Liberty International PLC

2 Operating leases

The group earns rental income by leasing its investment properties to tenants under operating leases.

In the United Kingdom the standard shopping centre lease is let for a term of 10 to 15 years, either at market rent or, for turnover based leases, at a minimum rent generally set at 80 per cent of market rent. Standard lease provisions include service charge payments, recovery of other direct costs and review every five years either to market rent or, for turnover leases, to 80 per cent of market rent. Standard turnover based leases have a turnover percentage agreed with each lessee which is applied to a retail unit’s annual sales and any excess between the resulting turnover rent and the minimum rent is receivable by the group. In the United Kingdom standard commercial leases vary considerably between markets and locations but typically are let, for a term of five to 15 years, at market rent with provisions to review to market rent every five years. Typically, single let properties are leased on terms where the tenant is responsible for repairs and running costs, and multi-let properties are leased on terms including service charges. In the United States leases are typically of shorter duration, sometimes with renewal options.

The income statement includes £7.2 million (2006 – £8.5 million) recognised in respect of expected increased rent resulting from outstanding reviews where the actual rent will only be determined on settlement of the rent review.