Are you a retail tenant who has received an invoice for outgoings from your Landlord which was much higher than you expected? Has your Landlord attempted to charge you for outgoings which were not disclosed to you at the start of your lease? This is an all-too common problem for retail tenants who can be misled by cunning Landlords looking to recover costs which they should rightly be paying for. So, what are your rights if you find yourself in this situation?
For a start, landlords are generally prohibited from gaining a profit from outgoings and can only pass on the costs they incur. Outgoings also have to be directly referable to the premises and the building. All outgoings should be disclosed to you =before you enter your lease, and must be disclosed, together with prior years’ actual figures, if you are a “retail shop lease” under the Retail Leases Act 1994 (NSW), in something called a ‘Lessor’s Disclosure Statement’ (Disclosure Statement) which includes a yearly estimate of the outgoings you will be required to pay under your lease (i.e. council rates, water usage, land tax, garbage levies etc).
For retail leases (which are not only “shops” in the strict sense), you are not required to pay any outgoings to your Landlord which were not disclosed in the Disclosure Statement. Similarly, if your Landlord provides you with an outgoings statement that is higher than the estimate and there was no reasonable basis for the estimate given at the start of your lease, you are not liable to pay the higher amount. If the Disclosure Statement given to you was incomplete or contained information that at the time it was given was materially false or misleading, you have the right to terminate the lease by notice in writing to your Landlord at any time within 6 months after the lease was entered into (as per section 11(2) of the Act).
Within three months of the first ‘accounting period’ under your lease (i.e. the first year), your Landlord must provide you with an outgoings statement that details all the outgoings applicable for that period. You are entitled to withhold payment for outgoings if your Landlord has failed to provide you with this statement and you have requested that your Landlord provides you with such a statement and your Landlord has not provided you with such a statement within 10 business days (section 28A of the Act). You will not be in breach of your lease if you withhold payment of outgoings under this section. Once your Landlord does in fact provide you with this statement, you must pay the withheld contributions to outgoings within 28 days.
However, with your consent, a Disclosure Statement can be amended after you have entered into the lease which can extend to adding or removing certain outgoings.
It is important that you scrutinise your lease and Disclosure Statement carefully before you sign so that you are aware of all outgoings payable under your lease. At Green & Associates, we specialise in reviewing and negotiating lease terms so do not hesitate to reach out if you needed expert help with your lease documents.
