A percentage lease is undoubtedly the most complex type of commercial lease, because the provisions that must be added to specify how the rent is calculated are directly related to the lessee's sales.

While it may seem that a percentage lease only benefits the lessor because rent is affected by the lessee's sales, it also benefits the lessee, because it ensures the lessor's interest in the lessee's business success. For example, the lessor may avoid renting an adjacent space to a prospective tenant that operates a similar business to ensure that the lessee's sales are not adversely affected.

We recommend using this legal document to lease space in the retail sector, most often in a shopping centre. This document can function as a standard percentage lease that the lessor may use with all its tenants to standardize the management of the centre(s) and its relationships with the tenants.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Breach
0.01.03 Building
0.01.04 Claim
0.01.05 Common Areas
0.01.06 Confidential Information
0.01.07 Dispute
0.01.08 Encumber / Encumbrance
0.01.09 Force Majeure
0.01.10 Hazardous Materials
0.01.11 Immovable
0.01.12 Land
0.01.13 Law
0.01.14 Lease
0.01.15 Leased Premises
0.01.16 Leasehold Improvements
0.01.17 Legal Representatives
0.01.18 Loss
0.01.19 Operating Costs
0.01.20 PARTY
0.01.21 Person
0.01.22 Prime Rate
0.01.23 Property
0.01.24 Property Taxes
0.01.25 Proportionate Share
0.01.26 Rent
0.01.27 Sales
0.01.28 Total Rentable Space
0.02 Entire Agreement
0.03 Applicable Law
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Knowledge
0.05.09 Approval
0.05.10 Accounting Standards
1.00 PURPOSE
1.01 Lease
1.02 Taking of Possession
1.03 Conditions
1.03.01 Required by OWNER
1.03.02 Required by TENANT
1.03.03 Election
2.00 CONSIDERATION
2.01 Base Rent
2.01.01 Monthly
2.01.02 Renewal
2.02 Additional Rent
2.02.01 Proportionate Share
2.02.02 Occupancy Rate
a) Increase
b) Limit
2.03 Percentage Rent
2.04 Estimated Value
3.00 TERMS OF PAYMENT
3.01 Base Rent
3.01.01 General
3.01.02 Deposit
3.02 Additional Rent
3.02.01 First Year
3.02.02 Revised Estimates
3.02.03 Subsequent Years
3.03 Adjustment
3.03.01 Report
a) Issued Annually
b) Payment or Reimbursement
3.03.02 Contesting
a) Notice of Objection
b) Access
c) Negotiation
d) Independent Auditor
3.04 Percentage Lease
3.04.01 Payment
a) Fixed Payment
b) Payments Outside Fixed Dates
3.04.02 Sales Reports
3.04.03 Books and Records
a) Accounting
b) Safe Keeping
c) Recording Sales
d) Failure to Remit
3.04.04 Objection
a) Notice of Objection
b) Access
c) Negotiation
d) Independent Auditor
3.05 Place of Payment
3.06 Interest
3.07 Waiver of Compensation
3.07.01 By TENANT
3.07.02 By OWNER
3.08 Loss of Term
4.00 SECURITY
4.01 Movable Hypothec With Delivery [OR Without Delivery]
4.02 Suretyship
4.03 Letter of Credit
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Status
5.02 Authority
5.03 Binding Agreement
5.04 Canadian Resident
5.05 Commission
5.06 Insurance
5.07 Nominee
5.08 Independent Advice
5.09 Disclosure
5.10 Legal Proceedings
5.11 Repairs to Leased Premises
6.00 REPRESENTATIONS AND WARRANTIES OF TENANT
6.01 Sole Ownership
6.02 Good Title
6.03 Right to Lease
6.04 Construction
6.05 Permits
6.06 Legal Activities
6.07 Latent Defects
6.08 Additional Rent
6.08.01 Annual Estimate
6.08.02 Previous Years
6.08.03 Previous Increases
6.08.04 Objections
6.09 Condition of Leased Premises
6.10 Bankruptcy
6.11 Occupancy Rate
6.12 Environment
6.12.01 Environmental Laws
a) Compliant Activities
b) Compliant Place of Operations
6.12.02 Contravention
6.12.03 Hazardous Materials
7.00 REPRESENTATIONS AND WARRANTIES OF OWNER
7.01 Condition of Leased Premises
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Confidential Information
8.01.01 Undertaking
8.01.02 Duration of Undertaking
8.01.03 End of Lease
a) Request for Return
b) Destruction
8.01.04 Penalty
8.02 Continuation of Representations and Warranties
8.03 Indemnification
8.03.01 Scope
8.03.02 Procedure
8.03.03 Third-Party Claim
8.03.04 Duration of Representations and Warranties
8.03.05 Deductible
8.03.06 Limitation
8.04 Disclosure of Lease
8.04.01 Undertaking
8.04.02 Public Announcement
8.04.03 Exception
8.04.04 Default
8.05 Periodic Meetings
8.06 Further Assurances
8.07 Limitation on Liability
9.00 DUTIES AND OBLIGATIONS OF OWNER
9.01 Required Work
9.02 Condition of Leased Premises
9.02.01 Upon Delivery
9.02.02 Maintenance and Repair
9.03 Condition of Immovable
9.03.01 Work
9.03.02 Minimal Disruption
9.04 Eviction
9.05 Quiet Enjoyment of Premises
9.05.01 Co-Tenant
