If you're a commercial property owner or renting a commercial property for your business, you will know that managing your expenses is critical to maintaining a profitable operation. In this article, our experts at First National Real Estate Neilson Partners provide an overview of outgoings in a commercial real estate lease, as well as the various obligations of both landlords and tenants, so you can better understand your costs and keep your property running smoothly.

What are outgoings?

Outgoings are costs payable relating to the leased premises or in the case of a multi-occupancy property, such as a shopping centre, the premises, and the property. When leased these costs may be transferred to the tenant. Examples of outgoings include water rates, council rates, and owner’s corporation fees.

Retail premises at Endeavour Hills Shopping Centre

A landlord must provide the tenant with various documents outlining outgoings (estimates and actual) at various points over the term of the lease.

Information a commercial landlord must provide to a tenant about outgoings

Under various sections of the Retail Leases Act 2003 (the Act), the landlord must provide the tenant with the following:

Category of outgoings

The tenant under a retail premises lease is not liable to pay outgoings except where they are detailed in the lease.

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Disclosure statement containing estimates of outgoings

The landlord must give a disclosure statement to the tenant at least seven days prior to entering into the lease. If a statement is not provided, the tenant is not liable to pay rent, if they have provided the landlord with written notice that they have not received the disclosure statement. This must be done during the seven days before, or during the 90 days after entering into the lease.

Estimate of outgoings (section 46 of the Act)

The landlord must give the tenant a written estimate of the outgoings for which the tenant is expected to pay under the lease. This must be done before the lease is entered into, and one month before the end of the landlord’s accounting periods. The tenant is not required to pay for outgoings if an estimate has not been given.

Statement of outgoings

All the landlord’s expenses must be detailed in an audited statement. This statement must list the accounting periods and related outgoings which the tenant is responsible to pay for. The landlord must give this statement to the tenant no later than three months after the end of each accounting period.

If the tenant is only required to pay for GST, utilities, council rates, and insurance, and the statement is accompanied by proof of payment i.e. invoices, assessments, or receipts, this statement does not have to be audited.

Work with First National Real Estate Neilson Partners with your commercial property

With a long history of managing commercial properties in Melbourne’s Southeast, our commercial team at First National Real Estate Neilson Partners are more than equipped to assist you in either searching for your next commercial lease, or in managing your property. For more information on outgoings and other charges under a commercial lease, or your responsibilities as a landlord or tenant, please contact us today, and a member of our team will be to help.