The John Lewis Partnership has been taken to the Supreme Court by the former and current owners of the Brent Cross shopping center in north London, in a dispute that could redraw the boundaries between brick-and-mortar leases and the digital checkouts they now go through.
Hammerson, the FTSE 250 landlord that now owns Brent Cross, and Standard Life, its predecessor, claim the employee-run retailer has underpaid its rent for more than a decade by failing to include click-and-collect transactions as part of its store revenue. The lawsuit, filed in the High Court last December and first highlighted by the *Financial Times*, is based on the wording of a lease agreement dated 1972, four years before Brent Cross even opened its doors and decades before the World Wide Web was used commercially.
John Lewis has been one of the center’s main tenants since 1976. The 125-year lease he signed requires the partnership to pay a base rent of £30,000 a year plus a turnover surcharge: 0.75 per cent of turnover between £4 million and £10 million, rising to 1 per cent for anything over £10 million. Industry sources put the store’s annual revenue at around £50 million, which would mean annual rent of around £475,000, a modest sum by modern retail standards and an indication of how cheap these deals can be.
Such generous agreements were common among anchors. In the heyday of the British shopping center, landlords routinely offered cheaper rents to John Lewis, BHS and Marks & Spencers around the world on the grounds that their mere presence would attract more visitors, increase surrounding rents and reduce risk to the entire project. Half a century later, those old leases are now being tested in a retail landscape their drafters could never have imagined.
At its core, it’s about the meaning of “gross receipts.” Hammerson and Standard Life argue that the term should include online orders collected from the Brent Cross store, online orders fulfilled in store and in-store orders later dispatched from a John Lewis delivery depot. They point to lease language that already takes into account “mail, telephone or similar orders received or fulfilled in or from” the premises alongside orders “originating and/or accepted in or from the demolished premises,” regardless of where delivery ultimately occurs.
John Lewis is not commenting publicly, but court records show he denies the claim. Sources close to the partnership argue that a lease agreement drawn up before the existence of the Internet was not, in common sense, intended to boost electronic commerce.
This view has support throughout the real estate industry. “Sales are done by click, not pickup,” a rival landlord told *Daily Sparkz*, “and the landlord should benefit from the “halo sales” when shoppers stop by to pick up their orders. You can’t say there was an intention to include click and collect in the lease because the internet didn’t exist in the 1970s.”
In this case it’s not just about definitions. Hammerson also took aim at the way John Lewis reported its figures. As part of the rental agreement, the retailer must provide a verified sales certificate signed by its accountants. The landlord claims that for the past 12 years, these certificates came with one glaring caveat: that the accountant’s audit “did not constitute an audit.” The certificates also do not contain a breakdown of sales. The landlords “consider it likely” that the certificates partially omitted amounts that should have been included.
The desired remedy is far-reaching. The plaintiffs want the court to force John Lewis to provide a detailed breakdown of sales for every year since 2013, with backdated rent, interest and costs, if the figures show that click-and-collect has been excluded.
For SME retailers and landlords watching developments from the sidelines, the impact is significant. Turnover rents, once a niche feature of anchor tenant deals, have spread rapidly across high streets and retail parks since the pandemic as landlords have offered flexibility in exchange for some of the upside. The way the courts interpret half-a-century-old language could set a benchmark for much newer agreements that also do not relate to omnichannel commerce.
This also raises a more vexing question for retailers operating hybrid businesses. If a click and collect order is fulfilled from a back-of-store warehouse, is the store a store, a warehouse or both? The answer is important not just for rent, but potentially also for business rates, insurance and later even planning classifications.
A trial date has not yet been set. Whatever the outcome, the case will likely be scrutinized by every real estate director, finance chief and retail lawyer with a sales lease in their bottom drawer.
