Percentage Rent - Contract Module

You can add, edit, and delete Percentage Rent Records.

1. Click Add Item in the Actions menu on the rightmost side of the page.

2. Complete the form:

   • Sales Group: Select the sales group to associate this percentage rent record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Description

   • Rent Year Start Month: Select the start month of the rent year.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Partial Term: Select if the term length is greater than 12 months but less than 2 years.
   • Trailing 12 months: Use a full 12 months of sales and your annual breakpoint to calculate the prorated amount due, even if the full 12 months is not within the same fiscal year.
   • Right to audit: Select if your landlord has the right to audit your percentage rent.

   • Payment Frequency

   • Reporting Frequency

   • Period Payment Due Day

   • Period Report Due Day

   • Annual Payment Due Day

   • Annual Report Due Day

   • Expense Group: Create a new group or category. Groups are the first level of organization in Lucernex. Groups are the parents of types, and grandparents of categories. Groups, types, and categories are used to simplify reporting.

   • Expense Type: If none are listed, add an expense type.

   • Currency Type

   • Cap Frequency: Select the frequency to apply. If you had a max cap of $100,000.00, the cap frequency could determine whether that cap is applied monthly, quarterly, or annually.

     If no cap frequency is specified, the cap amount is assumed to be the amount that applies for each percentage rent payment period. For example, if percentage rent is paid monthly and a $500 cap is specified, the system assumes that the cap is applied monthly if the frequency is not set.

   • Min Cap (Floor): Enter the minimum payment required. This is used to capture the rent payment that is required regardless of sales performance. This value is in fact a “de facto base rent" and must be included in your accounting schedules.

     You can see this value in your expense forecast on the Contract Expense Forecast page. This value impacts ASC 842, IFRS 16, and GASB 87. It does not impact Straight Line (ASC 840) schedules.

   • Max Cap (Ceiling): Enter the maximum payment allowed.

   • Calculation Method: The calculation method you select impacts the values displayed in the Lease YTD and Breakpoint columns on the Percentage Rent Schedule pages.

     • Annual: The annual breakpoint is compared against the annual sales. Percentage rent is paid in the final month of the year.

     • Annual Gross-Up: The Year-to-Date (YTD) sales are compared against a YTD breakpoint. Percentage rent is paid according to the payment frequency specified.

     • Cumulative: The YTD sales are compared against the annual breakpoint. Percentage rent is paid according to the payment frequency specified.

     • Per Period: Period sales are compared to the prorated breakpoint. Percentage rent is paid according to the payment frequency specified. The Per Period calculation for artificial breakpoints in a partial year is:

       Annual Amount / Number of Periods = Per Period Amount

       The Per Period calculation for partial periods where the Begin or End date of the contract does not fall on the first or last day of the month respectively is:

       Number of days in the first OR last month of the lease * (Per Period Amount / total days in month)

     • Period Gross-Up: Period sales are compared to the prorated breakpoint for the first 11 months of the year. In the final period, the total annual sales are compared against the annual breakpoint. Percentage rent is paid according to the payment frequency specified. Potential credits will only be generated in the final period of the term.

     View our Percentage Rent Calculation Method Examples.

   • Breakpoint Type:

     • Natural Breakpoint: Use when the tenant will not pay percentage rent until they know they have enough sales to cover base rent. The payment rate is the amount of sales that is allocated for paying base rent.

       View our Percentage Rent Natural Breakpoint Examples.

     • Artificial Breakpoint: Used when the landlord sets a sales amount that, when exceeded, the tenant must pay percentage rent. The breakpoint amount is a set amount specified in the contract. The payment rate is how much the tenant will need to pay when sales exceed the breakpoint.

       View our Percentage Rent Artificial Breakpoint Examples.

     • Count Based Rate: Used when the tenant bases their breakpoints on the number of units sold, rather than the dollar amount. An example of this scenario could be a movie theater basing their percentage rent on number of tickets sold.

3. At the bottom of the page, complete the remaining fields:

   • Comments

   • Covenant: Select a covenant to associate with your percentage rent record.

   • Section: Enter the section of the document that is associated with your percentage rent record.

   • Amendment: Select if this percentage rent record is associated with an amendment.

     To view amendment information, select an amendment then click View .

4. Click Save Changes in the Actions menu on the rightmost side of the page.

5. Create Breakpoints, Sales Exclusions, Sales Exclusion Caps, and Offsets.

6. Repeat these steps to add additional percentage rent records.

Edit a Percentage Rent Record

1. Select the percentage rent record you want to change from the Contract Percentage Rent List.

2. Edit Percentage Rent Information.

3. To edit a Breakpoint, Exclusion, Sales Exclusion Cap, or Offset click Edit in the Actions column of the record, make your changes, then click Update.

4. To delete a Breakpoint, Exclusion, Sales Exclusion Cap, or Offset click Delete in the Actions column of the record, then click Yes.

