Outgoings in Retail and Commercial Leases in Australia

Outgoings in Retail Leases

Outgoings are additional “property” related costs that tenants may be required to pay on top of rent. In retail (and commercial) leases, these can include:

Council Rates: Charges imposed by local councils over a specific property for services such as waste collection and road maintenance.
Water Rates: Costs associated with the supply of water to the premises.
Insurance Premiums: Costs for insuring the building which comprises the premises, and which will more than likely include public liability insurance.
Repairs and Maintenance Costs: Subject to prohibitions on recovery specified in retail leasing legislation in the various States, expenses for maintaining the premises in good condition, excluding structural repairs.
Management Fees: Fees charged by the landlord for managing the property.

In Australia, retail leases are governed by state-specific legislation and what is considered outgoings is prescriptive. Beyond outlining what outgoings can be recovered by a landlord, the legislation also provides additional requirements e.g. the landlord must provide annual estimates of outgoings to the tenant prior to the commencement of each financial year.

Tenants and landlords of retail premises must have a clear understanding of their respective rights and obligations of what is payable and by whom, and what processes must be adhered to and followed.

What the retail leases legislation in each State prescribes as recoverable outgoings is final and overrides any provisions in a retail lease which is contrary to that legislation.

Outgoings in Commercial Leases

Commercial leases cover a broader range of properties, including offices, warehouses, and industrial spaces. Because commercial leases are not subject to or governed by any State leasing legislation, the outgoings which can be recovered under commercial leases are those which are negotiated and specified in the lease and are typically more extensive than retail leases. Such additional outgoings may include:

Property Taxes: Taxes levied by the state based on the value of the property e.g. land tax.
Utility Capital Charges: Costs for the installation of electricity, gas, and water meters.
Security Costs: Expenses related to security services and systems.
Common Area Maintenance (CAM) Fees: Costs for maintaining shared areas such as lobbies and parking lots.
Lease Negotiation and Preparation Costs: The landlord’s legal and other costs of negotiating and preparing the lease.

Negotiating outgoings in commercial leases can be more complex due to the diverse nature of commercial properties. Both landlords and tenants should carefully review the lease terms, in particular the payment of outgoings, to understand their respective obligations.

A lease lawyer will help to ensure that your lease is fundamentally correctly categorised as a retail or a commercial lease. This will determine what costs can and cannot be passed onto and recovered from the tenant.

Our lease lawyers have extensive experience in handling retail and commercial leases, including negotiation of lease terms, drafting the lease and undertaking any enforcement action for breach, including complex litigation. Our team is here to provide you with quality advice and representation on retail and commercial leases and leasing matters.

Speak to a lease lawyer for
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