What should be included in a lease agreement for it to qualify as a valid percentage lease?

In a valid percentage lease, it is essential to include a clear base rent amount alongside a percentage of sales. This type of lease structure is common in commercial real estate, particularly for retail spaces, where the landlord receives a base rental fee plus a percentage of the tenant's gross sales. This arrangement not only motivates the landlord to support the success of the tenant's business but also aligns the landlord's interest with the tenant's performance.

A percentage of sales allows the rent to adjust based on the tenant's performance, providing a more equitable arrangement for both parties. The inclusion of a base rent ensures that the landlord has a guaranteed income even if the tenant's sales fluctuate. Without specifying both elements—the base rent and the percentage of sales—the lease would not meet the criteria of a percentage lease and could lead to disputes about terms later on.

Other options, while relevant in the context of leases, do not define the structure of a percentage lease. For example, property taxes and utility payment obligations may certainly be part of a commercial lease but are not specific requirements for creating a valid percentage lease. Restrictions on tenant businesses might be included for various reasons, but again, they do not pertain directly to the defining aspect of a percentage lease's validity.