What is the most common type of commercial lease where the tenant pays base rent plus a percentage of their gross sales?
Correct Answer
B) Percentage lease
A percentage lease requires the tenant to pay base rent plus a percentage of gross sales, commonly used in retail properties. This structure allows landlords to benefit from tenant success while providing tenants with lower base rents.
Why This Is the Correct Answer
A percentage lease is correctly defined as a lease where tenants pay base rent plus a percentage of gross sales. This is the exact definition provided in the question. Percentage leases are most commonly used in retail environments where landlords want to share in tenant success. The structure typically involves a lower base rent to offset the percentage component, making it attractive to retailers who prefer variable costs tied to performance. This lease type is standard in shopping centers and retail developments across Canada.
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