What is a Percentage Lease?
A Percentage Lease is a lease that typically requires a tenant pay "Base Rent" and then on top of that amount pay a percentage based on monthly sales volumes. Percentage leases are commonly executed in retail mall outlets but depending upon the location and nature of your business can have a dramatic impact on percentage rent.Never sign any lease offered to you without first trying to negotiate better terms. And because percentage leases are complex, and could cost you a lot of money down the road, it pays to have an attorney review any percentage lease before you sign one.
Percentage leases should not take a percentage of all sales made, but should include a percentage paid to the landlord (lessor) only when a tenant has made a certain amount in any given month. For example, a percentage lease might require a tenant to pay 5% of all sales that exceed more than $25,000 in any given month.
The following table details information for some business types and the average percentage rent charged in percentage leases.
| Typical Percentage Rents | |
| Alcoholic Beverage Stores | 1.5-5.0% |
| Card & Gift Shops | 3.0-6.0% |
| Card & Gift Shops | 5.0-8.0% |
| Drugstores | 2.5-4.0% |
| Jewelry Store | 7.0% or More |
| Pet Stores | 5.0-8.0% |
| Restaurants | 4.0-7.0% |
| Grocery Stores | 1.0-2.0% |
Source:
Table Adapted from Answers.com. Real Estate Dictionary: Percentage Rent. Access Date: July 06, 2008.
