Answer:
Turnover rent is calculated on a tenant’s retail sales. Most often it applies to leases in a shopping centre.
Turnover rent is often assessed as an amount on top of the base rent. Once the store’s sales reach the turnover threshold in a particular period, a fixed percentage will then be applied to the revenue. This gives the landlord security. It ensures that the tenant will pay a certain base rent, plus a higher amount if the store does well.
Administrative Burdens
However, this imposes extra administration on both the tenant and landlord. The tenant will need to audit and report on their turnover. The landlord will need to audit the reports. That said, turnover rent is still useful as it can adjust the rent to market conditions.
