Promotional levy in retail leases: what you’re really paying for

If you operate a retail business in a shopping centre or managed strip, you’re almost certainly paying a promotional levy or contributing to a marketing fund. These charges appear on your monthly statement alongside rent and outgoings, but many tenants don’t fully understand what they’re funding or how the money is spent. Unlike rent, which is straightforward, promotional levies can feel like a grey area—especially when you don’t see direct benefits for your store.

What is a promotional levy?

A promotional levy is a regular payment, usually calculated as a percentage of your rent or turnover, that tenants make to the landlord to fund marketing and promotional activities for the centre or precinct. It’s separate from your base rent and outgoings, though it’s often collected alongside them. In Victoria, the Retail Leases Act 2003 regulates how these levies can be charged and what landlords must disclose.

Promotional levies are most common in shopping centres, but they also appear in managed strip retail precincts, particularly those with a central marketing or management body. The idea is that collective marketing—like advertising campaigns, events, or loyalty programs—drives more foot traffic than individual stores could achieve on their own. Whether that happens in practice depends on how the levy is structured and how the funds are used.

How is the levy calculated?

There’s no standard formula, but most leases calculate the promotional levy as a percentage of either:

• Your annual rent (e.g., 1–3% of gross rent), or
• Your turnover (e.g., 0.5–1.5% of monthly sales).

Some leases use a fixed dollar amount per square metre, though this is less common. The method matters because it affects how much you pay and how it scales with your business performance. A turnover-based levy, for example, means you pay more when sales are strong and less when they’re weak—aligning the cost with your ability to pay. A rent-based levy, on the other hand, is fixed regardless of your sales, which can be tough during slow periods.

In Victoria, the Retail Leases Act requires landlords to disclose the levy’s calculation method in the lease’s disclosure statement. If the lease allows the landlord to change the percentage or method later, that must also be disclosed upfront. If you’re unsure how your levy is calculated, check your lease or ask your leasing consultant to review it.

What does the levy cover?

Promotional levies are meant to fund activities that benefit the entire centre or precinct, not just individual stores. Common uses include:

• Advertising and media: Digital ads, radio spots, social media campaigns, or print materials promoting the centre.
• Events and activations: Seasonal festivals, live music, kids’ activities, or pop-up installations designed to draw crowds.
• Loyalty programs: Discount schemes, gift cards, or apps that encourage repeat visits.
• Signage and branding: Centre-wide signage, wayfinding, or digital screens that promote the precinct as a destination.
• Public relations: Press releases, influencer partnerships, or community engagement initiatives.

What the levy doesn’t cover are costs that should be part of the landlord’s standard outgoings, like maintaining common areas or security. If you’re paying a promotional levy, the landlord can’t double-dip by charging those same costs as outgoings. The Retail Leases Act in Victoria is clear on this: promotional levies must be used for marketing, not operational expenses.

How to check if the levy is being spent properly

Landlords in Victoria must provide an annual statement showing how the promotional levy was spent. This statement should break down expenses by category (e.g., advertising, events, PR) and include receipts or invoices where relevant. If the statement is vague or doesn’t provide enough detail, you’re entitled to ask for more information.

Some red flags to watch for:

• The statement lists expenses that don’t seem like marketing (e.g., repairs, cleaning, or management fees).
• The landlord can’t explain how specific activities benefited tenants.
• The same expenses appear in both the promotional levy statement and the outgoings reconciliation.
• The landlord refuses to provide receipts or invoices when asked.

If you suspect the levy isn’t being used as intended, you can raise the issue with the landlord or, if necessary, seek advice from your solicitor or a retail leasing consultant. The Retail Leases Act gives tenants the right to challenge unfair or improper charges, but you’ll need evidence to support your case.

Negotiating the promotional levy

Promotional levies aren’t set in stone—they’re negotiable, especially for new leases or renewals. Here’s what to focus on:

1. The calculation method

If the lease proposes a rent-based levy, push for a turnover-based alternative. This ensures your contribution scales with your sales, which is fairer for seasonal or fluctuating businesses. If the landlord insists on a rent-based levy, negotiate a lower percentage or a cap on annual increases.

2. Transparency and reporting

Ask for clear terms in the lease about how the levy will be reported. The lease should specify:

• When the annual statement will be provided (e.g., within 3 months of the financial year-end).
• What level of detail the statement will include (e.g., itemised expenses, receipts).
• Your right to request additional information if the statement is unclear.

If the landlord resists providing detailed reporting, that’s a sign they may not be spending the levy as intended.

3. Control over spending

Some leases include a tenant advisory committee that has input into how the promotional levy is spent. While the landlord usually retains final say, a committee can ensure the funds are used for activities that actually drive foot traffic to your store. If the lease doesn’t mention a committee, ask if one can be formed as part of your negotiations.

4. Exclusivity for your category

If you’re the only tenant in your category (e.g., the only bakery or hair salon), ask for a clause that prevents the landlord from using the promotional levy to attract direct competitors. For example, if you’re the sole café in a small centre, the landlord shouldn’t use the levy to promote a new café opening nearby. This isn’t always possible in larger centres, but it’s worth asking for in strip retail or smaller precincts.

What to do if the levy isn’t delivering value

If you’re paying a promotional levy but not seeing any benefit—no increased foot traffic, no new customers, no engagement with the centre’s marketing—you have options:

• Request a meeting with the centre manager: Ask for a breakdown of how the levy was spent and how it benefited tenants. If the manager can’t provide clear answers, that’s a problem.
• Compare notes with other tenants: If multiple tenants feel the levy isn’t working, you’ll have more leverage to push for changes. Landlords are more likely to listen if the issue is widespread.
• Review your lease: Check whether the landlord is complying with the lease’s terms about how the levy should be spent and reported. If they’re not, you may have grounds to dispute the charges.
• Seek advice: If the landlord is unresponsive or defensive, talk to a retail leasing consultant or your solicitor. They can help you assess whether the levy is being used properly and what steps you can take next.

In Victoria, you can also take disputes about promotional levies to the Victorian Civil and Administrative Tribunal (VCAT). VCAT can order landlords to provide proper statements, refund improper charges, or even adjust the levy if it’s found to be unfair. However, going to VCAT should be a last resort—it’s usually better to resolve issues directly with the landlord first.

Key takeaways for tenants

• Promotional levies are a common but often misunderstood part of retail leases. Understand how yours is calculated and what it’s meant to fund.
• Landlords in Victoria must provide an annual statement showing how the levy was spent. Review this carefully and ask for more detail if needed.
• The levy should only fund marketing activities that benefit the centre as a whole, not operational costs like cleaning or repairs.
• Negotiate the levy’s terms at the start of your lease. Push for a turnover-based calculation, transparent reporting, and input into how the funds are spent.
• If the levy isn’t delivering value, raise the issue with the landlord, compare notes with other tenants, and seek advice if needed.

Promotional levies can be a useful tool for driving foot traffic, but only if they’re structured and managed fairly. As a tenant, you have the right to know what you’re paying for and to challenge charges that don’t deliver value. If you’re unsure about your lease’s terms or how the levy is being used, a retail leasing consultant can help you review the details and negotiate better terms.

Frequently asked questions

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Elite Retail Leasing acts for retail tenants across Australia on new sites, renewals, lease negotiations, surrenders and expansion planning. If any of the above applies to your business, get in touch.

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