Get Percentage Rent on ATM Revenues

June 30, 2005

If your retail tenants have installed an automated teller machine (ATM) in their spaces, chances are you're not collecting all the percentage rent you're entitled to. The percentage rent clause in your lease, like many we've seen, probably doesn't specifically mention ATM fees in its definition of “gross sales.” This loophole means that your tenants might not include the ATM fees they collect in the gross sales amount used to calculate their percentage rent. But ATM fees can really add up—as can the percentage rent you're losing.

If your retail tenants have installed an automated teller machine (ATM) in their spaces, chances are you're not collecting all the percentage rent you're entitled to. The percentage rent clause in your lease, like many we've seen, probably doesn't specifically mention ATM fees in its definition of “gross sales.” This loophole means that your tenants might not include the ATM fees they collect in the gross sales amount used to calculate their percentage rent. But ATM fees can really add up—as can the percentage rent you're losing.

ATMs Grow in Popularity

Nowadays, ATMs aren't just in banks; they're in restaurants, bars, dry cleaners, supermarkets, wholesale goods stores, delicatessens, cash-only establishments, and nearly every other retail setting. ATMs are a convenience to retail customers (who need quick access cash). Plus, they're an extra source of revenue for tenants because customers pay a fee for using the machine. And the tenant and bank each collect a portion of that fee.

How to Plug Percentage Rent Loophole

There's no reason to stop tenants from installing ATMs in their spaces. But you want to make sure you don't lose out on percentage rent in the process, says international financial management consultant Kenneth S. Lamy. To get all the percentage rent you're entitled to, have the lease require your percentage rent tenant to include its portion of the ATM fees collected in its gross sales when calculating percentage rent, says Lamy. If the lease doesn't mention ATM fees, and a dispute arises, a tenant could argue—and a court could agree—that these fees aren't meant to be included in gross sales.

Add the following language to the section of the lease's percentage rent clause where it lists the items included in gross sales: CLLI0076

Model Lease Language

(x) All fees and revenues collected by Tenant that are generated by the use of automated teller machines (ATMs) located within the Premises.

CLLI Source

Kenneth S. Lamy: President, The Lamy Group, Ltd., 650 Poydras St., Ste. 2245, New Orleans, LA 70130; (504) 525-9914; kslamy@thelamygroup.com.

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