A contract that requires a fixed minimum rent and a variable rent based on volume of business is called a ________ lease.

A lease that incorporates a fixed minimum rent along with a variable component based on the volume of business is specifically designed to align the landlord's interests with the tenant's performance. This type of lease incentivizes the tenant to increase sales, as their rent will adjust according to their business success. In this scenario, the landlord receives a guaranteed minimum amount, ensuring some income level, while potentially benefiting from an upside if the business flourishes.

This arrangement is especially common in retail spaces where sales can be directly tied to rent payments, making it a win-win situation for both parties. The landlord may generate more revenue during peak business times without requiring any direct investment, and tenants can also manage their rent more effectively during slower periods, as their costs are directly tied to earnings.

Other lease types do not share this structure. A fixed lease only entails a set rent amount, regardless of business performance. A net lease typically involves tenants paying a base rent plus some or all of the property’s operating expenses. A gross lease generally has the landlord covering all operating expenses, leading to a static rent amount without variation based on the tenant’s income. Thus, the characteristics of a percentage lease are distinct and crucial for businesses focused on sales-driven models.