Additional rent paid by a retail tenant calculated as a percentage of the tenant's gross sales above a defined breakpoint, layered on top of base rent. It aligns landlord income with tenant business performance.
Percentage rent is common in retail and shopping center leases. The breakpoint — the sales threshold above which percentage rent kicks in — can be natural (base rent divided by the percentage rate) or artificial (a negotiated fixed dollar amount). For example, if a tenant pays $60,000 base rent and the rate is 6%, the natural breakpoint is $1,000,000 in sales. Any sales above that trigger additional rent at 6%. Tenants should audit gross sales definitions carefully, as landlords may define "gross sales" broadly to capture more revenue.
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