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As a commercial tenant, you will have to pay your landlord outgoings. Outgoings, or variable outgoings, are the everyday operating expenses your business must pay on top of the cost of rent. The outgoings your business has to pay will ultimately depend on your lease agreement. However, there are general outgoings that most commercial tenants are expected to pay. This article will outline what these outgoings are and what your business should consider when paying outgoings. 

1 – Rates

You will have to pay rates to your local council. They will calculate your council rates using the property value and the use of your leased premises. The council will use these rates to fund their day-to-day operations and services, such as collecting your business’s rubbish.

2 – Utilities

Outgoings also encompass the cost of utilities. Utilities include:

  • electricity;
  • gas; 
  • water; and
  • telecommunications, such as the cost of internet and fibre. 

Your landlord may charge you a flat rate for your utilities or a monthly bill that reflects your business’s use of the utility. Your lease agreement should detail the payment method of each of your utilities. 

3 – Rubbish and Recycling Collection

You will usually be required to appropriately dispose of all of your business’s rubbish and recycling. This obligation will likely require you to keep any onsite rubbish bins or containers clean and orderly. However, any expense that accompanies disposing of your rubbish, recycling or unused goods is your business’s responsibility. 

4 – Insurance

Your business will be responsible for acquiring and maintaining insurance for the interior of your commercial premises. You should also insure any of your business’s assets. The cost of this insurance, and any accompanying premiums or fees, is your responsibility. However, your landlord will likely have taken insurance for your building. If a natural disaster damages your premises, such as an earthquake or a volcanic eruption, their insurance will likely cover any property damage. You will not be obligated to pay to make good, or repair the damage done.

5 – Maintenance and Repair

You will have to pay your landlord for any maintenance carried out on your premises. This maintenance may involve:

  • cleaning your business’s office or store; 
  • mowing the lawns in your cafe or restaurant’s courtyard;
  • clearing your car parking area; or 
  • trimming the hedges that line your business. 

In conjunction with the cost of maintenance, you will also have to pay your landlord for any repairs that you carry out to the property. These repairs may include:

  • repainting your leased premises; 
  • repairing any damage done to the floors or walls of the property; 
  • replacing any plants in your business’s courtyard; or
  • repairing the fence surrounding your business.

However, your landlord is responsible for structural repairs to your premises, such as repaving your car parking area or fixing damage done to your roof. Your landlord must also pay for repairs that are the result of defects in the design or construction of your leased premises.

6 – Provision of Facilities and Services

You will also have to pay to access certain facilities and services that your landlord provides, such as:

  • access to your building’s toilets, or other shared facilities;
  • air conditioning in your business space;
  • security services; or
  • the use of the lifts. 

7 – Fire Service Charges

It is your obligation to ensure that your business has all of the appropriate equipment in the case of a fire. You will have to pay New Zealand fire service charges, alongside paying for fire:

  • detection systems, such as smoke alarms; and
  • fighting equipment, such as fire extinguishers and sprinkler systems.

Your Outgoings

Before you enter into a commercial lease agreement, you must be aware of the outgoings that your business will have to pay. How these outgoings are calculated will vary depending on the outgoing type. It may be useful to estimate what your monthly outgoings will cost to assist in your business’s budgeting for the financial year.

For example, you will likely have to pay a monthly power bill that reflects your business’s power usage for that month. However, if you are leasing part of a commercial building, your cost for accessing shared facilities will be calculated in proportion to the total floor area your business occupies. 

If there are any outgoings included in your lease agreement that your business will not use, you should negotiate with your landlord to remove that cost

Key Takeaways

All commercial tenants have to pay outgoings alongside the cost of their rent. What outgoings each tenant has to pay will vary between tenancies. However, there are general outgoings that most commercial tenants have to pay. These outgoings include:

  • rates;
  • utilities;
  • rubbish and recycling collection; 
  • insurance; 
  • maintenance and repair;
  • access to shared facilities and services; and
  • fire service charges. 

If you are unsure what outgoings you are responsible for in your commercial lease, contact LegalVision’s property and leasing lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions 

What do outgoings mean in commercial property?

Outgoings are the everyday expenses that a commercial tenant must pay on top of the cost of rent.

What is included in outgoings?

What expenses that outgoings include will vary between commercial leases. However, outgoings generally include the cost of rates, utilities, rubbish and recycling collection, insurance, maintenance and repair, access to shared facilities and services and fire service charges. 

How are outgoings calculated?

The calculation of outgoings will vary between the types of outgoings. The cost of outgoings will usually depend on the total surface area of the business and the business’s activities.

What are commercial landlords responsible for? 

Commercial landlords are responsible for insurance against damage to the leased premises by an emergency or natural disaster, structural repairs to the exterior of the leased property and the cost of repairs resulting from a defect in the construction or design of the building. 

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