The term ‘outgoings’ generally has a broad interpretation, encompassing all expenses incurred or payable in respect of, or incidental to, the ownership of property. This means that any expense incurred by the landlord in relation to the premises, or in the operation of the property, which the landlord seeks to recover from the tenant, may be considered an outgoing.
Outgoings have become a major point of concern for industrial tenants over the past few years, with on‑charged costs continuing to rise. These increases are placing significant pressure on tenants by inflating total occupancy costs, tightening cash flow, and prompting many businesses to reassess both their lease terms and the suitability of their current premises. The largest contributors to this upward trend include Land Tax, local government council rates, and insurance, each of which has experienced substantial growth. In key industrial markets such as Sydney, outgoings have risen by more than 80% in recent years, making them a critical factor in any Stay vs Go assessment.
Strategies to Reduce the Impact of Outgoings on Tenants
Negotiating Caps: When entering lease negotiations, tenants should strongly consider negotiating caps on outgoings for at least part of the lease term. In addition, occupiers may benefit from capping specific components, such as management fees and certain repair or maintenance expenses, to limit exposure to unexpected increases.
Full Disclosure: Request a detailed outgoings budget or estimate during negotiations. This level of transparency helps verify that all charges are legitimate and provides a clearer understanding of the landlord’s cost structure before committing to the lease.
Review Foreign Owner Surcharges: Confirm whether the landlord is a foreign entity, as this may trigger additional Land Tax surcharges. Identifying this early allows tenants to assess whether these costs will be passed through and how they may impact total occupancy expenses.
Audit Expenses: Ensure the landlord provides an audited outgoings statement following each financial year. This provides assurance that all charges are accurate and compliant, while also giving tenants the opportunity to question or challenge any discrepancies.
If your lease is approaching expiry and you would like to undertake a Stay vs Go assessment, please contact the team below to discuss how we can assist.
