Magazine article Journal of Property Management

The Percentage Lease: A Necessity during the Depression

Magazine article Journal of Property Management

The Percentage Lease: A Necessity during the Depression

Article excerpt

"Store Leases," by A.E. MacDougall in the February 1937 JPM[R] issue provides historical insight on the percentage lease. During the Great Depression, landlords had to negotiate percentage leases with extremely low minimum payments or even "no minimum" percentage leases to promote development of new shopping areas.

"The percentage lease without a guaranteed minimum is a product of the Depression," MacDougall wrote. "New shopping zones have been created by the device of the percentage lease."

Although landlords resorted to percentage leases throughout the Depression to garner new retail tenants, MacDougall wrote this type of lease was received coldly at first. Tenants' potential accounting errors, the prospect of unstable revenue and the unfavorable effect percentage leases had on resale value were cited among the top reasons for proceeding with caution when negotiating a percentage lease. MacDougall said, "If you have a poorly located property or one erected in advance of shopping requirements, then a percentage lease without a minimum may be of assistance--but there is no excuse for it in a sound shopping zone. …

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