By the Streathers Litigation Team
A High Court dispute between the landlords of Brent Cross Shopping Centre and John Lewis has attracted significant attention across the commercial property sector and highlights a growing issue facing landlords and tenants alike: how should turnover rent provisions drafted decades ago apply to modern retail models?
The case centres on whether click-and-collect sales, online orders and other omnichannel transactions should form part of a tenant’s turnover for the purposes of calculating rent under a historic lease. Whilst the outcome remains keenly anticipated, the dispute already provides valuable lessons for those negotiating, renewing or litigating commercial leases.
For landlords and tenants operating in the retail, leisure and hospitality sectors, the case is a reminder that lease provisions drafted before the growth of e-commerce may no longer provide the certainty that modern trading models require.
What Is Turnover Rent?
Turnover rent is a common commercial leasing arrangement where some or all of the rent payable is linked to the revenue generated by the tenant’s business from the premises.
Traditionally, this model has offered benefits to both parties:
- Landlords participate in the success of the tenant’s business.
- Tenants benefit from lower fixed costs during quieter trading periods.
- Rental obligations become more closely aligned with trading performance.
Whilst turnover rents have existed for decades, the growth of online retailing, click-and-collect services and integrated sales channels has created new challenges when determining what revenue should properly be included within turnover calculations.
The Brent Cross Dispute
The dispute concerns a lease originally granted in 1979, long before internet shopping became part of everyday retail activity.
The lease requires John Lewis to pay a base rent together with a percentage of its “gross receipts” generated from the store. The central issue is whether the lease’s definition of gross receipts extends beyond traditional in-store transactions to include modern online sales connected with the Brent Cross branch.
The landlords argue that the turnover provisions should capture:
- Online orders collected from the Brent Cross store.
- Online orders fulfilled directly from the store.
- Orders placed in store but fulfilled from distribution centres.
- Certain related collection charges.
John Lewis is reported to argue that sales made online are completed before customers collect goods from the store and therefore should not be treated as part of store turnover simply because the premises acts as a collection point.
At its heart, the dispute raises a familiar legal question: how should historic contractual wording be interpreted when applied to commercial practices that did not exist when the lease was drafted?
Why This Matters
The issues raised by the case extend far beyond the parties involved.
Many shopping centres, retail parks and high street premises continue to operate under leases granted before the emergence of e-commerce. Those leases often contain turnover rent provisions drafted with traditional retail sales in mind.
Today, however, retailers commonly operate through multiple sales channels, including:
- In-store purchases;
- Click-and-collect services;
- Online ordering;
- Ship-from-store fulfilment;
- Mobile app purchases;
- Home delivery services.
The distinction between online and physical retailing has become increasingly blurred, making it more difficult to determine which transactions should be attributed to a particular premises.
Key Lessons for Landlords
Review Existing Turnover Rent Clauses
Landlords who rely on turnover rents should carefully review existing lease wording.
Particular attention should be given to whether definitions of “turnover”, “gross receipts” or “sales” adequately address:
- Click-and-collect transactions;
- Orders fulfilled from store stock;
- Online sales linked to a specific branch;
- Returns processed in store;
- Delivery and collection charges.
Historic drafting may no longer provide the clarity needed to avoid disputes.
Consider Asset Value and Investment Implications
For some shopping centres and retail developments, turnover rent can form a substantial proportion of rental income.
Uncertainty regarding how turnover should be calculated can therefore have wider implications for:
- Property valuations;
- Investment performance;
- Asset management strategies;
- Funding and refinancing arrangements.
Clear lease drafting remains one of the most effective ways to mitigate this risk.
Key Lessons for Tenants
Avoid Ambiguous Revenue Attribution
Retailers increasingly operate integrated sales systems where multiple channels contribute to the customer journey.
From a tenant’s perspective, it is critical that leases clearly identify:
- Which transactions count towards turnover;
- When a sale is deemed to occur;
- How online and physical sales interact;
- Circumstances where exclusions apply.
Without clear mechanisms, businesses may face unexpected turnover rent liabilities.
