Looking for Percentage lease information from our community.
Hello Group,

Are there any recent resources out there about percentage leases that can be recommended to this post?  Or personal experiences, good or bad?  I'm looking to learn all about this lease type from all angles.  Landlord, tenant, lien holder, investor, property manager, etc.  Any and all input is welcome.      

Thank you!!
[{"id": "h5g0gfv", "text": "Most big retail centers have % lease clauses after X in sales. For example, restaurant does $2M and pays base rent and 4-8% additional, depending on tenant, on sales over and above $2M.", "replies": [], "depth": 1}, {"id": "h5g12ux", "text": "when i was an asset manager, i hated dealing with % leases.  it's very difficult to verify store sales, especially cash businesses ('audited' financials mean squat) and some leases had lots of exclusions (i.e. what gets deducted from sales that are sometimes difficult to validate/reconcile).  major stores are also hesitant sharing their store sales.  it's also difficult to initially set the sales amount.  timing of sales reporting can also delays receipt of % rent payment. as a LL, expect a lot of 'leakage'.  if LL ever had to do % rent, probably better off doing base rent(adjust base rent annually) + additional % rent .", "replies": [{"id": "h5g1p0p", "text": "as a LL, you do not want to rely on % rent...think of it as a scratch off lottery ticket you buy once a year.", "replies": [{"id": "h5g9yzw", "text": "It\u2019s also a good insight into the health of a tenant", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h5gld37", "text": "Only done in rare instances, in a hard to lease property, IMO.\n\n&amp;#x200B;\n\n&lt;for small ball stuff, no idea on big co's&gt;", "replies": [], "depth": 1}, {"id": "h5ozj8s", "text": "Thank you to the group for the info and shared experiences.", "replies": [], "depth": 1}, {"id": "h5p343g", "text": "It\u2019s very difficult for traditional landlords who are used to accounting fixed streams, but makes a lot of sense in certain instances. \n\nThe best way to verify this is with state sales tax filings. 96% of transactions even in restaurants are now cards, and it\u2019s hard for people to cheat. \n\nPricing is complicated and without going into detail percentage rent should amount to 6-12% of revenue based on the individual particulars.", "replies": [], "depth": 1}, {"id": "h5yr11b", "text": "I've underwritten retail deals where nearly all tenants had some form of percentage rent.  A good compromise I've seen is base rent + percentage rent with a natural breakpoint. The percentage rent would be all upside for you but you would still have some \"skin in the game\" from the perspective of the tenant", "replies": [], "depth": 1}, {"id": "h654xhy", "text": "kinda tangential but I always hated sales based kickouts too for the same reasons people are indicating on percent based leases.  \n\nI'm almost always landlord side so I may be biased but from my perspective I feel like it is your business and you are the one that should know what your sales will be and take that risk.  We don't have access to your internal sales data and your department of people who just figure this stuff out all day.  I don't really know or care what rev your business does as long as you pay rent.", "replies": [], "depth": 1}, {"id": "h6z88rf", "text": "I don't have any resources to recommend but here are some points that jump to mind having represented both Landlords and Tenants in these types of leases:\n\n1) As a LL, you need to be sure that the Tenant is operating in a manner which will create the most number of sales. This means setting minimum operating hours and inventory requirements. \n\n2) As a LL, if the Tenant is not open for whatever reason, you want to make sure that the Lease provides for imputed income. The last thing you want is for the Tenant to close its doors and not owe you any rent for that period.\n\n3) Both sides need to carefully review the list of items included as income. Obviously, Landlords will want this list to be as broad as possible and Tenants will want the exact opposite. Internet sales are sometimes a sticking point, and this issue becomes more important every day.\n\n4) As a Tenant, if the Lease calls for percentage rent to be payable above a certain threshold over a certain period, you want to be sure that the period in questions covers an entire calendar year. Many Tenants make a large chunk of their annual revenue over the holiday period, and you don't want percentage rent measured only during those months. \n\nGood luck!\n\n**Disclaimer: This reply is informational purposes only, does not constitute legal advice, nor is it intended to create, nor shall the receipt of such information constitute, an attorney-client relationship.**", "replies": [], "depth": 1}, {"id": "h6zoohd", "text": "Thank you everyone for the continued information on my inquiry. Very helpful.", "replies": [], "depth": 1}, {"id": "h8o23co", "text": "Minimums are really important. Also defining online sales (for example in store pickups) or take away sales or gift card sales.", "replies": [], "depth": 1}]