Florida Real Estate Broker ExaminationProperty Management and LeasingMedium
A property manager is negotiating a new lease for a commercial retail space. The tenant proposes a percentage lease where the rent is 5% of gross sales, with a minimum base rent of $2,000 per month. If the tenant's average monthly sales are projected to be $60,000, what would be the total annual rent under this agreement?
- A$36,000
- B$48,000
- C$60,000
- D$24,000
Show answer & explanationAnswer & explanation
Correct answer: A. $36,000
First, calculate the percentage rent ($60,000 * 0.05 = $3,000). Since this is greater than the minimum base rent of $2,000, the tenant will pay the percentage rent. Multiply the monthly rent by 12 to get the annual rent ($3,000 * 12 = $36,000).
Why the other options are wrong
- B. This might be a miscalculation, perhaps doubling the base rent or confusing monthly with annual figures.
- C. This would be the total annual sales, not the rent.
- D. This only accounts for the minimum base rent annually ($2,000 * 12).
Percentage Lease
A lease agreement where the rent is based on a percentage of the tenant's gross sales, often with a minimum base rent.
- Common in retail properties.
- Rent fluctuates with tenant's business performance.
- Often includes a 'breakpoint' or minimum base rent.
Memory trick: Percentages of sales, but always cover your base!