Percentage Rent

A provision in some retail lease contracts that requires the tenant to pay the landlord a percentage of the gross sales that exceed a specified breakpoint. Example: A tenant and landlord have negotiated that, in any given month, 7% of gross sales receipts above a breakpoint of $300,000 will be paid as Percentage Rent to the landlord. The tenant achieves gross sales of $400,000 in a month, which exceeds the breakpoint by $100,000. Thus the tenant must pay 7% of this $100,000, or $7,000, to the landlord as Percentage Rent.

Also see: Natural Breakpoint