Percentage Rent Leases in Commercial Real Estate - 2018

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

Speakers: John S. Hollyfield, Norton Rose Fulbright, LLP, Houston, TX and Richard R. Goldberg, Ballard Spahr, LLP, Philadelphia, PA

NOTE: This program was originally produced as a telephone seminar and is available on demand in streaming audio. 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 ethics or elimination of bias credit.