Outgoings are the operating costs of a retail building: insurance, rates, maintenance, common area cleaning, security. The lease typically requires tenants to share these costs (proportionally based on floor area). But outgoings clauses are often vague, allowing landlords to shift unexpected or inflated costs to tenants. You can sign a lease expecting $10,000 annual outgoings and face $20,000 bills with no recourse.
What is a Outgoings Clause?
Outgoings are costs beyond rent that you (the tenant) pay, typically as a proportion of your share of the building. These include: building insurance, council rates, land tax, maintenance and repairs, common area cleaning, security, lift maintenance, parking lot maintenance, and sometimes landlord's costs for managing the building. The lease should specify which costs are included and how they're calculated, recovered, and adjusted.
Red flags to watch for
Vague definitions allow landlords to include charges you didn't anticipate. The lease should list specific costs.
Outgoings can spiral over time. A cap (e.g., 5% annual increase) or a review clause protects you.
Some landlords add their own profit margin or management fees on top of actual costs. These should be separately disclosed and negotiated.
Landlord's capital improvements should not be passed to tenants as outgoings. Clarify: major repairs vs. maintenance.
You should receive annual statements showing actual costs, your share, and adjustments. Without this, you cannot verify you're paying fairly.
Your outgoings share should be proportional to your use or the landlord's allocation method should be reasonable and transparent.
The lease should allow for third-party determination or arbitration if outgoings disputes arise.
Your legal rights
Under the Retail Leases Act 1994 (NSW), similar acts in other states, and common law, outgoings must be fair and reasonably incurred. Section 10 of the NSW Act requires outgoings to be specified and justified. The Retail Leases Act also requires a 'Retail Premises Lease' template disclosing outgoings clearly. If a landlord charges outgoings for work beyond maintenance or charges you disproportionately, you can dispute the charge. The Act also provides for rent reviews; outgoings adjustments are typically separate. In disputes, the tribunal or court will assess whether charges were reasonable and properly allocated.
Questions to ask before you sign
- 1What specific costs are included in 'outgoings'? (Request detailed, itemised list.)
- 2How is my share of outgoings calculated? (Floor area? Proportion of building?)
- 3Are landlord management fees or overhead costs included? If so, what percentage?
- 4Can outgoings increase annually? If so, is there a cap or review mechanism?
- 5Will I receive annual reconciliation showing actual outgoings and my share?
- 6Are major structural repairs or capital improvements included, or only maintenance?
- 7If I dispute outgoings, what is the dispute resolution process?
- 8What happens if actual outgoings exceed estimates? Must the landlord absorb overages?
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.