Turnover Rent Agreement
The lessor and tenant should remember at all times the possible effects of transfer restrictions on the revision of rental prices, which should not be taken into account if necessary. To calculate a natural threshold, divide the base rent by the agreed percentage for the calculation of the rent of the turnover. For example, if the base rent is $200,000 and the turnover rent is 10% of gross sales, the natural threshold is determined by the division of the base rent by the percentage corresponding to a natural threshold of $2 million. The higher the base rent, the higher the threshold. This will be essential to ensure that a lender and its lenders are familiar with the lease and, as with any other provision of a lease, a loan facility must include a provision preventing the lessor (as a borrower or debtor) from modifying or waiving business lease obligations without the prior written consent of the lenders. Historically, retail “revenue” would represent funds that the retailer took from the physical sales of leased premises. Now it is necessary to prescribe a much broader definition, online orders that are addressed to rented premises, and remote click-and-collection orders, but collected in the store. Tenants will want to exclude anything that is not directly related to the rental premises involved, and the processing of gift certificates, returns, partial payments and staff discounts will need to be carefully reviewed and negotiated on a case-by-case basis. Given the effects of the retail pandemic, market fluidity is essential. If retail is to survive the effects of Covid-19, radical changes are needed, starting with negotiations between landlords and tenants and the reintroduction of rents on a larger scale. One of the perceived advantages of sales leases is that they foster a sense of partnership between the landlord and the tenant. The above proposals and recommendations cannot be imposed on the tenant, but must be negotiated. The approach should not be to penalize the tenant (note that any attempt to impose a fine is in any case considered invalid), but rather to encourage the tenant to run his page of the good deal, namely to provide the lessor with accurate information on the turnover so that the rent can be calculated.
It is important to note that some landlords may not be able to pay potentially fluctuating rents. Despite a base rent that offers a guaranteed rent level, any increase depends entirely on the success of the tenant`s operational activities. A landlord may argue that he or she should not lose rental income as a result of a tenant`s business loss. In simple terms, a turnover rent is a rent calculated on the basis of income and other receivables generated by the rental property (usually on an agreed percentage of turnover).