In a percentage lease, what does the percentage typically relate to?

In a percentage lease, the percentage typically relates to sales revenue. This type of lease is common in retail and commercial properties, where the tenant pays a base rent amount plus a percentage of their sales made at the leased premises. This arrangement aligns the interests of both the landlord and tenant; as the tenant's sales increase, so do the landlord's earnings from the property through the additional percentage rent.

This setup encourages the landlord to support the tenant’s success, as higher sales for the tenant result in greater revenue for both parties. It also helps tenants manage their fixed costs because they pay a lower base rent when their sales are down, making it a more flexible option during fluctuating market conditions.

The other options, while related to leasing, do not appropriately define the core mechanism of a percentage lease. Monthly payments usually refer to fixed amounts that remain consistent irrespective of a tenant's sales. Property appreciation is related to changes in market value over time and is not directly tied to the lease structure. Market rent refers to the amount a property could theoretically be leased for in the open market, which is distinct from the revenue-based calculations seen in a percentage lease.