Percentage Lease

A Percentage Lease is a type of commercial Lease agreement where the tenant pays a base rent plus a percentage of their Revenue or sales generated from the Leased property. This arrangement is commonly used in retail environments, where the landlord benefits from the tenant’s business performance, and it aligns the interests of both parties.

For instance, a retail store may pay a base rent of $2,000 per month, plus 5% of its monthly sales. If the store generates $50,000 in sales in a month, the total rent for that month would be $2,000 + ($50,000 * 0.05) = $2,000 + $2,500 = $4,500.

In legal cases, one example is Friedman v. A.R. Heller Co., where the court upheld the terms of a percentage Lease, emphasizing that such agreements provide flexibility for tenants while allowing landlords to benefit from the tenant’s success.