"Prithee, tell him, so much the rent of land comes to: he will not believe a fool" King Lear, Act I Scene 4
Percentage-rent is based on the gross sales of
a tenant at a particular store. It is commonplace to the retail industry
where tenant revenues are based on sales, rather than services. A
formula is established in the lease to determine the amount of percentage
rent. Elements included in the formula are gross sales, a
“breakpoint” and a percentage rate. Typically, percentage rent is
calculated and paid annually.
Historical Origins
The concept of percentage rent originated in
the Depression era, after many retailers were forced into bankruptcy by fixed
monthly rent obligations. National chain stores, such as W.T. Grant
Company, with economic leverage and an appetite for long-term leases, began to
negotiate leases which provided for no minimum rent, but percentage rent
equivalent to 1% of gross sales. Since then, the percentage rent
