What Is a Percentage Lease?
A percentage lease is a lease where rent payments are based on the lease holder's sales or profits. A typical percentage lease will have a base rent, or minimum amount of rent that is due each month. In addition to the base rent, the lease holder must also pay a percentage of the gross or net sales each month, as stipulated in the lease agreement. The lease should state exactly what counts as a "sale" to be included in the calculation of what rent is due.
Is there a Maximum Amount of Rent that the Landlord Can Collect?
No, there is no maximum amount of rent that the landlord can collect under a percentage lease. As sales increase over time, the rent also increases over time. The only way to limit the maximum amount of rent that the landlord can collect under a percentage lease is to stipulate to a ceiling or upper limit rent amount in the lease.
Do I Need a Real Estate Attorney before Signing a Percentage Lease?
Commercial leases are very complex agreements with every provision open for negotiation. A real estate attorney will be able to inform you of whether a percentage lease is best for your business needs and can protect your interests and rights when negotiating your lease. Percentage leases are very complex and must be carefully constructed and specify exactly what counts as a "sale" to avoid later disputes. |
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