A lease agreement in which the rental payment is based on a percentage of the gross sales generated from the leased property is a common arrangement, particularly within retail contexts. This type of agreement generally involves a base rent, often lower than market value, supplemented by an additional payment calculated as a specified percentage of the tenant’s revenue. For example, a retail store might pay a monthly base rent of $1,000 plus 5% of its monthly gross sales.
The advantages of this leasing structure lie primarily in its alignment of interests between the landlord and the tenant. The landlord benefits directly from the tenant’s success, incentivizing support for the tenant’s business. Conversely, the tenant’s rent expense becomes partially variable, decreasing during periods of low sales, which can be especially beneficial for startups or businesses with seasonal fluctuations. Historically, these agreements allowed entrepreneurs with limited capital to establish businesses in prime locations, fostering economic growth.
