Legal Definitions - percentage lease

A percentage lease is a type of lease agreement where the rent paid by the tenant is based on a percentage of their gross or net sales or profits. This type of lease is commonly used in commercial properties, such as shopping malls or retail spaces. The lease agreement will typically include a set minimum rent, regardless of the tenant's sales or profits.

For example, a tenant leasing a retail space in a shopping mall may agree to pay 5% of their gross sales as rent, with a minimum rent of $5,000 per month. If the tenant's gross sales for the month are $100,000, they would owe $5,000 in rent (5% of $100,000). However, if their gross sales for the month are only $80,000, they would still owe the minimum rent of $5,000.

This type of lease benefits both the landlord and the tenant. The landlord has the potential to earn more rent if the tenant's sales increase, while the tenant has the flexibility to pay less rent during slower sales periods.