How to calculate increase in outgoings

[Mr C]

Hi
I was hoping that someone would be able to assist me with this query re calculating increase in outgoings.
As part of our lease the tenant is to pay increase in outgoings. Specifically, Land Rates and Land Tax. We have subleased to a new tenant as of February 2010. The original lease began in 2008.
Our calculations of the increase in outgoings for this new tenant are as follows:
Increase in outgoings from 2008 to 2010 is $5555 and his share of this should be 5/12 of this amount - $2314.58.
The tenant is calculating it differently - The $5555 divided by 24 months then multiplied by the 5 month of his lease at the time - $1157.30.
Any advice on this would be much appreciated as you can see I don't have much experience with commercial leases.

Thanks in advance.

 

[Leghorn]

it is calculated as the difference between the two amounts multiplied by their pro rata share. often how to do the calculation is in the lease

 

[Mr C]

Thanks for the prompt reply Leghorn.
As this is a sublease, does the increase date back to the beginning of the original lease and not just the beginning of the sublease ?

 

[chilliblue]

Remember to check both leases to see what you can and cannot claim.

 

[Compropmanager]

I tried to answer but then re-read you post and it doesn't seem to make sense.

The tenant is normally only liable for the outgoings that are charged to the lessor for the time that the tenant occupys the property. That would be the outgoings for the accounting period (i.e. 1/07/2009 - 30/06/2010) proportioned by the time that tenant occupied the premises (i.e. 1/02/2010 - 30/06/2010) so...

outgoings for year 1 = $5,000.00 / (1/07/2009 - 30/06/2010 or 365 days)
tenants share = $13.70(per day) X (1/02/2010 - 30/06/2010 or 150 days) = $2,055.00

hope this makes sense but you will need to read the lease and speak to someone that can view the leases and advise you better

 

[Mr C]

Thanks compropmanager.
What I'm really querying is how to calculate the increase in outgoings that the tenant must pay. Do you calculate from the base year for each year of the lease. Eg tenant must pay any increases in land rates and land tax from the base year of 2008. Say the tax has gone up from $2000(2008) to $3000(2009). Increase of $1000 is paid by tenant. If for 2010 it goes up to $4000 my understanding is that the tenant now pays the additional $$2000. Is this correct??

 

[Leghorn]

yes it is the current year less the base year, generally until the first market rent review then it resets.

 

[Mr C]

Thanks leghorn. That's what I needed to know. You've saved me a trip to the solicitor.

 

[dammit]

the base year is a static figure that remains the same throughout the lease (in most cases), although some tenants will negotiate to insert clauses such as the base amount increases by 4% so their portion of outgoings they dont get penalised by inflation etc. in your example post#6 you are correct, but the tenant doesnt pay the whole $2000 that it increased, only their % portion of outgoings of the increased amount.

 

[barfly]

Hello, newbie first post but I've been following awhile ...

Regarding paying of Land Tax ... I'm advised this is only payable by the landlord not tenant - at least for Vic based properties. Does this differ in other states?

 

[Compropmanager]

Section 50 of the Retail Leases Act 2003
50 Recovery of land tax
(1) A provision of a retail premises lease is void to
the extent that it makes the tenant liable to pay an
amount for tax for which the landlord or head
landlord is liable under the Land Tax Act 2005.
Note
The application of this section is affected by section 121
(notification of amount of land tax).
(2) Subsection (1) does not apply, in the case of a
lease entered into at any time on or after
1 May 2003 and before 1 July 2003, in respect of
any period before 1 July 2003.

 

[PrimeCommercial]

Hello, newbie first post but I've been following awhile ...

Regarding paying of Land Tax ... I'm advised this is only payable by the landlord not tenant - at least for Vic based properties. Does this differ in other states?

As stated by comppropmanager, Landlords are not able to include or recover land tax under a retail lease. Other commercial lease you can do what you like.