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What does:For the first year the percentage rent should be 5% over a natural breakpoint of $588,800.00 in years 1-3 mean to me

Orlando, FL |

This is part of a contract/lease agreement and I was wondering if someone could explain it to me

Attorney Answers 1

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In a lease with a percentage rent provision, the landlord will receive a minimum amount of rent (called the annual fixed rent or annual minimum rent) and, in the event the tenant's gross sales increase over a certain amount (sometimes called the "breakpoint"), the landlord will also receive a certain percentage of the gross sales over the breakpoint. If the parties intend that the landlord should receive a certain percentage of the tenant's total gross sales, then a "natural breakpoint" will be used. A "natural breakpoint" is the amount of gross sales that, when multiplied by the applicable percentage, equals the amount of annual fixed rent [natural breakpoint x _____% = annual fixed rent]. Stated another way, it is determined by dividing annual fixed rent by the applicable percentage [natural breakpoint = annual fixed rent ÷ ____%].

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