What is a Percentage Lease? A Comprehensive Legal Overview
Definition & Meaning
A percentage lease is a type of commercial lease agreement where the rent is based on a percentage of the tenant's gross sales from the property. In addition to a base rent, the tenant pays a specified percentage of their revenue generated at the leased location. This arrangement is often found in retail and commercial real estate, where landlords may also charge for operating expenses and maintenance of common areas.
Legal Use & context
Percentage leases are commonly used in commercial real estate transactions, particularly in retail settings. They are relevant in areas such as contract law and real estate law. Users may encounter percentage leases when negotiating rental agreements for retail spaces, shopping centers, or other commercial properties. Legal templates available through platforms like US Legal Forms can help users draft or review these agreements effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A clothing retailer signs a percentage lease with a base rent of $2,000 per month, plus 5 percent of their gross sales. If the retailer generates $50,000 in sales in a month, they would pay $2,000 plus $2,500 (5 percent of $50,000) in rent for that month.
Example 2: A restaurant enters into a percentage lease with a base rent of $3,000 per month, plus 6 percent of gross sales. If the restaurant's sales for a month total $80,000, their total rent for that month would be $3,000 plus $4,800 (6 percent of $80,000). (hypothetical example)