Tim Hackett answers: What is percentage rent in a retail lease?

A percentage rent is negotiated at the time of the lease. What it does is the tenant reports their sales every month to the landlord, once a certain base amount is reached, then the landlord then gets a percentage of the rest of the sales over and above that base amount. It actually works as an incentive to both the landlord in driving more tenants to the property and maintaining the property, and it helps the tenant by perhaps negotiating a lower base rent amount for them to get into the property.