Hawaii Pre-Licensing National Practice Exam

What is one reason a homeowner might choose a percentage lease?

1. Stable rental income

2. Variable expenses

3. Rental payments tied to sales performance

4. Guaranteed rent amount each month

The correct answer is: Rental payments tied to sales performance

A homeowner might choose a percentage lease primarily because it ties rental payments to the tenant's sales performance. This type of lease is especially common in retail settings where the landlord can benefit from the tenant's success. By aligning rental costs with the business’s revenue, the homeowner reduces the risk of the tenant defaulting on rent during lean financial periods. When a tenant does well, their rent increases, providing the homeowner with potential for higher income over time. This arrangement creates a more collaborative relationship where both the homeowner and tenant have incentives to work towards the tenant's business growth. While stable rental income or a guaranteed rent amount each month are advantageous for some landlords, these aspects are not characteristic of a percentage lease since this lease model entails fluctuations in payment based on performance. Variable expenses can be a concern for homeowners, but they don’t directly relate to the benefits of percentage leases. Therefore, tying rental payments to sales performance distinctively outlines why a homeowner might opt for this leasing structure.