Outgoings on commercial lease

[liswil05]

Hi there,
We have been leasing a commercial property for about 3 months. Our landlord has invoiced us for more than what our lease agreement is. Our agent says it's because the outgoings have increased. Can he legally increase outgoing costs whenever he likes?

Thanks,
Stressed.

[SwissKiwi]

Outgoings such as water/power/management fees - are not static - so perhaps they have risen and he passing on the costs.

What exactly does your lease say on outgoings?

If you think your Landlord is inflating the outgoings - why not get them invoiced to you directly - then you know exactly what they are - and you can pay them directly.

[One]

I know nothing about commercial leases - but do the outgoings include insurance? that could easily have increased.

Can you ask for a breakdown?

[Davo36]

OK, the situation is that the landlord can invoice you for the outgoings listed in section 3 of the lease (I assume it's an ADLS lease).

And you normally pay a proportion of the outgoings for the whole property. This percentage is stated in the first schedule of the lease.

So you pay a proportion of the rates, insurance and other outgoings.

You should only pay your share of actual outgoings though. You can ask for copies of bills. So for instance, I would ask for a breakdown of the monthly figure your landlord has given you. It should show how much for rent, gst, rates, insurance and so on.

[Ivan McIntosh]

Dear Lis,

Davo summed it up neatly, although negotiated leases can and do exclude various types of outgoings, or place a cap on them or fix them for initial periods. It all depends what the lease says.

It isn't about making a profit from you on outgoings (although sometimes landlords will try), just about passing on exactly what the cost is, no more no less.

There should be a "washup" at the end of each financial year where the landlord tots up outgoings paid versus outgoings money collected in from the tenants (or deemed to be collected in from vacant premises if you are in a multi-unit complex where there are some - the landlord covers off their share). If there is a shortfall, the landlord will invoice for it, if there is a surplus, the landlord will usually just set the budget for next year to take it into account rather than refunding.

Again, I stress that it depends what is in your lease. Assuming it is an ADLS form, what does it say in the first schedule (3 pages in) under "Proportion of Outgoings". Then go to the 4th page headed "Outgoings" and tell us if anything is crossed out. Then off to clause 3 of the second schedule (two more pages along) and tell us if anything was deleted there. Any changes to clauses 7 to 11 or 23?

Then we'll have a better idea of where you're at.

[liswil05]

Thanks so much for the help. This is the first time we have leased and the agent didn't explain how the outgoings worked, he made it sound like they were a fixed cost when we signed.

We've never been given the full contrast to sign either and only have the initial "agreement to lease". Under proportion of outgoings it says 100%, however there is a figure written in for the total annual outgoings cost - which is why I assumed it was fixed. On the outgoings page nothing is crossed out, and "water inclusive" is added at the bottom.

No changes on clause 3 and the page only goes up to clause 7.1.

Only other changes are the landlord to pay the cost of preparing the formal lease......"after 1 year" added at the end?

Also yes we are in a multi unit complex.....can I still request a breakdown of the outgoings?

Thanks.

[Ivan McIntosh]

Unfortunately all my quotes about clauses and pages were in reference to the latest formal Deed of Lease, so that won't have helped you too much. There are a variety of forms of agreement to lease about so I'm reticent to advise based on what I think might be in yours, but might not.

Being in a multi-unit complex, you may have a body corporate? If so the body corporate ought to be able to provide you with an operating expenses budget for the complex and the share payable by your unit. There may be some items that don't form part of the body corp budget but are nonetheless outgoings.....things such as rates or unit specific security, for example, may be charged separately to the landlord and be passed on to you as tenant, and the landlord would normally account for those at year end.

Interesting that you have a figure written in. That is probably the first year's budget rather than a fixed amount.....but I wouldn't like to say for sure without seeing it.

[Wayne]

You should only pay your share of actual outgoings though. You can ask for copies of bills. So for instance, I would ask for a breakdown of the monthly figure your landlord has given you. It should show how much for rent, gst, rates, insurance and so on.

I always send a copy of the origional bill with my outgoings invoice so the tenant can see everything is straight up.

[liswil05]

Thanks Wayne, yes I think I will request copies of the bills etc.

[liswil05]

Unfortunately all my quotes about clauses and pages were in reference to the latest formal Deed of Lease, so that won't have helped you too much. There are a variety of forms of agreement to lease about so I'm reticent to advise based on what I think might be in yours, but might not.

Being in a multi-unit complex, you may have a body corporate? If so the body corporate ought to be able to provide you with an operating expenses budget for the complex and the share payable by your unit. There may be some items that don't form part of the body corp budget but are nonetheless outgoings.....things such as rates or unit specific security, for example, may be charged separately to the landlord and be passed on to you as tenant, and the landlord would normally account for those at year end.

Interesting that you have a figure written in. That is probably the first year's budget rather than a fixed amount.....but I wouldn't like to say for sure without seeing it.

Hi Ivan
No we don't have any body corporate. Would it be ok if I emailed a copy to you?
Thanks.

[Ivan McIntosh]

Sure Liz, send it through and I'll have a quick look. Was away yesterday, btw, or would have replied earlier.

Regards
Ivan

[xenophobicfruit]

As a commercial landlord myself, I have been in situations where I have covered the cost of all outgoings, and also been in situations where the tenant pays for all outgoings.
The standard procedure that I take when I bill my tenants is to include the original invoice that I received and also if it is a proportion of outgoings I also include the working figures for clarity.
It is actually a lot of administration every month but in the end, transparency makes a happy tenant.
If your landlord has not done such a service for you, then in my opinion you are well in your rights to ask him to justify how the costs work out to you, in order for you to understand them.

[Beano]

Outgoings CBD fringe Auckland

As a commercial landlord myself, I have been in situations where I have covered the cost of all outgoings, and also been in situations where the tenant pays for all outgoings.
The standard procedure that I take when I bill my tenants is to include the original invoice that I received and also if it is a proportion of outgoings I also include the working figures for clarity.
It is actually a lot of administration every month but in the end, transparency makes a happy tenant.
If your landlord has not done such a service for you, then in my opinion you are well in your rights to ask him to justify how the costs work out to you, in order for you to understand them.

Does anyone know where we can obtain the breakdown range of outgoings ?
(I like to see if my costs are hight or low )
Bayleys and other real estate agents show a range of the total eg $75-$90m2 CBD fringe C-D grade
but not the breakdown
eg

Total	$49.00
Insurance (est)	$17.72
Insurance	$9.76
Air-conditioning	$9.97
Water	$1.48
BWOF	$0.53
Fire Alarms	$1.06
Maintenance	$2.12
Management	$4.24
Building Sinking Fund	$2.12