Contingent rent definition
/What is Contingent Rent?
Contingent rent is a rental payment that varies with the future amount of a specific factor that is not related to time. Contingent rent is usually based on the future rent or profits of the renter. It is not a fixed rental payment, as is most commonly the case with rental arrangements.
Example of Contingent Rent
Smith Movies rents a movie theater location from a landlord for $20,000 per month. Viewership is down drastically, to the point where Smith will not be able to make any rent payments. The landlord offers to replace the current arrangement with a contingent rent deal, under which Smith pays it 20% of its total gross receipts. By accepting this arrangement, Smith reduces its fixed costs, allowing it to stay in business even during periods in which gross receipts are in decline.