Prevent Double Counting
One of the most common concerns for retailers is the risk of turnover being counted twice.
For example, should a sale be included because:
- The customer ordered online?
- The goods were dispatched from store stock?
- The customer collected from the premises?
Modern turnover rent provisions should address these issues expressly.
Data and Audit Rights Are More Important Than Ever
As retail models have become increasingly sophisticated, so too have the reporting obligations associated with turnover rent leases.
Both landlords and tenants should ensure that lease provisions adequately address:
- Sales reporting requirements;
- Digital sales data;
- Audit and inspection rights;
- Record retention obligations;
- Omnichannel accounting processes.
Many disputes arise not because parties disagree on principle, but because the lease provides insufficient practical guidance on how turnover should be measured and verified.
Drafting Considerations for New Leases and Renewals
The Brent Cross dispute reinforces the importance of modernising turnover rent provisions.
When negotiating new leases or lease renewals, parties should consider expressly dealing with:
- Click-and-collect sales;
- Online orders fulfilled from store stock;
- Ship-from-store arrangements;
- Returns and refunds;
- Gift cards and vouchers;
- Discounts and promotions;
- Marketplace transactions;
- VAT treatment;
- Delivery and handling charges;
- The point at which a sale is recognised.
A well-drafted turnover rent clause should reflect how retailers actually trade in today’s market, rather than relying on concepts developed for a purely physical retail environment.
How Streathers Can Help
Our Litigation and Commercial Property teams regularly advise landlords, tenants and investors on:
- Commercial lease disputes;
- Turnover rent claims;
- Retail leasing arrangements;
- Lease renewals and variations;
- Service charge and rent disputes;
- Property litigation;
- Lease interpretation issues;
- Shopping centre and retail asset management.
The Brent Cross v John Lewis dispute demonstrates how seemingly straightforward lease provisions can generate significant liabilities when commercial practices evolve. Careful drafting at the outset and early legal advice when disputes arise can often prevent costly litigation later.
Why Choose Streathers?
At Streathers, our Litigation and Commercial Property teams combine technical property law expertise with a commercially focused approach. We advise landlords, tenants, developers, investors and occupiers on a broad range of commercial property disputes, including lease interpretation, rent review disputes, service charge claims, lease renewals under the Landlord and Tenant Act 1954, forfeiture, dilapidations and complex property litigation.
Gregory Ostroff, Head of Litigation, has extensive experience acting in high-value commercial disputes, including contentious landlord and tenant matters, contractual disputes and strategic litigation involving commercial property assets. Gregory is known for providing pragmatic, commercially driven advice designed to achieve the best outcome for clients while minimising disruption to their businesses.
Cormac Manion advises on a wide range of property disputes for both landlords and tenants, including lease renewals, possession claims, service charge disputes, redevelopment issues and contested lease interpretation matters. His experience enables him to guide clients through the practical and legal considerations that arise when commercial relationships break down.
Ian Baker is recognised for his substantial experience in commercial property and landlord and tenant law, advising clients on lease structures, property portfolio management and complex real estate issues. His commercial property expertise allows him to work closely with the litigation team where disputes arise from lease drafting, turnover rent provisions and asset management strategies.
Working collaboratively across our Litigation and Commercial Property departments, Streathers is well placed to advise on the evolving challenges facing landlords and tenants in today’s retail and commercial property market.
How Streathers Can Help
Whether you are a landlord reviewing historic turnover rent provisions, a retailer seeking to manage exposure arising from omnichannel sales models, or a party involved in a commercial lease dispute, our team can provide strategic and practical advice tailored to your objectives.
For specialist advice on:
- Turnover rent disputes
- Commercial lease interpretation
- Retail and shopping centre leases
- Landlord and tenant litigation
- Lease renewals under the Landlord and Tenant Act 1954
- Commercial property disputes
- Property portfolio management
please contact Gregory Ostroff, Cormac Manion, Ian Baker or a member of the Streathers Litigation and Commercial Property teams.
