Glossary
Lease Types
Percentage Lease
A retail lease structure where the tenant pays base rent plus a percentage of gross sales above a set breakpoint. Overcharge risk shows up when the landlord's gross sales definition, or the breakpoint calculation itself, does not match what the lease specifies.
Firm impact
Percentage rent disputes require pulling the tenant's own sales data, which makes this a different kind of engagement than a standard CAM reconciliation review. Firms that can verify both the gross sales definition and the breakpoint math add a distinct, high-value service for retail clients.
How this gets abused
A lease sets a natural breakpoint (annual base rent divided by the percentage rate), but the landlord's calculation uses an artificial breakpoint stated as a flat dollar figure lower than the natural breakpoint requires, triggering percentage rent earlier in the year than the lease allows.
Practitioner note
Confirm whether the lease uses a natural or artificial breakpoint, then check the gross sales definition for exclusions like sales tax, returns, and delivery charges before recalculating the percentage rent owed.
Related terms
FAQ
Questions about percentage lease
What is a breakpoint in a percentage lease?
The sales level above which percentage rent kicks in. A natural breakpoint is calculated as annual base rent divided by the percentage rate; an artificial breakpoint is a flat dollar figure the lease states directly.
What should a firm check first on a percentage lease dispute?
The gross sales definition and its exclusions, then the breakpoint calculation method. Both determine whether the percentage rent the tenant paid matches what the lease requires.
You know the term. Now check the math.
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