In a percentage lease, how is rent structured?

In a percentage lease, the rent structure includes a base rent that is payable regularly, along with an additional amount that is calculated as a percentage of the tenant's gross sales. This type of lease is typically used in retail settings where the landlord may want to share in the success of the tenant's business. The base rent provides a steady income for the landlord regardless of the tenant's performance, while the percentage component allows the landlord to benefit when the tenant’s sales increase.

This arrangement aligns the interests of both parties; the landlord has a vested interest in supporting the tenant's business, as higher sales will lead to higher rent. It also provides tenants with some financial flexibility, as they are not solely liable for a set rent amount during slower sales periods. This combination of a stable base rent with a variable component tied to sales is what makes the percentage lease an attractive option for many business arrangements.