If you lease a shop or a restaurant space, your rent is often tied to your sales. Here we explain how minimum rent and turnover rent work together, where the model is common and what to look for in the clause before you sign.
Turnover rent means that all or part of the rent is calculated as a share of the sales you make in the premises. If you lease an office, you will rarely come across it. If you lease a shop in a shopping centre or a restaurant space, it is common, and this clause will largely decide what the premises actually cost you.
It echoes a point we have made about warehouses. There, it is the clear height, not the ceiling height, that decides what the space is worth to you. In retail, the percentage alone does not decide your rent either. What matters is how the minimum rent, the rate and the contract's definition of turnover work together.
What is turnover rent?
With turnover rent, you pay an agreed percentage of your sales, usually calculated on gross turnover excluding VAT. As a rule, it is combined with a minimum rent, a fixed annual amount you pay no matter how business goes. In practice, you pay whichever of the two is higher. If sales are low, you pay the minimum rent. If they are high enough, you pay the percentage.
Thon Eiendom describes the arrangement like this for its shopping centres: in principle, all its tenants pay a minimum rent, and once sales pass a certain level, the turnover-based rent applies.
The Norwegian Tenancy Act (husleieloven) says little about turnover rent. For commercial premises, most of the Act can be set aside by agreement, and section 4-5 states that the rules on index adjustment and adjustment to prevailing rent do not apply to the part of the rent that is tied to turnover. How the rent is calculated is therefore decided almost entirely by the contract.
How to calculate what you actually pay
A hypothetical example makes this easier. You lease a 100 m² shop in a shopping centre. The minimum rent is NOK 600,000 a year, and the turnover rent is 7 percent of sales excluding VAT.
- Sales of NOK 7 million: 7 percent is NOK 490,000. That is below the minimum rent, so you pay NOK 600,000.
- Sales of NOK 10 million: 7 percent is NOK 700,000. You pay NOK 700,000, which is NOK 100,000 more than the minimum rent.
- Sales of NOK 12 million: 7 percent is NOK 840,000, and that is what you pay.
The most important number in the example is rarely stated in the contract. It is the threshold where turnover rent takes over, and you find it by dividing the minimum rent by the percentage. Here, that is NOK 600,000 divided by 0.07, or roughly NOK 8.6 million. Below the threshold, you pay the same no matter how much you sell. Above it, 7 percent of every additional krone you take goes to the landlord.
Minimum rent moves with the CPI
The minimum rent is normally adjusted every year in line with the consumer price index, while the percentage stays fixed. That means the threshold moves too. If the minimum rent rises by 3 percent to NOK 618,000, the threshold rises to roughly NOK 8.8 million. You have to sell more before turnover rent kicks in, but the floor has also gone up. We explain how the adjustment works in our guide to CPI adjustment in commercial leases, and you can run your own numbers in the KPI calculator.
Some contracts go further. The law firm DLA Piper describes clauses where the minimum rent is raised after five and ten years to reflect the turnover rent paid over the previous three years. A few good years can, in other words, become your new floor.
The same rate can give different rent
Not every lease uses the model above. Another variant is that you pay the minimum rent plus a percentage of sales above an agreed level. Using the same numbers, but with 7 percent of sales above NOK 10 million, you pay NOK 740,000 when your sales reach NOK 12 million. In the first model, you paid NOK 840,000. Two clauses with the same percentage can therefore differ by NOK 100,000. That is why you should run your own numbers instead of just comparing rates.
Where is turnover rent common?
If you are leasing space in a shopping centre, expect to come across turnover rent. A shopping centre is a concept the landlord actively runs, with shared marketing, shared opening hours and a tenant mix designed to draw people in. When the rent follows sales, the landlord has a direct interest in you selling a lot.
Rates vary between sectors because margins differ. According to Thon Eiendom, its rates for clothing and footwear are between 6 and 8 percent, often a little higher in the best centres. Other sectors will have different rates, and the rate is always up for negotiation.
On central high streets, the picture is more mixed. Outside shopping centres too, rent for retail premises is normally either fixed or a combination of minimum rent and turnover rent.
