percentage lease
Percentage Lease is a shop rent deal where you pay a base amount plus a slice of your sales, so the landlord earns more when your business does well.
In plain English
A man renting a small flat in Yaba pays ₦900,000 a year, full stop, whether he stayed indoors all year or travelled every weekend. His rent does not care how his life is going. Now put a boutique in a busy Lagos mall right beside him. That boutique might pay a lower fixed rent, but on top of it, the owner hands over a slice of whatever the shop sells every month. Two tenants, two very different relationships with rent, and the difference is what we call a percentage lease.
A percentage lease is common in shopping malls, plazas and busy retail spots where the landlord's fortune is tied to the tenant's hustle. The tenant pays a base rent, usually modest, and then an agreed percentage of monthly or yearly sales on top. So if business is booming, the landlord smiles wider too. If business is slow, the landlord feels it as well, though the base rent still cushions them from total loss.
This arrangement is popular because it spreads the risk. A new boutique owner in Ikeja City Mall may not want to commit to a huge fixed rent before knowing if the location will pull customers. The mall owner, in turn, wants a landlord's version of a bonus when the shop does well. Everyone has skin in the game.
In the United Kingdom, you see similar setups in some shopping centres and airport retail units, where big brands like a coffee chain might pay a base rent plus a percentage of turnover, especially in high footfall spots like Heathrow.
For a Nigerian abroad thinking of investing in a plaza back home, understanding percentage leases matters. It changes how you calculate your expected income, because your return is not fixed, it moves with how well your tenants are trading.
A shop in a Lekki plaza signs a percentage lease with a base rent of ₦2,000,000 a year, plus 6% of monthly sales above ₦1,500,000. In a good month, the shop sells ₦3,000,000, so it owes an extra 6% on the ₦1,500,000 difference, which is ₦90,000, on top of the monthly base rent portion.
Questions people ask
Is a percentage lease only for shops and malls?
Mostly yes. It works best for retail businesses where sales can be tracked easily, like fashion stores, supermarkets, restaurants and boutiques inside malls or plazas. It is rarely used for offices or homes.
How does the landlord know the real sales figures?
The lease agreement usually requires the tenant to submit regular sales reports, and many landlords reserve the right to audit the tenant's books or till records to confirm the figures are accurate.
Is a percentage lease better or worse than a fixed rent?
It depends on your business. If you expect strong sales, a fixed rent might save you money. If you are unsure how the location will perform, a percentage lease with a lower base rent can reduce your risk while you find your feet.
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