5. Click Save Changes in the Actions menu on the rightmost side of the page.

   The percentage rent record updates.

Delete a Percentage Rent Record

1. Select the percentage rent record you want to delete from the Contract Percentage Rent List.

2. Click Delete Item in the Actions menu on the rightmost side of the page.

3. Click Yes in the confirmation dialog.

   The percentage rent record is removed.

Breakpoints determine when tenants pay percentage rent. You can add, edit, or delete percentage rent breakpoint records.

Lucernex supports up to eight breakpoints, although only three display by default.

Before you add breakpoints, select the Breakpoint Type when you add or edit the percentage rent record so the system displays the Add Percentage Rent Breakpoint window.

Add Artificial Breakpoints

Use artificial breakpoints when the landlord sets a sales amount that, when exceeded, the tenant must pay percentage rent. The breakpoint amount is a set amount specified in the contract. The payment rate is how much the tenant will need to pay when sales exceed the breakpoint.

View our Percentage Rent Breakpoint Examples.

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Select Artificial Breakpoint for the Breakpoint Type.

3. Click Save Changes.

4. Click Add Percentage Rent Breakpoint in the Breakpoints table.

   The Add Percentage Rent Breakpoint window opens.

5. Complete the form:

   • Sales Group: Select the sales group to associate this breakpoint record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Portioned Sales Group. Select the portioned sales group.

   • Description

   • Breakpoint Amounts: Enter the breakpoint amounts #1 - #8.

   • Payment Rate: Enter the payment rates for the breakpoint amounts as a percentage.

   • Notes

6. Click Add.

   The window closes. The breakpoint displays in the Breakpoints table.

7. Repeat the steps in this section to add additional artificial breakpoints.

8. Click Save Changes in the Actions menu on the rightmost side of the page.

Add Natural Breakpoints

Use a natural breakpoint when the tenant will not pay percentage rent until they know they have enough sales to cover base rent. The payment rate is the amount of sales that is allocated for paying base rent.

Any recurring expense with an expense category of Rent is included in Natural Breakpoint calculations. View our Percentage Rent Natural Breakpoint Examples.

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Select Natural Breakpoint for the Breakpoint Type.

3. Click Save Changes.

4. Click Add Percentage Rent Breakpoint in the Breakpoints table.

   The Add Percentage Rent Breakpoint window opens.

5. Complete the form:

   • Sales Group: Select the sales group to associate this breakpoint record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Portioned Sales Group. Select the portioned sales group.

   • Description

   • Breakpoint Amounts: Enter the breakpoint amounts #1 - #8.

   • Payment Rate: Enter the payment rates for the breakpoint amounts as a percentage.

   • Natural Rate: Percent of each dollar you must allocate to meeting your base rent. After you meet your base rent, you begin to pay your percentage rent. For example, if a tenant knows that for every dollar they make, 5% or 5 cents of that dollar must go to base rent, they enter their natural rate as . 05.

   • Notes

6. Click Add.

   The window closes. The breakpoint displays in the Breakpoints table.

7. Repeat the steps in this section to add additional artificial breakpoints.

8. Click Save Changes in the Actions menu on the rightmost side of the page.

Add Count-Based Breakpoints

Use count-based breakpoints when the tenant bases their breakpoints on the number of units sold, rather than the dollar amount. An example of this scenario is a movie theater basing their percentage rent on number of tickets sold.

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Select Count Based Rate for the Breakpoint Type.

3. Click Save Changes.

4. Click Add Percentage Rent Breakpoint in the Breakpoints table.

5. The Add Percentage Rent Breakpoint window opens.

6. Complete the form:

   • Sales Group: Select the sales group to associate this breakpoint record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Portioned Sales Group. Select the portioned sales group.

   • Description

   • Breakpoint Amounts: Enter the breakpoint amounts #1 - #8.

   • Unit Count: Number of units that must be sold per breakpoint.

   • Payment Rate: Enter the payment rates for the breakpoint amounts as a percentage.

   • Notes

7. Click Add.

   The window closes. The breakpoint displays in the Breakpoints table.

8. Repeat the steps in this section to add additional count-based breakpoints.

9. Click Save Changes in the Actions menu on the rightmost side of the page.

If you are using aliases or portioned sales groups and you want to exclude a specific sales type, you must add exclusion records for all sales groups with that sales type.

For example:

• Blackwood Furniture has two sales groups: Sales and the other is Sales-Marketing.

• The Sales-Marketing sales group has the Sales group as an alias.

• Blackwood Furniture wants to exclude the Returns sales type from percentage rent.

• Blackwood Furniture creates two Sales Exclusion records: one for Sales with a sales type of Returns, and another for Sales-Marketing with a sales type of Returns.

• The Returns sales type is excluded from percentage rent for Sales and Sales-Marketing.

