What characterizes a "percent lease"?

A "percent lease" is characterized by the structure in which the rent is determined based on a percentage of the tenant's sales revenue. This type of lease is commonly used in retail settings, where landlords aim to capture a portion of the tenant's sales, thus aligning the landlord's income with the success of the tenant's business. It incentivizes the landlord to support the tenant in increasing their sales, as both parties benefit from higher revenue.

In this arrangement, there may be a base rent amount that the tenant pays, but the additional cost is linked directly to sales performance, making it a more flexible and performance-based approach to rental agreements. This is particularly advantageous in fluctuating market conditions, where traditional flat-rate leases may not reflect the actual earning capabilities of the tenant. This structure can promote a more collaborative landlord-tenant relationship, fostering support for tenant success.