Commercial Lease Outgoings Explained

Introduction

When negotiating a commercial lease, most business owners focus on rent — but one of the biggest ongoing costs often comes from outgoings. These extra charges can significantly affect your total occupancy cost and sometimes come as a surprise if not clearly explained in the lease.

In this article, we’ll break down what outgoings are, who pays for them, and how to avoid unexpected bills when entering or renewing a commercial lease.

What Are “Outgoings” in a Commercial Lease?

Outgoings are the landlord’s operating expenses related to the ownership, maintenance, and management of the leased premises or building. A typical lease will require the tenant to contribute to all or part of these costs, either directly or through a fixed or proportionate amount.

Common examples include:

• Council rates and water rates

• Land tax

• Building insurance premiums

• Repairs and maintenance of common areas

• Cleaning, lighting, and air-conditioning of shared spaces

• Security and management fees

These are usually payable in addition to rent, meaning your total occupancy cost is the sum of rent + outgoings + GST.

Gross vs Net Leases

A key distinction is whether the lease is gross or net:

• Gross Lease – The landlord pays all outgoings, and the rent amount is “all inclusive”.

• Net Lease – The tenant pays a base rent plus an additional contribution towards the landlord’s outgoings.

In Queensland, most commercial and industrial leases are net leases.

How Outgoings Are Calculated

The method of calculation should be clearly stated in the lease. Common approaches include:

• Proportionate Share – If you occupy part of a larger building, you’ll pay a percentage of the total outgoings based on the area you lease.

• Fixed Contribution – A set monthly or annual amount (sometimes adjusted annually).

• Direct Reimbursement – You reimburse specific expenses, like utilities or waste removal.

The Importance of Transparency

Before signing, request a schedule of estimated outgoings for the coming year. This should detail:

• Which items are included and excluded

• The method of calculation

• How often outgoings are reconciled

After the end of each financial year, the landlord should provide a statement of actual outgoings and a reconciliation of what you paid. You may owe more or be entitled to a refund.

Common Disputes and How to Avoid Them

Disputes over outgoings often arise when:

• The landlord includes costs not permitted under the lease.

• The tenant is charged for capital improvements or structural works.

• The calculation of “proportionate share” is unclear.

To avoid disputes:

• Have your lease reviewed by a commercial leasing lawyer before signing.

• Negotiate for capped or clearly itemised outgoings.

• Keep records of all payments and reconciliations.

The Retail Shop Leases Act Exception

If your lease is a retail shop lease, additional protections apply under the Retail Shop Leases Act 1994 (Qld) and retail shop leasing legislation in other States and Territories:

• Landlords must provide a written estimate of outgoings before the lease is signed.

• Certain costs (like land tax) cannot be passed on to retail tenants.

For non-retail commercial leases, these statutory protections don’t apply

Conclusion

Understanding outgoings is essential for accurate budgeting and to prevent disputes with your landlord. Always ensure your lease clearly sets out:

• What outgoings you must pay

• How they are calculated

• When and how they are reviewed or reconciled

Need help reviewing your commercial lease or outgoings clause?

Greyson Legal specialises in commercial leasing advice. We’ll make sure your lease obligations are clear, fair, and legally compliant.

📞 Call 0411 248 885 | 📧 Email mail@greysonlegal.com