A lease with rent based on a percentage of the monthly or annual gross sales made on the premises. There may be no minimum rent, but most specify a guaranteed minimum rent with the percentage, or graduated percentage rent payable on sales that exceed a specific level. The percentage can be fixed throughout the life of the lease or it can be a graduated percentage that increases based on lease specifications. It appeals to tenants in that, if sales performance is poor, they benefit from having a reduced rent. In a sense the property owner shares in the business risk as well as the upside. Percentage leases are common with large retail stores, especially in shopping centers. The underlying concept of the percentage lease is that both the landlord and the tenant should share in the location advantages of the leased property.
