Under what condition might a tenant prefer a gross lease over a percentage lease?

A tenant might prefer a gross lease over a percentage lease primarily when they wish to avoid fluctuations in monthly expenses. A gross lease typically consists of a fixed rental amount that includes most or all of the operating expenses, such as property taxes, insurance, and maintenance costs. This arrangement provides the tenant with budget predictability, allowing them to manage their expenses more easily without the concern that their rent will vary based on their business revenue or property-related costs that might change over time.

In contrast, a percentage lease ties the rent to the tenant's sales performance, which means if their sales go down, the rent might also decrease; however, it could also increase with higher sales, leading to unpredictability in monthly expenses. Tenants who prefer fixed costs and a straightforward budgeting process would thus choose a gross lease, ensuring they have stable financial planning without having to account for fluctuating costs associated with their sales or other expenses.