Variable Rent

Variable rent is a type of rental payment structure in which the rent amount fluctuates based on predetermined factors outlined in the lease agreement. Variable rent can depend on factors such as an index or future sales performance.

When rent is determined by an index or rate, it is tied to a specific index, such as the LIBOR, CPI, or inflation rate, and varies with changes in these indexes. This type of rent structure helps landlords hedge against inflation and market fluctuations, while tenants benefit from predictable rent adjustments tied to external factors.

Variable rent based on future sales performance is commonly used in retail and restaurant leases. In this case, the rent payment is contingent upon the tenant's sales, with the tenant typically paying a base rent plus a percentage of sales beyond a certain threshold. This structure aligns the interests of the landlord and tenant, as the landlord benefits from the tenant's success, and the tenant's rental expenses are proportional to their revenue.