What is minimum rent?

Minimum rent means the lowest amount a tenant must pay the landlord, even if business is slow. Quick tip: this rule protects the landlord’s income in any lease.

Picture this. Ritu rented a small shop in a mall. Her rent was 5% of monthly sales or a minimum rent of ₹40,000, whichever is higher. In January, her sales were low. Five percent of sales came out to ₹32,000. But ₹32,000 is less than the minimum rent, so she paid ₹40,000 that month. In February, sales were better and five percent was ₹45,000, so she paid ₹45,000. That’s how minimum rent works in real life.

Here’s the thing. A lease often has two parts:

• Base or minimum rent – This is the guaranteed amount the landlord gets.

• Additional or percentage rent – This is extra, usually tied to sales numbers.

Minimum rent can go by different names. Dead rent. Fixed rent. Flat rent. All of these mean the same basic idea: the landlord gets a bottom-line payment no matter what.

Why this matters?

Here’s a quick example that helps. Think of minimum rent like a safety net for the landlord. Suppose a shop keeps getting quiet traffic. Sales drop. Without a minimum rent clause, the landlord might make almost nothing. That feels unfair if the building still costs them money to maintain. So they add minimum rent to the lease.

For tenants like Ritu, minimum rent means planning ahead. Some months may be tougher, but the rent won’t dip below a floor. That changes how much working capital you need.

Does this mean rent always stays the same? Not necessarily. Some leases allow yearly increases tied to a percentage or an index, but the minimum part stays as the bottom line. That’s the deal you agree to when you sign.

Quick list to remember:

• Minimum rent is a base amount in a lease.
• It applies even if sales drop or production slows.
• If other rent formulas (like % of sales) end up higher, you pay the bigger amount.
• Other names include dead rent, fixed rent, flat rent.

Common misunderstandings

Some people think minimum rent is optional. It’s not. If it’s in the signed lease, it’s binding. Another mistake: thinking minimum rent only applies to big commercial spaces. Nah. It appears in any lease where the landlord wants guaranteed income. Even small retail spaces can have it.

Here’s another scenario: Kumar runs a bakery in a mall. The lease says 6% of sales or ₹30,000 minimum per month. In July sales slump and his percentage rent is only ₹18,000. He still has to pay ₹30,000. That’s the minimum doing its job.

FAQ

Is minimum rent always in a lease?

Not always. Only if the landlord and tenant agree to it. Typically more common in commercial leases.

Can minimum rent change later?

Leases may allow yearly increases, but any change should be in the contract.

Does residential rent work this way?

Usually no. Residential leases normally fix a monthly rent with no percentage clause.

Tired of scratching your head about confusing rent terms? Minimum rent just means a base you can count on, for better or worse.

Longer reads help, but this explains the core. Click to know more about lease terms and smart renting.