Turnover rent is also used for restaurants, cafés and bars. Hospitality raises a few questions of its own about outdoor seating, takeaway and delivery, which we come back to below. For offices and warehouses, the model is rarely relevant, because the sales are not generated in the premises themselves.
What do you get in return for turnover rent?
Turnover rent splits the risk of how sales develop between you and the landlord. When business is good, the landlord gets a share of the upside. In return, the minimum rent should be lower than a straight fixed rent for the same premises. If it is not, you are giving away the upside and getting nothing back.
Be aware, though, that the risk is not shared equally. If sales fall below the threshold, you pay the full minimum rent, just as you would with fixed rent. The landlord shares the upside with you, while you still carry the downside down to the floor. There is also administration involved. You have to report sales throughout the year and submit figures confirmed by an auditor, and the landlord gets a view into your finances that you would not give up under fixed rent.
What to look for in the clause
What counts as turnover?
The starting point is normally gross turnover in or from the premises, excluding VAT. What is actually included, however, is decided by the contract, and this is where a lot of the money is. The law firm Selmer points out that most income generated from the premises is likely to be included if the lease says nothing else. If the contract is silent, do not assume that unclear items are left out.
For many tenants, online sales are the biggest question. Should online sales, click and collect, and online orders returned in store count? The landlord will often want a broad definition, while you as a tenant are normally better off if only sales that actually happen in the premises count. If your shop works mainly as a showroom for an online store, that is a strong argument for fixed rent instead. Selmer recommends the same, from the landlord's side.
For restaurants and cafés, the same applies to outdoor seating, takeaway and delivery. Selmer advises landlords to include such sales regardless of whether payment happens in the premises, online or elsewhere, including when the outdoor seating is on a municipal pavement. If you sell a lot through delivery apps, clarify whether the gross amount or the amount after commission counts. Deductions for card fees and commissions are common in hotel leases and may be worth asking for.
Finally, clarify how returns, discounts and gift cards are treated, and whether the turnover of any subtenant counts as yours.
Reporting, auditing and access
Rent is usually paid in advance during the year, based on the minimum rent, budgeted sales or last year's sales. After year end, it is settled against sales figures confirmed by an auditor. Many landlords also want weekly or monthly reports and the right to see the underlying documentation.
That is reasonable, but the terms should be clear from the start. Agree on the reporting format and deadlines, preferably as an appendix to the lease. Clarify who pays if the landlord wants its own auditor to review the figures, and ask for your sales figures to be treated as confidential.
Operating obligation and opening hours
Section 5-1 of the Tenancy Act states that a tenant of premises for a shop or restaurant must keep the business open and in normal daily operation, unless a temporary closure is necessary. In shopping centres, the requirement is often stricter, and you must stay open for all of the centre's opening hours.
With turnover rent, the operating obligation matters even more, because the landlord loses rent when you are closed. DLA Piper mentions double minimum rent as an example of a sanction for breaching the obligation. The shopping centre standard from Norsk Eiendom provides for a fee or additional rent as a percentage of the rent when the shop is closed, with exceptions including when the landlord has consented or the closure is due to circumstances beyond your control. Read the sanction carefully, check which exceptions apply, and consider asking for a cap.
Non-compete and radius clauses
Some contracts prohibit you from opening a competing business within a certain distance of the premises. The purpose is usually to prevent sales from moving out of the centre. For a chain or a restaurant that wants to grow, a clause like this can be costly, so make sure both the distance and the duration are as narrow as possible. Conversely, do not expect exclusivity yourself. The shopping centre standard states explicitly that the landlord is free to let competing businesses into the centre.
When the centre changes
In a shopping centre, you depend on the rest of the centre working. The shopping centre standard gives the landlord the right to move you to replacement premises of essentially the same quality, and if you cannot agree, you can terminate. If your contract has no such provision, ask for one.
If neighbouring shops disappear, that does not normally give you a right to lower rent or to leave the lease, unless this has been agreed. In the worst case, you pay full minimum rent for the rest of the term in a centre that is emptying out. An exit clause that applies if occupancy falls below a set level, or if key tenants leave, is the best protection against this. Also specify whether occupancy is measured for the whole centre or only for your part of it.
