Understanding Turnover Rent: what uK Businesses Need to Know in Commercial Leases
What Is Turnover Rent and Why Do Landlords Use It?
How Does Turnover Rent Work in a Typical UK Lease?
What Counts as ‘Turnover’ in a Lease?
What Are the Pros and Cons of Turnover Rent for Tenants?Key Pros
Key Cons
If you’re opening a shop, restaurant, or hospitality business on the UK high street (or even in a shopping centre), chances are you’ll come across the phrase "turnover rent" during your hunt for the perfect premises. For many new business owners, the rent model in your lease can feel confusing, especially if it’s your first time dealing with commercial property.
Don’t stress - understanding turnover rent isn’t as complicated as it sounds, and once you know the basics, you’ll be ready to negotiate your lease with much more confidence. In this guide, we’ll break down exactly what turnover rent is, how it works, the pros and cons for tenants and landlords, and the key legal points to watch out for. If you want to make sure your business is protected (and set up to grow) from day one, keep reading.
What Is Turnover Rent and Why Do Landlords Use It?
Let’s start with the essentials. Turnover rent (sometimes called "percentage rent") is a way of calculating rent based on your business’s actual trading performance at the property, rather than just a fixed amount per year.
Typically, a commercial landlord will charge:
A Base Rent: A minimum fixed rent, often set below the usual "market rate" for the premises.
Plus a Turnover Element: An additional percentage of your business’s gross revenue (your "turnover") earned at the premises, usually calculated and settled quarterly, bi-annually, or annually.
This is most common in retail, leisure, hospitality, and food outlets - think high street shops, supermarkets, gyms, cafes, and restaurants, especially in shopping centres and outlets where footfall can fluctuate.
What Is Turnover Rent and Why Do Landlords Use It?
How Does Turnover Rent Work in a Typical UK Lease?
What Counts as ‘Turnover’ in a Lease?
What Are the Pros and Cons of Turnover Rent for Tenants?Key Pros
Key Cons
If you’re opening a shop, restaurant, or hospitality business on the UK high street (or even in a shopping centre), chances are you’ll come across the phrase "turnover rent" during your hunt for the perfect premises. For many new business owners, the rent model in your lease can feel confusing, especially if it’s your first time dealing with commercial property.
Don’t stress - understanding turnover rent isn’t as complicated as it sounds, and once you know the basics, you’ll be ready to negotiate your lease with much more confidence. In this guide, we’ll break down exactly what turnover rent is, how it works, the pros and cons for tenants and landlords, and the key legal points to watch out for. If you want to make sure your business is protected (and set up to grow) from day one, keep reading.
What Is Turnover Rent and Why Do Landlords Use It?
Let’s start with the essentials. Turnover rent (sometimes called "percentage rent") is a way of calculating rent based on your business’s actual trading performance at the property, rather than just a fixed amount per year.
Typically, a commercial landlord will charge:
A Base Rent: A minimum fixed rent, often set below the usual "market rate" for the premises.
Plus a Turnover Element: An additional percentage of your business’s gross revenue (your "turnover") earned at the premises, usually calculated and settled quarterly, bi-annually, or annually.
This is most common in retail, leisure, hospitality, and food outlets - think high street shops, supermarkets, gyms, cafes, and restaurants, especially in shopping centres and outlets where footfall can fluctuate.