Whilst store presence is still key to a retailer’s brand, rapid advances in technology over recent years and changes to consumer spending habits has resulted in more sales being made on-line. The rapid rise in multichannel and online retailing has resulted in landlords becoming increasingly concerned about in-store turnover figures and the effect on rental income.
Turnover rents have been popular in the retail sector as they enable risk and reward to be shared fairly between a landlord and tenant during difficult market conditions. A typical turnover arrangement provides for the tenant to pay a base rent (usually 80% of the market rent) plus a turnover ‘top up’ which is based upon an agreed percentage of the tenant’s turnover and which is payable only to the extent that it exceeds the base rent.
Today store and online sales are often co-dependent. The consumer purchasing process derives from the physical store, the internet or a combination of them. Accordingly, for the purposes of calculating a tenant’s turnover and the turnover rent payable how should the following be treated
- Sales made from terminals or a smart phone application while a customer is physically located in store but where the goods are collected by the customer in store at a later date or delivered to a customer’s home‘Click and collect’ purchases where a customer orders goods online but collects the goods from in-store Refunds where purchases are made online but the customer later returns goods to the store.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.