Commercial Retail Leases

Turnover Rent in Commercial Leases UK

Turnover rent (percentage rent): commercial lease rent linked to tenant's trading turnover. Structure: base rent (fixed minimum ~70-80% of open market rent) + turnover top-up (% of gross turnover above natural break). Common in retail, restaurant, leisure. Gross turnover definition: critical battleground; inclusions/exclusions; online/omnichannel attribution; VAT excluded; refunds excluded; concessions excluded. Audit rights: quarterly estimates; annual certified accounts; EPOS data-sharing; under-reporting consequences. COVID-19: Commerz Real v TFS Stores [2021] EWHC 863 — fixed rent payable despite COVID lockdowns; turnover rent leases provided automatic relief. Base rent review: open market value or RPI/CPI; impact on natural break. Scotland: same general principles; Scottish commercial lease law applies.

10 min readUpdated 7 June 2026Last reviewed: 17 May 2026turnover-rentpercentage-rentretail-leasecommercial-lease

How Turnover Rent Works

Base rent: fixed minimum (~70-80% of open market rent) payable regardless of trading. Turnover top-up: (Gross Turnover × Rate) minus Base Rent (where positive); commonly 6-12% for retail. Natural break: turnover level where tenant begins paying more than base rent (= Base Rent ÷ Rate). Quarterly base rent payments in advance (RICS standard); annual certified turnover statement from tenant; year-end reconciliation. Example: base rent £200,000; rate 10%; natural break £2m; gross turnover £2.5m; top-up = 10% × £500,000 = £50,000; total rent £250,000.

Gross Turnover Definition

Inclusions (typical): all sales at/from premises; gift card redemptions; online sales attributable to the store (click and collect; geographic attribution). Exclusions (typical): VAT; customer refunds; staff discounts; credit card processing fees; concession sales (unless commission received). Online/omnichannel: attribution of digital sales to physical stores increasingly important as omnichannel retail grows — define clearly to avoid disputes. Concessions: exclude concessionaire turnover unless tenant receives commission/licence fee (which is included).

Audit Rights and Obligations

Quarterly estimates: tenant provides estimated quarterly turnover for base rent calculation. Annual certified accounts: delivered within 3-4 months of accounting year end. Landlord audit rights: inspect trading records, EPOS data, financial accounts — essential to verify reported turnover. Under-reporting consequences: additional rent; audit costs; interest; potentially forfeiture in serious cases. EPOS data: modern leases may include real-time or monthly EPOS data-sharing — simplifies reconciliation and reduces under-reporting risk.

COVID-19 and Turnover Rent

Commerz Real v TFS Stores [2021] EWHC 863 (Ch): retailer Pandora sought to withhold rent during COVID lockdowns (frustration; force majeure; implied term). High Court rejected — fixed rent remained payable. Turnover rent leases: zero trading during lockdowns → zero turnover top-up; base rent reduced effective burden. Pandemic accelerated: shorter leases; break clauses; hybrid turnover/fixed rent structures. Post-pandemic: major shopping centre landlords (Hammerson, British Land) increased proportion of retail portfolio on turnover or hybrid arrangements.

Rent Review and Scotland

Base rent review: open market value review or RPI/CPI indexation; upward-only in prime retail. Review impact on natural break: higher base rent raises natural break — tenant needs higher turnover before paying top-up. Assignment: outgoing tenant must comply with reporting obligations for year of assignment; incoming tenant takes on obligations from completion. Keep-open covenants/minimum turnover: some landlords require minimum trading performance and minimum turnover thresholds. Scotland: turnover rent used in Scottish retail (Glasgow/Edinburgh/Aberdeen shopping centres); Scots law governs; same reporting and audit structure in practice.

Frequently asked questions

What is turnover rent in a commercial lease?+

Turnover rent is a commercial lease structure where rent is linked to the tenant's trading turnover. It typically combines a base rent (fixed minimum) with a turnover top-up — a percentage of gross turnover above a natural break point. Common in retail, restaurant, and leisure commercial leases.

How is the turnover top-up calculated?+

Turnover top-up = (Gross Turnover × Rate) − Base Rent (where positive). Example: base rent £200,000; turnover rate 10%; natural break £2,000,000. If gross turnover is £2,500,000, top-up = 10% × £500,000 = £50,000; total rent = £250,000.

Did COVID-19 affect turnover rent leases?+

Yes — turnover rent leases provided automatic relief during COVID lockdowns (zero trading → zero or minimal turnover top-up). Fixed rent retailers were not so fortunate — Commerz Real v TFS Stores [2021] confirmed that fixed rent remained payable despite COVID lockdowns. The pandemic significantly accelerated adoption of turnover rent and flexible lease structures in UK retail.

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