get ahead in business, get the degree that gets you there faster. ONE YEAR – PART - TIME – NO THESIS FOR L AWYERS AND NON - LAWYERS law.utoronto.ca/ExecutiveLLM GPLLM Global Professional Master of Laws [Get a Master of Laws] Untitled-1 1 2015-02-25 8:38 AM

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