John Lewis hit with click-and-collect lawsuit
John Lewis is being sued by the owner of London’s Brent Cross shopping centre over claims it should pay for online sales collected in store on top of its annual turnover, despite the lease being signed decades before the surge of online shopping.
Hammerson and Standard Life Investments, the property company which operates the North London retail hot spot, has asked the High Court to clarify if click-and-collect sales should be included in the rent despite the lease terms being agreed in 1979, long before offering click and collect, the FT reported.
The case relates to a provision in the lease, signed in 1979, revolving around annual “turnover rent”. Hammerson is alleging John Lewis must pay an additional cost alongside the £30,000 rent if the store’s takings reach a certain threshold.
John Lewis, in its defence, argues that any sales and charges related to click-and-collect purchases should not be included in the turnover as the transaction is completed when the order leaves the distribution centre as opposed to taking place in store.
Turnover tensions
Under the current lease terms, the retail giant is obligated to pay the landlord 0.75 per cent of the store’s gross revenue if annual turnover tops £4m, and if earnings rise above £10m, the bill rises to 1 per cent of turnover.
Kristine Ng, partner at Morr & Co told Morning Wire 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 instead looks at “how a historic lease should be interpreted” in relation to whether the language used at the time the lease was issued can extend to modern retail practices such as click and collect.
“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,” Ng said.