Outgoings are operating costs related to the premises that a commercial landlord reasonably incurs and passes on to their tenants, either as part of, or in addition to rent.
Leases usually include one of three methods for recovering outgoings from tenants:
- Direct recovery – andlords pay outgoings costs and invoice tenants.
- Net lease recovery – budgeted and charged in advance with year-end adjustment based on actuals.
- Gross lease recovery – an estimate of outgoings is included in the rent with no adjustments, regardless of actuals.
Retail vs commercial leases
Outgoings vary greatly between commercial and retail shop leases.
- The Retail Shop Leases Act 1994 (Qld) (the RSL Act) includes specific provisions for outgoings for retail shop leases.
- There is no ‘standard’ definition of outgoings in commercial leases.
Landlords cannot charge retail tenants for certain costs listed in the RSL Act, e.g., land tax, excess payments under the landlord’s insurance policy, or a body corporate sinking fund (however, body corporate fees are recoverable).
Outgoings costs from suppliers may increase unexpectedly and are usually beyond the control of the landlord.
Preparing and reviewing
When preparing or reviewing estimates and statements, consider:
In addition to outgoings specified in a lease, tenants are responsible for any direct costs they sign up for as part of their business which may include internet and telephone costs, self-arranged electricity or water etc.
Outgoings for retail tenants
A retail shop lease tenant is only responsible for paying outgoings if the lease specifies:
The RSL Act mandates that landlords can only pass on a tenants share of outgoings based on the proportion of retail space.
Estimates and statements
Under the RSL Act, landlords must provide tenants with outgoings estimate when the lease begins, or one month before the relevant period starts (often financial year).
A tenant agrees to pay outgoings under the lease agreement, and generally the costs cannot be re-negotiated.
If a lease specifies appointing service providers for an outgoing is at the landlord’s sole discretion, it is unlikely the tenant can negotiate who carries out the work.
Who decides disputes
A QSBC mediator can mediate a dispute (up to $750,000 in value) over whether an outgoing was reasonably incurred, but not the amount of an outgoing.
- QCAT considers disputes between a tenant and landlord related to retail shop leases if the dispute is not resolved after mediation at the QSBC.
Which court hears financial disputes over outgoings in commercial (non-retail shop) leases is dependent on the value in dispute:
Download the Outgoings fact sheet.