A Sales Exclusion is a sales type that is excluded from percentage rent calculations until it meets a preset cap. Sales exclusions have individual caps, or they can be subject to a group cap if they belong to a Sales Exclusion Cap group.

Sales exclusions can be grouped under sales exclusion caps. To determine whether the cap of the sales exclusion cap has been met, you must sum the sales of each of the sales exclusions which belong to the sales exclusion cap group.

Exclusions reduce Net Sales.

For example:

• Employee Sales and Shipping & Handling are sales types line items that belong to sales exclusion cap Group A.

• Group A is not included in Blackwood Inc.'s percentage rent unless the sum of Employee Sales and Shipping & Handling exceeds $10,000.00.

• However, Employee Sales and/ or Shipping & Handling can be included in percentage rent if they exceed their individual line item caps. For Employee Sales, the cap is $5,000.00. For Shipping & Handling, the cap is $8,000.00.

Add a Sales Exclusion

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Click Add Sales Exclusion in the Exclusions section.

   The Add Sales Exclusion window opens.

3. Complete the form:

   • Sales Group: Select the sales group to associate this sales exclusion record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Sales Type: Select the sales type to associate this sales exclusion record with. Add a Sales Type if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Exclusion Rate: Enter a percentage of the specified sales type.

   • Cap Percent or Cap Amount: Enter a value in one of the fields.

   • Currency Type

   • Exclusion Group

   • Notes

4. Click Add.

   The window closes. The sales exclusion appears in the Exclusion Caps table.

5. Repeat the steps in this section to add additional sales exclusions.

6. Click Save Changes in the Actions menu on the rightmost side of the page.

Sales Exclusion Caps are groups of Sales Exclusions line items with a cap. To determine whether the cap has been met, you must sum the sales of each of the sales exclusions which belong to the group.

For example:

• Employee Sales and Shipping & Handling are sales type line items that belong to sales exclusion cap Group A.

• Group A is not included in Blackwood Inc.'s percentage rent unless the sales totals of Employee Sales and Shipping & Handling exceed $10,000.00.

• At the end of the term, the sales for the Employee Sales sales type is $4,000.00, while the sales for the Shipping & Handling sales type is $7,000.00.

• Because the sales total for the Employee Sales and Shipping & Handling sales types exceeded Group A's $10,000 cap, these sales must be included in Blackwood Inc.'s percentage rent.

Exclusion caps are not applied until the final period of the term.

Add a Sales Exclusion Cap

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Click Add Sales Exclusion Cap in the Exclusions section.

   The Add Sales Exclusion Cap window opens.

3. Complete the form:

   • Sales Group: Select the sales group to associate this sales exclusion cap with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Exclusion Group: If necessary, create a new group or category.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Cap Percent or Cap Amount: Enter a value in one of the fields.

     Cap Percent is a percentage of Gross Sales.

   • Currency Type

   • Notes

4. Click Add.

   The window closes. The sales exclusion appears in the Sales Exclusion Cap table.

5. Repeat the steps in this section to add additional sales exclusion caps.

6. Click Save Changes in the Actions menu on the rightmost side of the page.

Offsets reduce the Payment Amount after all other adjustments such as caps and exclusions are accounted for. Expense offsets are applied to the total transaction amount created for an expense group and type for a period.

Add an Offset

1. Select the percentage rent record from the Contract Percentage Rent List.

2. Click Add Expense Offset in the Offsets section.

   The Add Expense Offset window opens.

3. Complete the form to create a Fixed Adjustment or a Calculated Adjustment:

   • Sales Group: Select the sales group to associate this sales exclusion record with. Add a Sales Group if none are available for selection. You can track sales and add sales data on the Sales tab.

   • Begin Date and End Date: Click Calendar to open the Date Picker and select the date.

   • Fixed Adjustment: Fixed Offsets are applied according to the Payment Frequency selected for the Percent Rent record. Only fields relevant to fixed adjustments are active. Other fields are unavailable.

     • Fixed Offset Amount

     • Offset Group: Create a new group or category.

     • Offset Type: Create a new group or category.

     • Currency Type

   • Calculated Adjustment: Only fields relevant to fixed adjustments are active. Other fields are unavailable.

     • Expense Group: Create a new group or category.

       Groups are the first level of organization in Lucernex. Groups are the parents of types, and grandparents of categories. Groups, types, and categories are used to simplify reporting.

     • Expense Type

     • Offset Group: Create a new group or category.

     • Offset Type: Create a new group or category.

     • Cap Percent / Cap Amount:

       • Enter Cap Percent to cap the percentage rent offset at a specific percentage of the total transaction amount created for an expense group and type for the period.

       OR

       • Enter Cap Amount to cap the percentage rent offset at a specific amount of the total transaction amount created for an expense group and type for the period.

   • Currency Type

   • Notes

4. Click Add.

5. Repeat the steps in this section to add additional offsets.

6. Click Save Changes in the Actions menu on the rightmost side of the page.