Outgoings — the costs a landlord passes on to retail tenants beyond base rent — are one of the most contentious areas of Australian commercial leasing. They can include council rates, water, insurance, management fees, and even capital expenditure disguised as maintenance. Every Australian state and territory has retail lease legislation that limits what a landlord can recover as outgoings and requires detailed disclosure. Understanding your rights can save thousands of dollars per year.
What is a Outgoings and Recoverable Expenses?
Outgoings are the operating expenses of a retail premises that the landlord recovers from tenants, either directly or as a proportionate share. They typically include council rates, land tax (in some states), building insurance, common area maintenance, and management fees. Each state's retail lease act defines what can and cannot be recovered.
Red flags to watch for
In NSW (Retail Leases Act 1994, s 26), land tax cannot be recovered from retail tenants. Other states have different rules — check your jurisdiction.
Landlords may attempt to pass on costs for structural upgrades or new plant and equipment as 'maintenance'. Capital items that extend the life of the building should generally be amortised, not passed through as annual outgoings.
Management fees are often calculated as a percentage of gross outgoings, creating a perverse incentive for the landlord to increase outgoings. Look for a fixed cap or a percentage ceiling.
Most state retail lease acts require landlords to provide audited or certified outgoings statements annually. If the lease does not reference this, it may attempt to avoid the statutory obligation.
A sinking fund for major repairs is reasonable, but you should know the current balance, planned expenditure, and whether surplus funds are returned at lease end.
If the building has vacant units, the landlord should not recover those units' share from existing tenants unless the lease explicitly allows it.
Your legal rights
Each state has specific retail lease legislation: NSW — Retail Leases Act 1994 (s 26–28 on outgoings); VIC — Retail Leases Act 2003 (s 46–51); QLD — Retail Shop Leases Act 1994 (s 32–35); SA — Retail and Commercial Leases Act 1995 (s 30–32); WA — Commercial Tenancy (Retail Shops) Agreements Act 1985 (s 12). These statutes require landlords to provide disclosure statements before lease execution and annual outgoings reconciliations. Tenants generally have the right to audit outgoings.
Questions to ask before you sign
- 1Which outgoings are recoverable under the lease, and are any excluded by the applicable state retail lease act?
- 2Is land tax included, and is that permitted in this state?
- 3What are the management fees, and is there a cap?
- 4Will I receive an audited outgoings statement annually?
- 5How is my proportionate share calculated, and what happens when units are vacant?
- 6Is there a sinking fund, and can I see the current balance and planned expenditure?
- 7What is the process for disputing an outgoings charge?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.