What is overage rent?

Overage rent refers to the additional rent that a landlord collects based on a tenant's sales performance, specifically when a tenant's sales exceed a predetermined breakpoint. This arrangement incentivizes tenants to increase their sales since overage rent only applies when their performance surpasses an agreed-upon threshold.

This concept is commonly seen in retail leases where, once a tenant's sales cross the specified breakpoint, they pay a percentage of those sales—usually as an additional rent amount—to the landlord. This method can benefit both parties: the tenant can potentially lower their base rent while sharing in the success of higher sales with the landlord.

The other choices do not capture the essence of overage rent. Property expenses relate to costs associated with maintaining the property, advance rent refers to prepayment terms that guarantee occupancy, and the difference between market rent and actual rent pertains to rental valuation rather than a performance-based rent structure. Thus, the correct understanding of overage rent lies in its dependence on sales performance exceeding predetermined limits.