Outgoings

Outgoings

Here are some tips that can assist you:

When the landlord gives quotes on an outgoings rate per square foot or per square metre, ensure that you know exactly which outgoings the rate covers.

In shopping centres some outgoings include municipal, council and water rates as well as a land tax charge, while others do not. If these charges are excluded from the rate you will probably be billed either directly by the State authority or the Centre will pay the account and recover it from you periodically throughout the financial year.

Therefore when calculating your occupancy cost before signing the lease make sure you include all outgoing charges both “direct and indirect.”

Remember in some states like Queensland, South Australia and Victoria, land tax is no longer recoverable as an outgoing from tenants

Ensure that you are given a current schedule of outgoings with your disclosure statement and ask your solicitor to check that each item is covered by the lease. This will ensure that in later years any new outgoing expenses can not be included by the landlord without your permission

As one of the largest outgoings expenses is the management charge by the Landlord for administering the centre, ask the landlord to explain exactly how this cost is made up.

He should tell the amount represented Centre Management salaries, wages and office expenses and how much is Head Office allocated expenses as well as the basis used to apportion other Head Office expenses to the centre.

Remember that In West Australia management fees are not recoverable as an outgoing from tenants

Air Conditioning costs and their apportionment to tenants has also become a source of contention between Landlord and Tenant. Although one centralised system seems to service the entire centre, landlords contend that the major tenants have their own air-conditioning systems and as a result their leases do not provide for them having to bear any share of the air-conditioning expenses. This has resulted in an imbalance in the area proportion over which such costs are made up.

Repairs and Maintenance is another large expense in the outgoing schedule. Try to obtain a breakdown of how this is made up for example building, electrical, signs, car parks. locks and keys glass etc.

Alert yourself to the possibility of capital expenditure being included in this outgoing cost area. This is type of cost is not recoverable from the tenant

If you are in a strip centre which may be subject to flooding from storms, always insist that the lease contains a condition requiring the landlord to covenant that on the hand over of the premises to you that such premises are water and weather sealed.

This is an excerpt from the Retailer's Survival Kit by Hymie Zawatzky

HYMIE ZAWATZKY