How does a percentage lease operate?

A percentage lease is a type of commercial lease commonly used in retail settings. In this arrangement, the tenant pays a base rent, which is a fixed amount, plus an additional percentage of the profits generated from their business operations. This structure is beneficial for landlords because it aligns their interests with the performance of the tenant's business. When the tenant’s business does well, the landlord benefits from increased revenue through the profit percentage. This can also incentivize the landlord to be supportive of the tenant's success, as both parties stand to gain from a thriving enterprise.

The other options do not accurately capture the essence of a percentage lease. A fixed amount regardless of profits does not offer the potential for the landlord to share in the tenant's business success. Receiving only a flat fee does not allow for any adjustment based on the tenant's performance, which is a crucial aspect of a percentage lease. Paying only based on profits ignores the stability provided by the base rent, which ensures the landlord receives predictable income regardless of how well the tenant performs. Thus, option B effectively represents how a percentage lease operates.