Capture Gross Sales from All Tenants That Fill Specific Space

Gross sales clauses can be very lucrative for owners because they aren’t limited to collecting just base rent—the percentage of sales a tenant must hand over could potentially be more than its actual rent. But a problem crops up for you when other tenants use the named tenant’s space. You might not be able to collect a percentage of their sales—unless you’ve specified in the lease that you have the ability to do so.

What can you do to protect your interests? If you want a tenant to include all sales and receipts generated from a space—including those generated by subtenants and occupants—don’t define “gross sales” as the sales or receipts of the named tenant in and from the space.

Instead, base the “gross sales” definition on sales and receipts of all business conducted at, on, or from any part of the space by “Tenant and Tenant’s Occupants.” Ask your attorney about using this language in the gross sales provision in your lease:

Model Lease Language

“Gross Sales” shall mean the aggregate amount of the actual rental or sales price, whether wholly or partly for cash, credit, or otherwise, of all merchandise, tickets, food, beverages, and services sold, leased, licensed, or delivered whatsoever of all business conducted at, on, or from any part of the Premises by Tenant and Tenant’s Occupants.

You’ll have to define “Tenant” and “Tenant’s Occupants” elsewhere in the lease. To capture all of the gross sales, don’t narrowly define “Tenant” as the name of the original tenant that signed the lease. Instead, make sure “Tenant” includes not only the original tenant but also all successors and permitted assignees. And define “Tenant’s Occupants” to include all concessionaires, licensees, subtenants, and anyone else holding rights to any part of the tenant’s space.

By using these broader definitions of gross sales, tenant, and tenant’s occupants, you have the legal right to require a tenant to pay percentage rent based on the tenant’s, subtenant’s, and all other occupants’ gross sales and receipts generated at, on, or from the space.