9.05.02 Third Parties
9.05.03 Defence
9.05.04 Indemnification
9.05.05 Penalty
9.06 Limitation on Liability
9.07 Safety
9.08 Guarantee by Hypothecary Creditor
9.09 Insurance Policies
9.09.01 Coverage
9.09.02 Certificates
9.10 Services
9.11 Exclusivity
9.12 Sale of Immovable
9.13 Personal Information
10.00 DUTIES AND OBLIGATIONS OF TENANT
10.01 Non-Solicitation of Personnel
10.01.01 Scope of Undertaking
10.01.02 Breach of Undertaking
a) Automatic Penalty
b) Payment
c) Protective Measures
10.02 Non-Solicitation of Clients
10.02.01 Scope of Undertaking
10.02.02 Breach of Undertaking
a) Automatic Penalty
b) Payment
c) Protective Measures
10.03 Acknowledgement
10.04 Acceptance of Leased Premises
10.04.01 Notice
10.04.02 Assumption
10.05 Electricity Costs
10.06 Activities
10.07 Insurance
10.07.01 Acknowledgement
10.07.02 Insured Risks
10.07.03 Conditions
10.07.04 Increased Risks
10.07.05 Hazardous Materials
10.07.06 Copies of Insurance Policies
a) Undertaking
b) Breach
10.08 Use of Leased Premises
10.09 Continuous Occupancy
10.10 Continuous Presence
10.11 Regular Business Hours
10.12 Taxes
10.13 Heating, Ventilation and Air Conditioning
10.13.01 Maintaining HVAC System
10.13.02 Maintaining Adequate Temperature
10.14 Minor Maintenance Repairs
10.15 Major Repairs
10.16 Fire Prevention
10.17 Environment
10.18 Permits
10.19 Compliance
10.20 Alterations, Additions and Improvements
10.20.01 Prior Consent Required
10.20.02 Supervision
10.20.03 Incurred Expenses
10.20.04 Insurance
10.20.05 Removal
10.21 Encumbrances
10.22 Legal Hypothec
10.23 Right to Visit Premises
10.24 Limitation on Liability
10.24.01 TENANT's Property
a) Limitation
b) Maintenance
10.24.02 Utility Services Interruptions
10.25 Deterioration
10.26 Abandonment
10.27 Excess Load
10.27.01 Prohibition
10.27.02 Repairs
10.28 Delivery of Leased Premises
10.29 Alternative Execution
10.30 Certificate of Occupancy
10.30.01 Undertaking
10.30.02 Modifications
10.31 Fees for Preparing Lease
10.32 Fitting the Premises (if V1 in Section 4.01 applies)
10.33 Personal Information
10.33.01 LESSOR's Right
10.33.02 Authorization to OWNER
10.33.03 Authorization to Third Parties
10.33.04 Limitation
11.00 SPECIAL PROVISIONS
11.01 Assignment
11.01.01 Prior Consent
a) Definition
b) Default
11.01.02 Notice of Transfer
a) Prohibition
b) Information
c) Reply
11.01.03 Reasonable Cause
11.01.04 Limitation on Liability
11.01.05 Termination
11.01.06 Procedure
a) Payment
b) Documents
c) Signature
d) No Release or Discharge
e) Closing Session
11.01.07 Rent
a) Collection by OWNER
b) Remittance to TENANT
c) Advance Payment
11.01.08 Bankruptcy of Assignee
11.02 Hypothec and Assignment
11.02.01 Sale or Financing
11.02.02 Subordination
11.02.03 Declaration by TENANT
11.02.04 Execution of Deeds or Certificates
11.02.05 Assignment by LESSOR
11.03 Publication
11.03.01 Right to Publish
11.03.02 Undertaking
11.04 Force Majeure
11.04.01 Limitation on Liability
11.04.02 Duty
11.04.03 Right of Other PARTY
11.05 Relationship Between the PARTIES
11.06 Remedies
11.06.01 Choice
11.06.02 No Limitations
11.07 Pre-Incorporation Agreement
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
a) Written Notice
b) Meeting
c) Legal Proceedings
d) Protective Measures
12.02.02 Mediation
a) Process
b) Settlement
c) Arbitration [OR Legal Proceeding]
12.02.03 Arbitration Procedure (if V1 of 12.02.02 c) applies)
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.03 Choice of Forum
12.04 Counterparts
12.05 Amendment
12.06 No Waiver of Rights
12.07 Electronic Transmission
12.08 Language
13.00 TERMINATION
13.01 Expiry of Term
13.02 Termination
13.02.01 Without Notice
13.02.02 With Notice
13.03 Destruction of Leased Premises
13.03.01 Partial Destruction
a) Undertaking
b) Reduction of Base Rent
c) Termination of Lease
13.03.02 Substantial Destruction
a) Undertaking
b) Reconstruction
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 Initial Term
15.02 Renewal
15.02.01 Procedure
15.02.02 Expiry of Lease
15.03 Tacit Renewal
16.00 SCOPE

SCHEDULE A – EXCERPT OF A RESOLUTION OF OWNER
SCHEDULE B – EXCERPT OF A RESOLUTION OF TENANT
SCHEDULE 0.01.15 – LEASED PREMISES
SCHEDULE 4.01 – MOVABLE HYPOTHEC WITH[OUT] DELIVERY
SCHEDULE 4.02 – SURETYSHIP
SCHEDULE 4.03 – LETTER OF CREDIT
SCHEDULE 6.01 – TITLE SEARCH
SCHEDULE 6.02 – ENCUMBRANCES
SCHEDULE 9.01 – COMPLEMENTARY WORK BY OWNER
SCHEDULE 10.02.01 A – NON-SOLICITATION - CLIENTS
SCHEDULE 10.02.01 B – NON-SOLICITATION – PRODUCTS AND SERVICES
SCHEDULE 10.13 – MAINTENANCE
SCHEDULE 11.02.03 – DECLARATION BY TENANT
SCHEDULE 11.03 – PUBLICATION