Master Lease

What is a master lease?

 A master lease is a rental agreement where a property owner grants the lessee (renter) the right to re-lease and manage the property. While the owner still retains the legal title of the property, lessee’s still have great control. 

What types of master leases are there? 

Generally, there are two types of masters leases: 

Performance master lease 

In a performance master lease, the lessee pays the property owner a percentage of the profits generated from subleasing individual units or spaces within the property. This payment is typically made only after the lessee receives the profits from their sub-tenants. 

Fixed master lease 

Conversely, a fixed master lease requires the lessee to pay a predetermined percentage of the profits to the property owner. In essence, the master tenant is obligated to make payments to the property owner according to the terms of the lease agreement, regardless of the actual rental income generated from subleasing. 

While this provides a predictable income stream for the property owner, it also places more financial responsibility on the master tenant, who must cover the lease payments regardless of occupancy rates or rental income. 

How long do master lease agreements typically last? 

Master lease agreements typically vary in duration, ranging from a few months to several years, depending on the negotiation between the property owner and the master tenant. 

However, there is no fixed standard duration for master lease agreements, as the length of the lease term can be influenced by various factors such as market conditions, the nature of the property, the financial stability of the parties involved, and the goals of both the property owner and the master tenant.