Percentage Rent

Percentage rent is most common in retail leasing, where a landlord shares in a tenant's success. The tenant pays a lower base rent plus a percentage of gross sales above an agreed breakpoint. The natural breakpoint is the sales level at which the percentage rent equals the base rent; below it, the tenant pays only base rent. While traditional medical practices rarely sign percentage-rent leases, the structure is relevant for healthcare-adjacent and retail-oriented uses — a med spa, an optical shop, or a wellness retailer in a shopping center may encounter it. Tenants should scrutinize how gross sales are defined (excluding refunds, taxes, and certain revenue), whether sales reporting is required, and whether the landlord can audit records. For any practice with a retail component, understanding percentage rent prevents an unexpected obligation as the business grows.

Percentage rent ties occupancy cost to performance. For healthcare-adjacent retail uses, understanding the breakpoint and how sales are defined prevents rent from climbing unexpectedly with success.

A retail wellness concept signs a lease at $25/sq ft base plus 6% of gross sales over a $500,000 breakpoint. If annual sales reach $700,000, it owes an additional 6% of the $200,000 excess — $12,000 in percentage rent.