The Effects of Electronic Commerce on the Traditional Shopping Center Lease

Abstract

The Internet, in addition to its wealth of information, has introduced America to a new way to purchase goods. Along with this new way to shop comes the potential for conflict between the way the retail industry has done business in the past and this new technology. Traditional shopping center leases contain clauses which base the tenant's rent on a percentage of the sales from that store. To ensure its profits, landlords require tenants not compete within a certain radius of the shopping center. With the birth of electronic commerce, customers are ordering their goods directly from retailers online and not entering malls, which, in turn, causes lower profits for landlords. Shopping center tenants who also sell online have the potential to breach their shopping center leases. Therefore, to protect themselves, tenants should draft lease language to address electronic commerce. Section I of this article will discuss the specifics of shopping center leases and explain how electronic commerce works. Section II will explain the problem and demonstrate how courts have addressed similar problems in the past. And, finally, Section III will propose two different solutions to the problem-a legal one, through drafting, and a technological one.