2020 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

Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for GAL Certification, ethics, elimination of bias or Kansas credit.