Commercial Property Leasing: Costs You May Not Have Foreseen

Commercial Property Leasing: Costs You May Not Have Foreseen

In areas that there is an oversupply of leases available, not only will you have the chance to secure a good rental rate but there may be additional lease inducements that are on offer. These may include a contribution towards the cost of your fit out, rent free periods or other cash incentives. These can be a great way to get you started, however, be sure to get your tax team to review the contractual obligations that affect your end of financial year obligations. Ideally, you’ll want to have things configured to obtain a tax neutral outcome, otherwise it may not be in your best interests to take a landlord up on their ‘sweeteners’. Even non cash incentives that can be converted into cash will be done so in the eyes of the tax office, so beware!

Other costs that you might not have factored into your initial budget is that the rent price advertised will generally be the cost exclusive of GST. However, you will still need to pay GST or factor it in if claiming as an input tax credit. Also, it is more common to negotiate the rental price in the commercial sector so don’t be shy to address this before you commit to a lease. If you can determine that it has been on the market for a while, this is likely to work in your favour if you are looking to pay a reduced rate.

There will generally be a variety of outgoings that you will also need to pay. In some instances there will be a levy for car parking, cleaning and rubbish removal, infrastructure costs (installing cabling for example) and repair and maintenance. On top of this are lesser known hidden costs such as a make good clause which upon vacating requires you to deliver the premises back to the landlord in the condition you received it in. Rather unfairly in many tenant’s eyes, this also applies even if you have made substantial improvements or quality renovations. There are of course many ways to navigate around this clause, but will need to be done before you sign!

Be sure to enquire about the energy efficiency of a potential commercial property that’s for lease. What you want to see is a Building Energy Efficiency (BEEC), but you should be able to publicly access this online on the BEEC register. This will typically be mandatory for buildings over 2000 square metres. A higher energy star rating, using the NABERS system, will mean lower costs for you as a tenant. Don’t forget that you will be paying for your utilities so it is wise to check this. You may wish to see if your potential premises has a Green Star rating as well, but this is a voluntary rating system that will consider the environmental design of a building.

Don’t forget that commercial leases are freely negotiable within common contract law. This means that you can try to negotiate different things from length of lease to inducements.