A turnover rent audit is typically conducted as an Agreed-Upon Procedures engagement under ISRS 4400 (Revised) and ICAEW ethical standards. It maps a tenant’s declared income against the turnover provisions and audit rights set out in the lease. It’s commissioned by the landlord or asset manager. It’s also known as a turnover rent verification, or simply a turnover audit — same engagement, different name depending on who’s asking. (In the US, the equivalent lease structure is usually called percentage rent.)

Looking for an independent turnover rent audit for your property or portfolio? Calmsulting provides turnover rent audit and verification services for landlords and asset managers.

Because traditional turnover clauses were written for till sales less VAT and returns, and today’s occupiers generate income through channels a till was never built to capture. Membership fees, supplier marketing rebates, placement income, concession and subletting arrangements, gift card redemptions, loyalty scheme revenue, and app-driven transactions that bypass the premises entirely — all of this can sit outside a lease’s original turnover definition. When it does, landlords lose visibility across the portfolio, and occupiers carry the governance risk of getting the declaration wrong in good faith.

Consider a restaurant paying a base rent of £100,000 per year. The lease provides for additional turnover rent equal to 8% of turnover above £1 million.

The landlord or asset manager commissions the engagement, and the output is a report of factual findings — not an opinion, and not negotiation advice. We map what’s been declared against what the lease and audit rights actually require, report the exceptions objectively, and leave the interpretation and any resulting action to management. That distinction matters: an AUP engagement doesn’t draft or negotiate leases, and it doesn’t tell a tenant they’re wrong — it tells everyone, factually, what the records show.

The engagement typically involves reconciling declared income to the tenant’s records, assessing how different income streams interact with the lease definition of turnover, and testing any exclusions claimed by the occupier rather than simply accepting them at face value. Depending on the circumstances, this may include point-of-sale data, e-commerce reports, delivery partner statements, concession reporting and other supporting information used by the occupier to record and report turnover.

Industry-standard turnover rent clauses are generally thorough on traditional sales channels but may be silent or ambiguous on income streams that have emerged through omni-channel retailing. Standard drafting typically captures till sales, phone and internet orders regardless of where they’re fulfilled, vending and electronic sales, and commissions tenants earn from third parties on things like delivery and warranties. What it may not address clearly includes app-driven transactions that bypass the premises entirely, membership fee attribution and loyalty scheme revenue. If your leases were drafted or last reviewed before these channels became material to a tenant’s business, the gap isn’t a tenant error. It’s a lease definition that hasn’t kept pace, and it’s worth reviewing before assuming a declaration is complete simply because it matches the letter of the clause.

The engagement runs through a defined six-stage process — Discovery, Terms of Engagement, Conduct Procedures, Communicate Draft Findings, Report of Factual Findings, and Feedback — so scope, fee, and timing are agreed before any work begins, not discovered along the way. Because it’s a scoped AUP engagement rather than an open-ended audit, most single-tenant reviews complete within a few weeks of receiving the required records.

See more on What Should My Occupiers Expect?

Does our own statutory auditor need to do this? No. Many landlords prefer a specialist reviewer who is separate from significant occupier relationships elsewhere in the portfolio and has experience of turnover rent reviews. Read our article Who Should Conduct a Turnover Rent Audit? for further discussion on qualifications, objectivity and lease expertise.

Is this the same as a full financial statement audit? No. ISRS 4400 (Revised) governs Agreed-Upon Procedures specifically — a defined set of tests against agreed criteria, reported as factual findings. It’s not an opinion on a full set of accounts, which is exactly why it’s faster, cheaper, and better suited to this specific question.

Can this run on one tenant, or does it have to cover the whole centre? Either. Portfolio-wide annual reviews are common practice for larger asset managers and internal audit teams. So is a targeted, single-tenant review when a specific declaration doesn’t look right.

Is this the same thing as “percentage rent”? Functionally, yes. Percentage rent is the US term for a rent structure calculated off tenant sales; turnover rent is the UK and European equivalent, and increasingly captures far more than sales at the till.

Who actually pays for the audit? The landlord pays upfront, since it’s their engagement — but standard lease drafting typically shifts the cost onto the tenant if the review finds turnover has been understated beyond a specified threshold. In the industry-standard model lease clause, that threshold is a 2% understatement; below it, the landlord absorbs the cost even where a review was warranted, and above it, the tenant pays. If the declaration turns out accurate, the tenant faces no cost at all beyond the time spent supplying records — which is exactly why cooperating with a review shouldn’t feel like an accusation.

Author: Scott Finn, Chartered Accountant — Member of Chartered Accountants Australia and New Zealand (CA ANZ) and The Institute of Chartered Accountants in England and Wales (ICAEW)

Related Reading

• Who Should Conduct a Turnover Rent Audit? A Guide for Landlords and Asset Managers
• Turnover Rent Audit Services