PERCENTAGE RENT....What is it exactly???
In commercial leases, percentage rent works on the basis of the percentage of the tenant’s gross sales and is usually paid in addition to the gross rent. It’s usually found in shopping mall leases. Generally, if the majority of the tenants in the mall are paying Percentage Rent in addition to their gross rent, the Landlord will require that all tenants in the mall have the same obligation. The percentage rent usually starts once the tenant is making a profit and exceeds a certain amount of sales. This is called the threshold, breakpoint or natural breakpoint.  For example, if the Lease states that Landlord gets a percentage rent of 5% on sales over $600,000, then the Landlord is entitled to percentage rent on sales over $500,000 and Tenant doesn’t pay so long as the sales are under that amount. Typically, with a standard 1,000 to 3,000 square foot premises, we see percentages in the 3% to 8% range with threshold of $500,000 to $900,000. Percentage rent is reported either monthly or quarterly to the Landlord. And Landlords do have the right to request and access your financial information.

Do online sales count towards Percentage Rent? The “Gross Sales” definition in the Lease must specifically include online sales, otherwise it’s silent and there are no clear guidelines on it. A successful online site that is bringing in sales, really has nothing to do with the Landlord’s premises unless the buyer browsed through the bricks and mortar store and made an online purchase at a later time. In any event, a tenant would want to have online sales either excluded in the Gross Sales definition and can use a clause similar to the following:

"Gross Receipts will exclude all internet, computer, telephone, online or electronic orders of merchandise regardless of where such orders are placed, received or delivered (except orders placed through registers within the Leased Premises which shall be included in Gross Receipts)."

And Landlords would want to include all online channels in the definition and can use a clause similar to the following:

"Gross Receipts will include the sale of all merchandise, goods or services leased or sold at, in or from the Leased Premises (whether or not filled at the Leased Premises) including any sales on electronic devices, computers, tablets or other technology."

January 23, 2020


Positional Negotiating

In positional or competitive bargaining, the negotiators begin with an exchange of positions. A position is a specific proposal or suggested solution. The negotiators usually then argue about why their position should be accepted. Concessions may or may not be made. If an agreement is reached, it is normally a compromise between two positions.

Interest Based Negotiation
In interest-based negotiation, the negotiators focus on each sides' interests and try to create options that will satisfy those interests. Interests are the underlying needs, desires, wants, goals, and concerns behind the positions.

Jan 2, 2020