John Lewis Click-and-Collect Lawsuit Is a Lease Wake-Up Call

What the dispute is about

Hammerson (LSE: HMSO) and Standard Life Investments, which together operate London's Brent Cross shopping centre, have asked the High Court to determine whether click-and-collect sales should be included in the turnover figures that trigger additional rent payments under a lease originally signed in 1979, as first reported by the Financial Times.

The lease obliges John Lewis to pay a base rent of £30,000 per year. On top of that, a turnover-rent provision kicks in: the retailer must pay the landlord 0.75% of the store's gross revenue once annual turnover exceeds £4m, rising to 1% once it passes £10m, according to City AM's reporting of the lease terms.

John Lewis argues that click-and-collect transactions are completed when the order leaves a distribution centre, not when a customer picks it up in store. The sale, on that reading, never takes place at Brent Cross. Hammerson's position is that goods collected in the physical store should be captured by the turnover-rent clause regardless of where the payment was processed.

The lease was drafted more than four decades before omnichannel retail existed. Neither party could have contemplated click-and-collect when the wording was agreed.

How turnover-rent clauses work, and where they break down

Turnover-rent provisions are common in UK shopping-centre leases. The mechanism is straightforward: the tenant pays a base rent plus a percentage of sales once revenue crosses a stated threshold. It aligns the landlord's income with the tenant's trading performance and has historically been seen as a fair risk-sharing device.

The model was designed around in-store transactions. A customer walks in, buys something at the till, and the sale is recorded at the premises. The British Property Federation has previously flagged ambiguity around how online fulfilment interacts with these clauses, particularly where goods are ordered online but collected or returned in a physical store.

Click-and-collect complicates the picture. The payment may be taken on a website. The warehouse may despatch the item. But the customer's journey ends in the store, and the store's footfall, staffing, and operational costs reflect that activity. Whether the lease language captures this depends entirely on the specific wording, and most legacy leases were never drafted with this distinction in mind.

Kristine Ng, a partner at law firm Morr & Co, told City AM that the dispute "centres on the commercial tension built into turnover rent clauses, with landlords seeking to maximise what counts towards turnover and tenants seeking to limit it."

"The question before the court is whether wording agreed decades ago, long before online retail and click and collect existed, can fairly be applied to today's trading models," Ng said.

Ng added that the case is "not about creating new rules on turnover rent" but about "how a historic lease should be interpreted" in relation to whether the language used at the time can extend to modern retail practices.

What the ruling could mean for tenants with legacy leases

Hammerson's portfolio includes 11 flagship UK retail destinations. A ruling that click-and-collect revenue counts towards turnover rent at Brent Cross would not automatically apply to every other lease in the portfolio, but it would establish a persuasive interpretation that landlords across the sector could rely on in negotiations or further litigation.

The financial stakes are material. Consider a store with £50m in annual revenue, of which 20% is fulfilled through click-and-collect. If that £10m slice is included in the turnover calculation, the additional rent at a 1% rate amounts to £100,000 per year on the portion above the threshold. Across a portfolio of stores, or across a landlord's entire tenant base, the cumulative effect would be significant.

For tenants, the risk is retrospective as much as prospective. If the court rules that click-and-collect revenue falls within the existing lease wording, landlords may seek to recover underpaid turnover rent for prior years, depending on limitation periods and the specific terms of each lease.

For landlords, the case offers a potential route to recapture rental income that has been eroded by the shift to online fulfilment. Shopping-centre operators have watched a growing share of tenant revenue migrate to digital channels without a corresponding increase in turnover-rent receipts.

Practical steps for operators reviewing their own lease terms

The Brent Cross dispute is a reminder that lease language drafted in a different era can carry consequences that neither party anticipated. Operators with turnover-rent obligations, whether as tenant or landlord, should be reviewing their exposure now rather than waiting for the judgment.

Audit the definition of turnover

The critical clause is the lease's definition of "gross revenue" or "turnover." Some leases define it broadly as all sales "from or in connection with" the premises. Others restrict it to sales "made at" the premises. The precise phrasing determines whether click-and-collect, ship-from-store, or in-store returns of online orders fall within scope.

Quantify the exposure

Tenants should model the financial impact of different interpretations. If click-and-collect revenue were included, what would the additional rent liability be, both going forward and retrospectively? Landlords should run the same exercise to understand the potential uplift.

Check for variation or side-letter history

Many long-running leases have been varied, extended, or supplemented by side letters over the decades. The original 1979 wording may not be the only relevant document. Any subsequent correspondence that touches on the definition of turnover could be decisive.

Consider renegotiation before litigation

Ng noted that "where leases are priced on the basis of particular trading models, those assumptions need to be clearly reflected in the wording to avoid disputes emerging as retail continues to change." For leases approaching renewal or rent review, both parties have an opportunity to update the turnover-rent mechanism to reflect omnichannel reality. That is cheaper and faster than litigation.

The High Court's ruling, when it comes, will not rewrite every turnover-rent clause in the country. But it will signal how judges are likely to approach pre-digital lease language in a post-digital retail environment. Any operator with a legacy lease and a growing online-fulfilment model should treat this case as a prompt to read the small print.