This clause requires you to pay the landlord a percentage of your business profits (or sales) once your turnover exceeds a certain threshold. It's designed so landlords share in your business success, not just collect fixed rent. This is common in retail leases where the landlord wants upside potential. For example, you might pay £20,000 fixed rent plus 5% of any sales above £500,000 per year. The risk is that landlords can demand access to your accounts to verify figures, and disputes over what counts as "turnover" are common.
Define "turnover" very precisely in writing—specify whether it includes VAT, refunds, discounts, and online sales, or you'll argue about this constantly. Negotiate a cap on turnover rent (for example, it won't exceed 50% of your fixed rent) so your costs don't spiral if business booms. Agree in advance on who audits your accounts and how often, and try to limit the landlord's access to a qualified accountant rather than giving them direct access to your books. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires you to pay the landlord a percentage of your business profits (or sales) once your turnover exceeds a certain threshold.
Why should I care about this clause?
It's designed so landlords share in your business success, not just collect fixed rent.
What are my options?
This is common in retail leases where the landlord wants upside potential.
How does this affect small businesses?
For example, you might pay £20,000 fixed rent plus 5% of any sales above £500,000 per year.