Stop Tenant from Claiming Unauthorized Gross Sales Exclusions for New Types of Sales

You may think that your lease lists all the items that should be included or excluded from gross sales. But consider this: Did the leases you had tenants sign years ago mention Internet sales? Probably not. If you're like many owners, you may have only recently started mentioning Internet sales in your leases. And you can't assume that this scenario won't repeat itself. Other new types of sales may arrive in the future. But the leases that you sign today may not address those sales.

That could be a costly loophole. Every gross sales exclusion takes percentage rent out of your pocket. So you'll want to stop the tenant from taking exclusions that you didn't expect it to take. But if the tenant starts making money from sales that weren't mentioned in your lease, you and the tenant could end up in court, arguing about whether those sales should be included or excluded from gross sales, warns financial management consultant Kenneth S. Lamy.

Add Lease Language

To plug this loophole, say in the lease's gross sales clause that if the lease doesn't permit an item to be excluded from gross sales, the item must be included in gross sales, says Lamy. This way, the clause doesn't have to mention an item, Lamy says. Even though, for example, an item wasn't in existence when the lease was signed, the tenant can't try to exclude it from gross sales, he explains.

To do this, add the following language to your lease's gross sales clause:

Model Lease Language

All monies or other things of value accepted or received by or on behalf of Tenant not herein specifically excluded from Gross Sales shall be deemed to be included herein.

CLLI Source

Kenneth S. Lamy: President, The Lamy Group, Ltd., 650 Poydras St., Ste. 2245, New Orleans, LA 70130; (504) 525-9914.