Retail leasing FAQ20: What is turnover rent and how do I calculate how much I will have to pay?

What is turnover rent and how do I calculate how much I will have to pay?

• Many leases include a Turnover Rent which is expressed as a percentage
• It is often included in the terms because in order to require the tenant to provide accurate gross sales figures to the lessor, which they can then use for marketing and decision-making purposes, the lease must include a turnover rent clause.
• The lower the percentage figure, the higher the turnover must be before it will become payable.
• If any amount is due, the lessor will usually audit the sales at the end of the financial year and invoice the tenant a single amount due for the whole year.
• ie presuming base/net rent is $100k, at 10% turnover rent, you will pay 10c additional rent for every $1 of turnover above $1mil. Whereas at 8% turnover rent on the same base rent of $100k, the threshold will be $1.25mil in sales before you start paying just 8cents from every $1 above $1,250,000 in sales