Retail leases come with their own vocabulary - turnover rent, Zone A, pas-de-porte, dilapidations - and misreading one term can cost you real money. This glossary explains the terms that matter most to a retail tenant, in plain English, with the number or rule of thumb attached to each.
The retail lease glossary
These are the terms a retail tenant meets most often - and the ones that most often cost money when misread. Read them alongside the offer, not after you have signed.
Permitted use — What the lease and local planning allow you to sell or do in the unit. A shop-use unit often cannot become a restaurant without a formal change of use - always confirm your exact trade is permitted before signing.
Change of use — The planning process to switch a unit from one use class to another (for example retail to food-and-beverage). It can take weeks to months, may require permission, and can be refused - never assume it will be granted.
Turnover rent — Rent charged as a percentage of your sales, typically 6-12% depending on category, usually as a base rent plus a top-up above an agreed sales threshold. Common in shopping centres.
Zone A — A valuation method pricing the front ~6 metres of the unit (behind the window) at the full rate, with each deeper zone halved. Wide, shallow units rent higher per m² than deep, narrow ones.
Key money / pas-de-porte — A one-off, non-refundable up-front payment for the right to take a desirable unit or existing lease, common in France, Belgium and Luxembourg. It can equal several months’ rent or more.
Service charge — Your share of the cost of running the building or centre (cleaning, security, common areas). Shopping-centre service charges commonly run €5-15/m²/month.
Marketing / promotion levy — A separate shopping-centre charge funding centre-wide advertising and events, often around 10-20% of the service charge or a fixed €/m²/month.
Reinstatement / dilapidations — Your obligation to return the unit to an agreed condition at lease end, which can mean stripping out fit-out and repairing wear. Agree a schedule of condition at the start to cap the cost.
Break clause — A right to end the lease early on a set date without penalty, commonly at year 3 or 5 of a 5-10 year term. Cheap insurance on an unproven pitch.
Personal guarantee — A promise by a director to cover the lease personally if the business cannot. Resist it, or cap it (for example to 6-12 months’ rent) to limit your exposure.
Frontage — The width of your shopfront and window onto the street. Wider frontage and corner positions carry a rent premium because they convert more passing footfall.
Anchor tenant — A large, footfall-generating tenant (a department store, supermarket or major brand) that pulls shoppers into a centre or pitch, lifting the smaller units around it.
Footfall — The number of pedestrians passing a unit, measured hourly or daily. It is the single biggest driver of retail rent and the best predictor of walk-in trade.
Franchise agreement — The contract between a brand owner (franchisor) and an operator (franchisee) covering brand use, know-how, training and fees - typically an entry fee plus ongoing royalties. It usually requires the franchisor to approve the site before the franchisee signs a lease.
Territorial exclusivity — The area a franchisee is protected in, defined as a radius, a postcode or a named catchment. Check whether it prevents only other franchisees, or the franchisor’s own stores too, from opening inside it.
Occupancy cost ratio — Total cost of occupying the unit - base rent plus service charge plus marketing levy - as a share of sales. It typically runs 8-15% depending on retail type, and is the fastest test of whether a unit is affordable.
The three that most often cost tenants money
Permitted use — Wrong use class can block your trade entirely
Turnover rent — A percentage of sales, typically 6-12%
Dilapidations — Exit repairs can run to tens of thousands
