When looking for a commercial property to lease, most people focus on the rental price and can overlook the outgoings. This can be misleading because when you lease a commercial property, as a tenant, you are required to pay both rent and outgoings.
Outgoings are like the running costs of owning a commercial property and the owner can pass some of these costs on to the tenant.
If you’re about to lease a commercial property, no matter the size, be prepared to pay more than just the rent.
What Are Outgoings on a Commercial Lease?
Outgoings on a commercial lease are the additional costs to rent included in the commercial lease agreement that tenants are required to pay.
Outgoings of a commercial lease can include maintenance costs of the property, council and water rates, strata fees, and insurance.
Here’s a comprehensive list of potential commercial lease outgoings:
- Council and local government rates
- Water and sewage rates
- Strata fees
- Land tax
- Ongoing property services – e.g. pest control, security, and test and tag
- Property management fees
- Property condition reports & inspections
- Maintenance costs – e.g. gardening, cleaning, air-conditioning service, and window washing
- Rubbish removal and collection
Who Pays the Outgoings on a Commercial Lease?
Commercial property outgoings can be shared between the landlord, the tenant, or between multiple tenants of the same building.
During the lease negotiations for the property, it is critical that all parties discuss the commercial lease outgoings – what the tenant will pay – and include these costs in the disclosure statement.
Any outgoings not included in the commercial lease and disclosure statement are not required to be paid by the tenant.
What Commercial Property Outgoings Must be Paid By the Owner?
For a retail lease, there are certain outgoings that the owner is restricted from passing on to the tenant. These can include land tax and costs in preparation of the lease.
Other outgoings that cannot be included in the lease agreement:
- Personal costs of the landlord
- Costs associated with capital improvement of the property
How to Calculate Outgoings of My Commercial Lease?
A commercial lease agreement that requires the tenant to pay outgoings, must include estimates of the future outgoings.
As a tenant, it’s critical to read all of the commercial lease agreement and disclosure statement to understand which outgoings you’ll be liable to pay, what percentage you’ll be paying, and when you’ll be required to make payments.