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Outgoings

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.

Recovering outgoings

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. 

Important facts

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).

  • In general, landlords cannot profit from outgoings and should only pass on the costs they incur.
  • A tenant may have the option not to pay outgoings until the audited statement is received.
  • A tenant may have the option not to pay outgoings until the audited statement is received.

Inaccurate estimates

Outgoings costs from suppliers may increase unexpectedly and are usually beyond the control of the landlord.

  • Typically, tenants cannot avoid paying outgoings if the actual audited amount turns out to be more than the estimate.
  • QCAT or the courts may decide whether landlords provided knowingly inaccurate estimates that mislead tenants.

Preparing and reviewing

When preparing or reviewing estimates and statements, consider:

  • Are all the items permitted outgoings in the lease and (if applicable) the RSL Act?
  • Are the costs charged, reasonably incurred?
  • Are the figures accurate?
  • Are proportions correctly calculated?
  • Is each cost itemised and not more than 5% of the total outgoings? (Applies only if the cost can be further itemised).
  • Is the statement prepared by a registered auditor?

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.

Top Tips

Outgoings for retail tenants

A retail shop lease tenant is only responsible for paying outgoings if the lease specifies:

  • the outgoings payable,
  • how they will be determined and allocated, and
  • the process for the landlord to recover them from the tenant.

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). 

  • An audited annual outgoings statement (the statement) is typically provided to the tenant by 30 September every year.
  • A registered auditor needs to prepare the statement

Negotiating outgoings

A tenant agrees to pay outgoings under the lease agreement, and generally the costs cannot be re-negotiated.

  • Large lump sums for outgoings can present cashflow issues for tenants. Negotiating a payment plan may be in the best interests of both parties, to ensure ongoing viability and tenancy of the premises.

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:

More information

Contact the QSBC by submitting an online enquiry or calling 1300 312 344.

Download the Outgoings fact sheet.