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Sales Category: In the calculation of percentage rent for retail tenants, the classification of gross sales based upon the type of merchandise/service sold. Some retail leases define multiple sale categories and apply different percentage rent calculation mechanics to each category.
Sales Kick-Out Clause: A retail lease provision whereby the landlord has the right to terminate a tenant’s lease in the event that the tenant does not achieve a particular level of gross sales.
Security Deposit: A payment by a tenant, held by the landlord during the lease term, and kept (wholly or partially) on default, or on destruction of the premises by the tenant.
Self-Insurance: The right of a tenant or landlord to set aside funds to protect against losses rather than purchasing insurance for such protection. In many leases, self-insurance is allowed only if the tenant or landlord can meet pre-defined net worth requirements.
Sharecropping: In an agricultural lease, the agreement between the landowner and the tenant farmer to split the crop or the profit from its sale, actually sharing the crop.
Sublease Profits: Consideration received by a sub-lessor from a sub-lessee under a sublease with is greater than the consideration payable by the sub-lessor (i.e., tenant) to the landlord under the original lease. In many subleases, the sub-lessor is required to share some or all of the sublease profits received with the original landlord.
Subordination: The process by which a person or entity’s claims are ranked below the claims of another party. In a lease transaction, the claims of a tenant against a landlord are often ranked below those of a mortgagee or a ground lessor; however, certain larger tenants will require subordination from a mortgagee or ground lessor. While subordination language is included in most leases, some leases obligate a landlord to obtain a subordination, non-disturbance and attornment agreement, whereby either the tenant or the mortgagee/ground lessor will formally agree to subordinate their claims to those of the other party.
Subrogation: The substitution of one person into the place of another with regards to a legal right or claim. With regards to lease transactions, subrogation is typically found in insurance clauses, whereby the insurance company is given the right to ‘step into the shoes’ of the party to whom they have provided compensation in order to recover the amount of the loss from the legally liable party, often via a lawsuit.