What type of lease requires the tenant to pay a base rent and a percentage of their business profits?

A percentage lease is specifically designed for commercial tenants, particularly in retail settings. This type of lease usually entails a base rent plus a variable component that is calculated as a percentage of the tenant's gross sales or profits. The rationale behind this arrangement is to align the interests of both the landlord and tenant; as the tenant's business flourishes and sales increase, the landlord also benefits from a share of that success.

This type of lease structure is commonly found in shopping malls or retail centers where landlords seek to encourage tenants to maximize their sales, creating a symbiotic relationship. The base rent provides the landlord with a steady income while the percentage component allows them to benefit as the tenant's profitability rises.

In contrast, the other types of leases have different structures: a fixed lease typically involves a set rental amount without adjustments; a gross lease requires the landlord to cover most operating expenses, usually not tied to tenant revenues; and a net lease places some or all property expenses on the tenant, not including a revenue-sharing component.