A shopping center landlord requires a percentage lease clause from a major department store anchor tenant. The anchor tenant negotiates a natural breakpoint. What is a natural breakpoint?
Correct Answer
B) The sales volume at which the percentage rent equals the base rent, calculated by dividing the annual base rent by the percentage rate
A natural breakpoint is calculated by dividing the annual base rent by the percentage rate. At this sales level, the percentage of sales equals the base rent. The tenant pays percentage rent only on sales exceeding the breakpoint.
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Related Topics & Key Terms
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Related Concepts
A life estate is a freehold estate that grants ownership rights for the duration of someone's life.
Real property is immovable land and anything permanently attached to it, while personal property (also called chattels) is movable.
Tenancy by the entirety is a form of co-ownership available only to married couples that includes the right of survivorship and protection from individual creditors. Neither spouse can unilaterally sell or encumber the property.
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