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Define Percentage Lease in Real Estate

Percentage Lease: 

A percentage lease is a type of commercial lease where the tenant pays a base rent plus a percentage of their gross sales to the landlord. This type of lease is commonly used in retail and restaurant spaces.


Imagine that a restaurant owner signs a percentage lease for their space in a shopping center. The lease requires the restaurant owner to pay a base rent of $2,000 per month plus 5% of their gross sales. If the restaurant makes $40,000 in sales in a month, they would owe an additional $2,000 in rent ($40,000 x 5% = $2,000), making their total rent for the month $4,000 ($2,000 base rent + $2,000 percentage rent).

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Here are a few additional things to keep in mind about percentage leases:

The percentage rent is typically calculated on a monthly basis.
The tenant's gross sales are usually calculated on a monthly basis, and the percentage rent is then added to the base rent for that month.

The percentage rate can vary depending on the tenant and the type of business.
The percentage rate may vary depending on the tenant's business and their projected sales, as well as the type of business and the location of the space.

The lease should specify how gross sales are defined and calculated.
To avoid any confusion or disputes, it's important for the lease to clearly define what constitutes gross sales, how they will be calculated, and what documentation the tenant needs to provide to the landlord to prove their sales.

Percentage leases can benefit both landlords and tenants.
Percentage leases can benefit landlords by providing them with additional income if the tenant's business does well, and they can benefit tenants by allowing them to pay lower rent if their business is struggling.

It's important to consult with an attorney when signing a percentage lease.
Before signing a percentage lease, it's important to consult with a licensed attorney who can review the lease and ensure that it is fair and favorable to both parties.

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A percentage lease, it's as easy as can be,
It's a lease that helps both the landlord and the tenant, you see!

The tenant pays a base rent, that's not too much fuss,
But they also pay a percentage, based on their sales, oh yes!

So if they sell a lot, they pay more in rent,
And if they sell less, their rent money is spent.

It's often used in shops and restaurants galore,
And both parties benefit, that's what it's for!

The landlord gets a steady rent, plus a little bit more,
And the tenant can grow their business, and expand their store.

So when signing a lease, remember this type,
A percentage lease can help you take flight!

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