How to use the percentage rent breakpoint calculator
- Enter the yearly base rent and the percentage rate from the lease.
- Enter the gross sales for the year.
- If the lease sets its own breakpoint, enter it. Leave the box blank to use the natural breakpoint.
- Read the percentage rent owed, the breakpoint and the total rent.
Formula
Natural breakpoint = base rent / percentage rate
Percentage rent = (sales - breakpoint) x rate, never below 0
Total rent = base rent + percentage rent
At the natural breakpoint the percentage rate on all sales equals the base rent, so a tenant pays only the base rent below it.
A shop with $120,000 base rent
The base rent is $120,000 a year and the percentage rate is 6%. The natural breakpoint is $120,000 / 0.06 = $2,000,000 of sales.
With sales of $2,500,000 the sales above the breakpoint are $500,000, so the percentage rent is $30,000 and the total rent is $150,000, which is 6.00% of sales. With sales of $1,500,000 nothing is owed beyond the base rent.
Why leases use a breakpoint
Some retail leases tie part of the rent to how well the tenant sells. The landlord gets a fixed base rent for certain income and a share of sales above a threshold. Setting the threshold at base rent divided by the rate is natural, because below that level the share of sales would be less than the base rent already paid.
A landlord and tenant can agree an artificial breakpoint higher or lower than that. A higher one favors the tenant, since less of the sales count, and a lower one favors the landlord. Compare both in the calculator before you agree one.
Details the lease decides
Leases differ on what counts as gross sales. Returns, taxes, gift cards, online orders and sales by subtenants are treated in different ways. They also differ on whether the base rent is credited against percentage rent, how often it is settled and whether the breakpoint is prorated in a partial year.
This page uses the simplest form, in which the percentage rent is added to the base rent. If your lease works another way, use the figures as a first estimate and read the clause. The page is not legal advice.
Assumptions and limits
- Sales, base rent and breakpoint all cover the same one-year period.
- The percentage rent is added to the base rent. No credit or cap is applied.
- The rate must be above 0 so the natural breakpoint exists.
- The figures are examples. Nothing is uploaded.
Frequently asked questions
What is an artificial breakpoint?
A threshold that the landlord and tenant negotiate instead of using base rent divided by the rate. Enter it in the optional box.
Is percentage rent charged on all sales?
Not usually. Under a breakpoint lease it is charged only on sales above the breakpoint.
Can I use monthly figures?
Yes, if base rent, breakpoint and sales are all monthly. Mixing a yearly base rent with monthly sales gives a wrong result.
Does this include taxes or other charges?
No. Only base rent and percentage rent. Add taxes and shared costs separately.