National Real Estate Exam (PSI)ContractsMedium
A tenant operates a retail store under a percentage lease requiring a base rent of $2,000 per month plus 5% of annual gross sales exceeding $100,000. If the store's gross sales for the year total $180,000, what is the tenant's total annual rent?
- A$9,000
- B$24,000
- C$33,000
- D$28,000
Show answer & explanationAnswer & explanation
Correct answer: D. $28,000
Base rent is $2,000 × 12 = $24,000. Sales exceeding the $100,000 threshold equal $180,000 − $100,000 = $80,000. Percentage rent is 5% × $80,000 = $4,000. Total annual rent = $24,000 + $4,000 = $28,000.
Why the other options are wrong
- A. This reflects only the percentage rent portion, ignoring the base rent.
- B. This is only the base rent, omitting the percentage rent component.
- C. This overstates the calculation, possibly by applying 5% to total sales instead of the excess.
Percentage Lease
A commercial lease structure where rent includes a base amount plus a percentage of the tenant's gross sales, often above a specified breakpoint.
- Common in retail and shopping center leases
- Percentage typically applies only to sales exceeding a breakpoint
- Total rent = base rent + (percentage × sales over breakpoint)
Memory trick: Base rent is the floor; percentage rent is the bonus above the ceiling threshold.