Free Percentage Lease Agreement Template

A percentage lease agreement is a commercial lease where the tenant pays base rent plus a share of sales. Once sales pass an agreed level, that extra rent begins.

The structure ties an owner’s return to the tenant’s performance. Slow months cost the tenant less, while strong months pay the owner more.

Retail centers use it most. Shopping malls, airport concourses, food halls, and anchored plazas all commonly write rent this way.

Mechanically it is simple, yet the definitions are not. Almost every dispute traces back to how the contract defines sales.

Owners favor the model in busy locations, where foot traffic they helped create shows up in tenant revenue. Tenants accept it because the base rent usually sits below what a straight lease would demand.

Three numbers drive the arrangement: base rent, the percentage rate, and the breakpoint where that rate starts to apply.

Owners typically pick one of two breakpoints:

• A natural breakpoint, found by dividing annual base rent by the agreed percentage rate
• An artificial breakpoint, negotiated as a fixed sales figure regardless of the math

Below the breakpoint, the tenant pays base rent only. Above it, the tenant adds the agreed percentage of whatever sales exceed that line.

Rates differ sharply by category, because margins do. High-volume, low-margin businesses negotiate a smaller percentage than boutiques selling fewer items at a wider markup.

Timing matters as well. Some contracts measure sales monthly and others annually, and that choice changes what a seasonal tenant actually pays. Write the percentage lease agreement so all three numbers appear together in one clause.

A percentage lease agreement carries every clause a standard commercial lease has, plus the sales mechanics that make it work.

Parties and Premises

Name both parties and describe the leased space, including any storage, patio, or kiosk area counted in the deal.

Term and Options

Set the initial term, renewal options, and the notice required to exercise them.

Base Rent

State the base rent, the due date, and any scheduled increases across the term.

Percentage Rate and Breakpoint

Give the rate, the breakpoint, and whether that breakpoint is natural or negotiated. Show how it was calculated.

Definition of Gross Sales

Define what counts, then list exclusions explicitly: refunds, exchanges, taxes collected, gift card issuance, employee purchases, and third-party platform commissions.

Reporting Schedule

Require sales statements on a set schedule, with an annual reconciliation. Name the format and the person who certifies the numbers.

Audit Rights

Give the owner a right to inspect records, and say who pays for an audit that uncovers an understatement.

Continuous Operation

Many owners require the tenant to stay open during set hours, since a dark storefront generates no percentage rent.

Additional Rent and Expenses

Cover operating costs, marketing funds, and utilities separately from the sales calculation.

Signatures

Both parties sign and date, with every exhibit attached and initialed.

The reporting clause makes everything else enforceable. Without reliable numbers, a share of sales is only an estimate.

Set expectations inside the document:

• Which point-of-sale records the tenant keeps, and for how long
• When monthly and annual statements fall due
• Who certifies that the figures are accurate
• How long the owner has to request an inspection
• What follows when an audit finds an understatement

Tenants should watch the scope of those rights. An audit clause allowing inspection at any moment, without notice, disrupts a working business.

Owners, in turn, benefit from keeping the process proportionate. A short notice period and a defined threshold for who pays audit costs keep the relationship healthy.

Online orders complicate the picture. Decide whether delivery sales, curbside pickup, and orders placed online but fulfilled in store count toward the total, then write that answer down.

Multi-location tenants should confirm the reporting runs per store. Nobody wants a clause that pulls revenue from another address into this building’s calculation.

Commercial lease rules vary by state and by locality, and shopping center deals often add another layer through recorded agreements. Check your state’s official website on filing or disclosure questions, then read any center rules the lease incorporates.

Confirm a few practical points before signing:

• Does an existing center agreement restrict your use, hours, or signage?
• May the tenant assign or sublease, and how would that affect percentage rent?
• Which party handles common area costs, and how are they calculated?
• What records must the tenant keep, and in what format?

Sales-based rent involves financial reporting that runs for years. Therefore, a local attorney and an accountant are both worth consulting, since their review costs little next to a definition that quietly gives away several points of margin.

Both parties should also agree on what happens during a closure. Renovations, staffing gaps, and supply problems all cut sales, so the contract should say whether base rent alone continues.

Confirm the numbers before anyone signs. Run the breakpoint calculation against realistic sales figures and check that both parties read the result the same way.

Then finish cleanly:

1. Verify the rate, the breakpoint, and the reporting dates.
2. Read the gross sales definition line by line, exclusions included.
3. Attach the site plan, center rules, and every exhibit referenced.
4. Sign, date, and keep a countersigned copy with your accounting records.

With Document Genius, a step-by-step questionnaire builds a complete percentage lease agreement you can download, print, or e-sign. Set your rent terms in minutes and keep every signed copy in one place.