A Tenant’s Guide to Commercial Lease Outgoings

If you’re leasing commercial property in the ACT, understanding outgoing costs (or ‘outgoings’) is crucial to avoiding unexpected expenses. These are operating expenses that landlords may pass on to tenants in addition to rent, subject to the terms of your lease agreement, and can include things like:

• Utilities expenses
• Rates
• Building insurance
• Property management fees.

Unfortunately, they’re often overlooked during lease negotiations, leading to unwelcome surprises when invoices arrive. Outgoings can significantly increase your total occupancy costs – sometimes by 20-40% or more depending on the property and location.

Outgoings are often paid in one of two ways:

1. The landlord estimates the annual outgoings, and you pay them in agreed-upon installments (typically monthly or quarterly). At year’s end, these payments are reconciled to ensure expenses have been accurately recovered, with any overpayment refunded to you or underpayment invoiced to you; or
2. They are charged to the tenant in arrears after the expense has been incurred by the landlord.

Under ACT law, outgoings exist to reimburse landlords for reasonable costs of maintaining the property during the lease term. Equally important, tenants should generally only pay for outgoings related to areas they actually access, use, and benefit from, though the specific allocation method will depend on your lease terms and the property structure. In multi-tenancy buildings, this often involves proportionate allocation based on floor area for common areas.

Protecting Yourself: Key Steps to Ensure Fair Outgoing Charges

Due diligence is essential. If you see charges for ‘repair and maintenance,’ request a detailed breakdown. Ask your landlord to provide verified receipts showing exactly what you’re being charged and why. This transparency ensures fair treatment and accurate billing.

For retail leases specifically, the Leases (Commercial and Retail) Act 2001 (ACT) requires landlords to provide a Disclosure Statement containing a reasonable estimate of outgoings before the lease is entered into. If a landlord charges fees not disclosed in the pre-lease Disclosure Statement, or fails to provide the required disclosure or estimates on time, you may have grounds to dispute those outgoings. However, the specific remedies available will depend on your circumstances and you should seek legal advice.

Every commercial lease is unique, making it impossible to provide a one-size-fits-all answer to outgoing costs. However, experienced legal counsel can help you negotiate favorable terms and protect your interests. If you‘re entering a commercial lease, or already have one and need assistance understanding, reviewing, or disputing outgoing costs, our property law team is here to guide you through the process. Contact us today to discuss your specific situation.

DISCLAIMER: This article is for informational purposes only and does not constitute legal advice.