WebCredenza 2024 Percentage rent leases in commercial real estate

Percentage rent is used in retail leases where the landlord has bargaining power to demand a share of the tenant’s economic gains. Demand for retail space may be high or a landlord’s specific location may be particularly attractive such that the tenant is willing to pay not only a fixed amount of rent but a share of its gross revenue. These types of leases require a sophisticated understanding of the underlying economics of tenant’s business. These leases also require very careful drafting. How is gross revenue defined? Is there a minimum amount or a maximum amount? How are these numbers verified? And what are all the related protections for the landlord or the tenant? This program will provide you with a practical guide to negotiating and drafting percentage leases.

• Circumstances where percentage rent is commonly seen.
• Economics of percentage rent – landlord and tenant perspectives.
• Defining key terms – “gross sales,” exclusions, percent of rent.
• Determining thresholds – minimum rent, sliding scales.
• Financial reporting and audit rights.
• Important related provisions – non-competition, continuous use, payment terms. 

Opinions and positions stated by presenters of MoBarCLE programs are those of the presenters and not necessarily those of The Missouri Bar. This program is intended as information for lawyers in Missouri, in conjunction with other research they deem necessary, in the exercise of their independent judgment.