Percentage rent is additional rent based on a share of tenant sales above a set breakpoint.
Percentage rent is more common with retail tenants. The tenant pays base rent plus a percentage of gross sales above a threshold, called the breakpoint. For investors it offers the potential for extra income but is less predictable than base rent. Many buyers underwrite using only base rent and treat percentage rent as upside. The lease should explain how sales are reported and whether the landlord has the right to audit.