Its quite common for outgoings to be charged by landlords in addition to rent, the amount charged varies from lease to lease.
Some landlords will pass on charges like business rates, land tax, strata fees etc and some charge for many more items related to the building in which your business operates.
Many people believe that if outgoings are listed in the lease then they have to be paid but this is not the case. Changes to the Retail Leases Act in July 2017 mean that if outgoings are not listed in the Disclosure Document then the landlord cannot legally charge you for them.
What is a disclosure document?
When you were looking to take over the premises you should have been given a copy of this document (via your solicitor). The disclosure document is basically a summary of the key points of the lease, the document is given to you so that you can be sure that you know what you are signing for.
How Lucas just reduced his annual outgoings by $5,000 per year.
I was recently looking through a lease for a client, Lucas, to help him work out the potential value of his business when I noticed that the level of outgoings seemed quite high.
Lucas was not entirely sure what the outgoings that he paid monthly actually covered so the first thing we did was get the managing agent to send through an itemised invoice for all charges.
Looking through the lease along with the invoice for the outgoings we noticed that although the amounts charged seemed to match what was stated in the lease some of the charges did not appear on the disclosure document.
In addition to this the landlord had also miscalculated the way in which the land tax was being calculated.
I asked Lucas to contact his solicitor to check this and he confirmed what we had found and followed up with the landlord’s agent with the letter below.
Without going into too much detail the outcome resulted in a reduction of just over $5000 per year in outgoings and a rebate of the over payment since the lease was signed, not a bad result!
If you are currently paying your outgoings without being 100% sure what they cover it may well be worth checking.
Here is what you should do:
✅ Ask your agent or landlord for an itemised breakdown of what the outgoings on the rent invoice actually cover.
✅ If you do not have a copy ask the solicitor that acted for you when you signed the lease for a copy of the disclosure document.
✅ Make sure that all of the charges on the invoice are listed on the disclosure document and that the amounts being charged match up (allowing for declared annual increases).
✅If you find any differences then it may well be worth double checking these with your solicitor.
This whole exercise took Lucas only a few hours and resulted in a refund, a reduction of ongoing costs and a more saleable and valuable business. The $5000 saved per year drops straight into the overall profit of the business which ultimately will help to increase the value.
I hope that this inspires you to double check your own outgoings, good luck and let me know if you have any questions about this.
If you would like to have a confidential chat about your business anytime feel free to book in a time that suits you here https://www.gsebusinessconsultants.com.au/apply