Commercial Percentage (%) Lease Agreement

A commercial percentage (%) lease agreement is a rental contract where the business tenant pays the landlord a base rent plus a part of gross sales or revenue above the agreed-upon breakpoint. These agreements are typically used in retail stores, restaurants, and entertainment venues.

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Last updated January 2nd, 2025

A commercial percentage (%) lease agreement is a rental contract where the business tenant pays the landlord a base rent plus a part of gross sales or revenue above the agreed-upon breakpoint. These agreements are typically used in retail stores, restaurants, and entertainment venues.

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Benefits of a Percentage (%) Lease Agreement

  • Tenants: Lower costs if sales are below the breakpoint.
  • Landlord: Share in the tenant’s success.

Key Things to Know About Commercial Percentage Lease Agreements

  • Base Monthly Rent: The tenant pays a fixed rate regardless of their sales performance
  • Percentage Rent: The tenant pays a percentage of gross sales above a certain threshold, known as the “breakpoint.” This can be paid monthly, quarterly, or annually.
  • Best Suited For: Businesses with fluctuating sales since rent aligns with performance.

Who is Responsible for Reporting Sales? 

The tenant must provide sales reporting, as defined in the lease agreement.

What is the Breakpoint? 

In a commercial percentage lease agreement, the breakpoint is the gross sales threshold above which the tenant starts paying a percentage to the landlord.

What are Gross Sales? 

Gross sales excludes returns, taxes and non-retail income.

Sample

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