
Turnover rent is a type of commercial lease agreement. This type hinges on the tenant’s revenue, aligning the landlord’s income with the tenant’s business performance.
Unlike fixed rent agreements common in Bangkok’s residential leases, turnover rent bases the rental payment on a percentage of the tenant’s sales.
Turnover rent differs from other lease types due to its performance-based nature. Fixed leases demand a constant payment regardless of business success, whereas percentage leases might combine a lower fixed rent with a sales-based component.
Turnover rent, however, primarily relies on the actual sales generated, making it distinct in promoting a symbiotic relationship between landlord and tenant.
Three popular features of turnover rent include sales reporting requirements, where tenants must regularly provide sales figures to landlords; adjustable rent rates, allowing rent to fluctuate with business performance; and audit rights, granting landlords the ability to verify sales figures. These features ensure transparency and fairness in calculating rent, prevalent in Bangkok’s retail spaces like malls and shopping centers.
Common features of turnover rent comprise minimum guaranteed rent, ensuring landlords receive a baseline income; exclusivity clauses, preventing landlords from leasing nearby spaces to direct competitors; and lease duration flexibility, allowing adjustments based on business performance. These characteristics are typical of commercial leases aiming to balance risk and reward between parties involved.
Unusual features of turnover rent include caps on rent increase, limiting how much rent can rise in a successful year; specific exemptions in sales calculations, like excluding sales from online transactions; and inclusion of marketing contributions, where a portion of rent is allocated to joint marketing efforts. These aspects, though less common, can be crucial in negotiations, offering unique advantages to both landlords and tenants in Bangkok’s competitive market.
Unique to turnover rent are co-management clauses, allowing tenants to have a say in property management decisions; performance-based lease termination rights, offering an out based on sales performance; and profit-sharing models, where landlords might receive a portion of profits instead of traditional rent. These features foster a partnership approach to commercial leasing, heavily reliant on mutual success.
Turnover rent offers a more dynamic and potentially fairer structure than fixed or percentage leases by directly linking rent to business success. This alignment of interests between tenant and landlord creates a partnership-like relationship, differentiating it significantly from more traditional lease agreements.
This structure can be particularly advantageous in volatile markets or industries, providing flexibility and incentive for both parties to maximize the property’s commercial potential.
For more information on turnover rent and other real estate concepts, visit our glossary about Bangkok real estate.