New York State Real Estate Salesperson Licensing Exam

In which scenario would a percentage lease be most commonly used?

1. Renting an apartment

2. Leasing office space

3. Leasing a retail store

4. Subletting a residential unit

The correct answer is: Leasing a retail store

A percentage lease is most commonly used in the context of leasing retail space. This type of lease involves the tenant paying a base rent plus a percentage of their gross sales or revenue generated from the business operating in that space. Retailers benefit from this arrangement because it aligns their rent expenses with their revenue. If business is good, they pay more, but if sales are slow, their rent reflects that downturn. In contrast, renting an apartment typically involves a fixed lease where the rent remains constant, without any relation to the tenant's income or revenue generating ability. Leasing office space also usually employs a fixed or modified gross lease structure rather than a percentage lease, as office tenants may not have sales figures directly tied to their rent. Subletting a residential unit does not usually involve a percentage lease either; it tends to be strictly between the original tenant and subtenant, often based on a fixed rental amount.