Will Turnover Rents Affect Your Online Business? Historically industrial leases have actually been based simply on open market rents. 2 occupants beside each other with the exact same sized systems would generally pay the very same lease as each other. One tenant might be doing considerably better than the neighbour however they would pay the very same lease. Things have been changing in the last 2 years and turnover leas are now becoming more common. What is a Turnover Rent? A Turnover Rent is where your lease as a renter is determined versus your turnover for that shop or shop. The more cash you turn over the more rent you pay. It is necessary to keep in mind that this is not a profit lease. The rent is not determined on your revenue, just on your turnover. So if you offer water bottles for ₤ 10 and you sell 10 bottles your turnover is ₤ 100. It makes no difference if you purchased the bottles for ₤ 2 or ₤ 5 - your turnover is still ₤ 100. Turnover Rent is normally a portion of your turnover. It could be 10% of your turnover. So in our example you would pay 100 x 10% = ₤ 10 lease. What is a base lease? The problem with a straight turnover rent as detailed above is if the renter does not show up for the day the property manager doesn't get paid rent (no turnover, no rent). To resolve this issue the proprietor normally wants a minimum lease. That is called the base lease. How does it operate in practice? Example: Base lease - ₤ 50,000 per annum. Turnover Rent - 10% of turnover over ₤ 500,000 If in year 1 you make sales of ₤ 300,000 you will pay the minimum base rent - ₤ 50,000. In year 2 you make sales of ₤ 600,000. Now you will pay 10% of ₤ 100,000 (as that is the amount above ₤ 500,000). That is ₤ 10,000 additional lease so you pay ₤ 60,000 rent in total that year. In year 3 you make sales of ₤ 450,000.