The popularity of more flexible leasing agreements has seen an increase in the use of turnover-based rents. This is particularly so within the retail sector and stores within stores. These rents are based on the client's trading accounts as opposed to the open market rate, but what do these new agreements mean for landlord and tenant?
Turnover-based rent is based on the client’s trading accounts, as opposed to an open market rate. Landlords will inevitably be keen to make sure they are getting the most out of this deal by enforcing certain opening hours, including weekends and bank holidays. With this in mind, tenants should seek to negotiate certain exclusions from the ‘keep-open covenant’ so that the lease is not breached if they are prevented from trading due to circumstances beyond their control.
In addition, and with retailers having an ever increasing online sales presence (including “dark stores”), if entering into a turnover-based rent agreement, tenants may want to ensure that all online sales are excluded from the turnover calculation, or if included, are deducted from the calculation.
Finally, retailers entering into these kinds of partnerships would usually consider including ‘exclusivity clauses’ and ‘competition clauses’ within the lease arrangement to protect the commercial interests of both parties.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.