Turnover Rents in Commercial Leases

A turnover rent links some or all of the rent to the tenant's sales. It is common in retail and leisure, and it aligns the interests of landlord and tenant, for better and worse.

How it works

Under a turnover rent, the tenant pays rent based on a percentage of their turnover from the premises, often on top of a lower base rent. So the landlord shares in the tenant's success, and the tenant's rent falls if trade is poor.

Where it is used

Turnover rents are common in shopping centres, retail parks and leisure schemes, where the landlord actively manages the scheme and benefits from strong trading. They are less common in offices and industrial.

The trade-offs

• For the landlord: upside when the tenant trades well, and a way to attract occupiers by sharing risk, but income becomes variable and depends on the tenant's performance and honest reporting.
• For the tenant: rent that flexes with trade, reducing fixed-cost risk, at the price of sharing upside.

The detail matters

Turnover rents need careful drafting: how turnover is defined (what counts, including online sales attributable to the store), verification and audit rights, the base rent, and how it interacts with rent review. Online and click-and-collect sales have made the definition of turnover a live issue. Take advice on the drafting.

What is a turnover rent?

Rent based on a percentage of the tenant's sales, often on top of a lower base rent, common in retail and leisure.

Why does the definition of turnover matter?

Because online and click-and-collect sales make what counts a live issue, so the drafting and audit rights matter.