A common practice in commercial leasing, particularly for retail spaces, involves a base rent plus an additional charge based on a tenant’s gross sales. This variable component, calculated as a predetermined percentage of sales exceeding a specified breakpoint, provides landlords a share in the tenant’s success while offering tenants potentially lower initial rental costs. For instance, a lease might stipulate a base rent of $1,000 per month plus 5% of gross sales above $50,000. If the tenant achieves $75,000 in monthly sales, the additional rent would be 5% of the $25,000 surplus, or $1,250, resulting in a total rent of $2,250 for that month.
This approach offers a flexible arrangement that aligns landlord and tenant interests. It allows landlords to participate in the upside potential of thriving businesses, potentially offsetting risks associated with new or unproven ventures. For tenants, it can reduce the initial financial burden, particularly during the establishment phase, enabling them to invest more in inventory, marketing, or other growth drivers. This method has historical roots in sharecropping and other agricultural arrangements where landowners shared in the harvest’s yield, adapting the principle to the commercial real estate landscape.