Real Estate: Sales-Based Rent Settlement

SAP Real Estate Management delivers extensive functions for sales-based rent settlement and adjustment, and supports the mapping of the most complex and flexible sales-based agreements. The sales-based rent settlement is sometimes referred to as percentage rent or turnover rent, and provides for the calculation and settlement of rent based on tenant turnover.

This C-Business Map illustrates the collaboration between the tenant and the real estate manager. The tenant rents commercial space, e.g. a store, from the real estate manager. The real estate manager negotiates the lease agreement with the tenant. Terms and conditions for the sales-based rent settlement and adjustment are defined in the contract. This includes the definition of sales and reporting rules. A sales rule specifies how and when the sales-based rent settlement is calculated. A reporting rule governs what type of sales are to be reported. Any number and combination of sales-based rent agreements can be defined in a contract. Minimum and maximum rents and advance payments for sales-based rent are managed as separate conditions. Mapping all contractual details centrally provides transparency for both the real estate manager and the tenant.

Sales-based rent settlement can not only be used to calculate and settle agreement based on tenant turnover, but can also be used to calculate and settle contractual agreements based on performance or consumption.

SAP Real Estate Management provides functions for editing contract data, for entering sales reports and performing sales-based rent settlement and reporting. In the sales-based rent agreement you specify how payments due (rent/advertising fees) are determined based on sales reported by the tenant, and how these charges are offset against payments already made, such as advance payments, minimum or maximum rent. All contractual details are mapped in the real estate contract. During the year the tenant makes periodic payments to the real estate manager. These include payments for rent, as well as advance payments for sales-based rent conditions. The tenant reports sales for all product types on a periodic basis. The real estate manager can view and analyze sales results for all contracts at any time. In addition, he can check for missing sales reports and inform the tenant accordingly. Sales reports and settlements can also be corrected or reversed.

Flexible reporting rules allow different types of revenues to be reported, such as regular sales, planned or statistical sales revenues. This supports the real estate manager in the determination of key figures.

The real estate manager performs the sales-based rent settlement. Correspondence is sent to tenant informing him of reported sales for the settlement period, actual settlement results and of the credit/debit due.  Advance payments for the following settlement period are calculated and adjusted based on the settlement result. The tenant checks the settlement results.

It is also possible to run the settlement based on cumulative settlement values. In cumulative settlement, the reported sales from the previous periods are taken into consideration for each settlement (e.g. the first quarter is settled - the second quarter is settled and the sales results of the first quarter are taken into account). This helps to level peaks and lows during the settlement period.

After settlement, the real estate manager is able to analyze sales results for all of his tenants. Key figures are determined which provides for accurate forecasting for future periods. 

Sales-based rent settlement offers a number of benefits to both the tenant and the real estate manager. Mapping all contractual data and sales-based agreements provides both parties with a complete, transparent view of all-important information. For the tenant, when turnover is high, he is able pay higher rent. However, when sales are low he is not penalized, but pays only a minimum rent. The manager has a complete overview of all contractual agreements and sales levels at all times, and is able to forecast and plan based on this information.