Marketing contributions and common costs come on top
Rent is rarely the whole bill in a shopping centre. Most centres require a marketing contribution towards shared marketing and activities, either as a fixed amount or as a percentage of sales. According to Thon Eiendom, tenants normally pay between 1.5 and 2 percent of sales as a marketing contribution.
Common costs come on top of that. Many shopping centre leases also allow the landlord to include the cost of replacing technical installations in the common costs, which the standard leases for commercial premises otherwise do not. We have covered what is normally included in our article on common costs in commercial buildings.
So calculate the total as a share of your sales. In the example above, you pay NOK 700,000 in rent on NOK 10 million in sales. With a marketing contribution of 1.5 percent, another NOK 150,000 comes on top. Before common costs, 8.5 percent of your sales goes to rent and the marketing contribution. Compare that figure with the margins in your own business.
The shopping centre standard and the meglerstandard
The dominant contract basis in Norwegian commercial leasing is the meglerstandard, the standard leases from Norsk Eiendom, Forum for Næringsmeglere and Norges Eiendomsmeglerforbund. There are separate versions for retail. In May 2022, a dedicated standard for retail premises in shopping centres was launched, often called Kjøpesentermalen, in which the parties can choose between fixed rent and turnover rent. The law firm Wiersholm considers it more balanced than the leases landlords have drawn up themselves, but also notes that most shopping centre landlords still use their own templates.
Ask early which template the landlord uses. If it is their own lease, the shopping centre standard is a useful benchmark for judging how far the terms lean in the landlord's favour.
Checklist before you sign
- Is the rent the higher of minimum rent and turnover rent, or minimum rent plus a top-up above an agreed threshold?
- Where is the threshold in kroner, and how does CPI adjustment move it?
- Can the minimum rent be raised during the term based on past sales?
- How is turnover defined, and what is expressly excluded?
- Are online sales, click and collect, takeaway, delivery and outdoor seating included?
- How often do you have to report, and who pays if the landlord wants to audit the figures?
- Are your sales figures treated as confidential?
- What does it cost to close, and are there exceptions and a cap?
- Is there a non-compete or radius clause that stops you from opening more locations?
- Can the landlord move you, and can you terminate if you do not accept the new premises?
- Do you have an exit if the centre loses key tenants or vacancy rises?
- What is the total cost including marketing contribution and common costs, as a percentage of sales?
- Is the lease based on the shopping centre standard or on the landlord's own template?
Frequently asked questions about turnover rent
What is turnover rent?
Turnover rent is a rent model where all or part of the rent is calculated as a percentage of the tenant's sales in the premises. It is usually combined with a minimum rent, and you pay whichever is higher. The model is most common in shopping centres and for restaurants.
What is minimum rent?
Minimum rent is the fixed amount you pay no matter how business goes, and it is normally adjusted every year in line with the CPI. It is the landlord's security when sales are low.
What percentage of sales is common as rent?
It varies by sector and location. Thon Eiendom states 6 to 8 percent for clothing and footwear in its shopping centres, often a little more in the best centres. Remember that the marketing contribution and common costs come on top.
Is turnover rent adjusted for CPI?
Not the percentage itself. Section 4-5 of the Tenancy Act states that the rules on index adjustment do not apply to the part of the rent tied to turnover. The minimum rent, on the other hand, is normally adjusted for CPI, which moves the threshold at which turnover rent kicks in.
Do online sales count towards turnover rent?
It depends on the contract. Many landlords want to include online sales, click and collect, and delivery, and if the contract is silent, income connected to the premises may be included. Clarify the definition before you sign.
Can I close if business is slow?
As a rule, no. Shops and restaurants have an operating obligation under the Tenancy Act, and shopping centre leases often require you to stay open for all of the centre's opening hours. A breach can trigger a fee or additional rent.
How we can help
At Spacefinder, we help shops and restaurants find the right premises, from the first conversation to a signed lease. Along the way, we are happy to work out what the rent model means for your finances before you commit. The service is free for tenants. Browse available retail and hospitality spaces, or start by mapping your needs in two minutes.
Sources: The Norwegian Tenancy Act (Lovdata), Norsk Eiendom (standard leases for retail premises), Wiersholm via NE.no, Selmer via NEF, DLA Piper (Utleiers ABC), BAHR via NE.no and Thon Eiendom.
