Definition of Percentage lease:
Commercial lease in which the rental amount is computed as a certain percentage of the sales generated at leased property.
A percentage lease is a type of lease where the tenant pays a base rent plus a percentage of any revenue earned while doing business on the rental premises. It is a term used in commercial real estate. A percentage lease agreement generally decreases the base rate for lessees and offers the lessor additional upside potential.
A percentage lease has two components — base rent (or minimum rent) and a percentage of the monthly or annual gross sales made on the premises. The lessee could find this arrangement attractive, as it lowers this fixed cost, which normally accounts for a large proportion of operating costs, and the lessor obtains some upside potential beyond what a standard lease (i.e., no percentage of sales component) could yield. Additionally, the percentage lease aligns the interests of lessee and lessor.
How to use Percentage lease in a sentence?
- This percentage is added on top of a base rent, but the base will be set lower than it would be on a standard lease, making it attractive to tenants.
- Often, the percentage of revenue portion of the lease will not kick in until a negotiated sales breakpoint is first reached.
- A percentage lease requires commercial tenants to pay to the landlord a set percentage of gross revenue earned from business conducted at the leased premises.
Meaning of Percentage lease & Percentage lease Definition