Included Costs Beyond Rent
Many commercial tenants focus primarily on rent when budgeting for a lease, but additional costs—known as outgoings—can significantly impact overall expenses. Understanding these costs upfront allows tenants to budget accurately, avoid unexpected financial burdens, and maintain a positive leasing experience.
What Do Outgoings Cover?
Outgoings contribute to the operational and maintenance costs of the property. These expenses ensure the premises remain safe, functional, and compliant with regulations. Common outgoings include:
- Council rates – Charged by local councils for services such as waste collection and infrastructure maintenance.
- Building insurance – Covers the structural integrity of the property, protecting both the landlord and tenants.
- Essential Safety Measures (ESM) servicing and maintenance – Includes fire safety equipment, exit lighting, and emergency systems to keep the premises compliant with safety regulations.
- HVAC servicing – Maintenance of heating, ventilation, and air conditioning systems to ensure comfort and efficiency.
- Property management fees – Costs associated with professional management services, which can include tenant support, lease administration, and property upkeep.
In Victoria, land tax cannot be passed on to tenants under a retail lease, which is an important protection for businesses operating in retail-zoned premises. However, non-retail leases may include land tax as an outgoing, so it’s always essential to clarify this before signing.
Additionally, some leases may outline exclusions or caps on outgoings, limiting how much costs can increase over time. A well-structured lease will provide transparency on these expenses, ensuring there are no surprises.
Fixed vs. Variable Outgoings
The way outgoings are structured can affect how predictable your expenses are:
- Fixed outgoings remain consistent throughout the lease term, making it easier to plan ahead.
- Variable outgoings fluctuate based on external factors, such as council rate increases, insurance adjustments, or maintenance costs. These costs may change annually, so it’s important to review past trends to anticipate potential changes.
Before signing a lease, tenants should request a detailed breakdown of all outgoings, including how they are calculated and whether any caps or limits apply. This ensures transparency and allows for better financial planning.
