# What are standard commercial lease terms?

## What are standard commercial lease terms?

A typical commercial lease is a “5 and 5”, meaning a 5 year lease, with an option to renew for another 5 years. Options usually must be exercised by writing a letter to the landlord some months before the initial lease term expires, expressly exercising the option.

What is a breakpoint in commercial lease?

Breakpoint: Natural or Fixed A ‘natural’ breakpoint reflects the amount of Gross Sales which, when multiplied by the Overage Percentage, equals Base Rent (stated differently, a natural breakpoint is calculated as Base Rent divided by the Overage Percentage). The Overage Percentage is stated in the lease.

### Can you negotiate commercial lease?

They set hefty monthly rents and include critical terms that favor the ongoing management of their properties. However, you can negotiate nearly all the terms in your commercial real estate lease. This is more important if you don’t want to make mistakes that could tank your business.

How is percentage lease calculated for a commercial property?

The formula is (Gross Sales – Artificial Break Point x % = Percentage Rent). If tenant’s Gross Sales are \$3,000,000, then the tenant would pay landlord 6% of \$1,750,000 (\$3,000,000 (Gross Sales) – \$1,250,000 (Artificial Breakpoint) = \$1,750,000 x 6% = \$105,000 (Percentage Rent for Year 1).

## How is the break even point calculated for a percentage lease?

A common method for determining percentage rent is to use a natural breakpoint. A natural breakpoint is calculated by dividing the base rent by an agreed percentage. The percentage rent payable by a tenant will then be equal to this percentage multiplied by the amount by which gross sales exceeds the breakpoint.

What is a typical percentage lease?

Percentage rent is usually about 7 percent A percentage lease is a lease that requires a commercial space tenant to pay a “base rent” and, on top of that, to pay the landlord a percentage that is based on the business owner’s monthly sales volumes. Percentage leases are commonly executed in retail mall outlets.