Outgoings in commercial building

hi everyone,
we operate a business in a leased commercial building. in the agreement we signed, we are supposed to pay rates and outgoings. What's included in outgoings?? recently the toilet in the commercial building was faulty, a plumber came and fixed it. the owner refused to pay saying it is our responsibility. is he right? is the fixing of toilet part of the outgoing?? please help.
 
in the agreement we signed, we are supposed to pay rates and outgoings. What's included in outgoings??

Whatever it says in your Lease. No point asking anybody on here as they haven't read it. If you are looking for a "standard" or a "normal" answer, there is no such thing.

It will boil down to you having to actually read what it says. You will be far wiser once having read it. (I'm naturally assuming, despite having signed it, you are like most people, because you are asking the question you haven't read it). Brace yourself Nelly...it's gonna hurt :eek:


recently the toilet in the commercial building was faulty, a plumber came and fixed it. The owner refused to pay saying it is our responsibility. is he right?

No-one on here can possibly answer this, as they haven't read your Lease. Are you under some assumption that the Owner needs to pay ?? Are you currently wearing your Commercial Tenant's hat ??

I find my Commercial Tenant's take about 9 to 12 months of training before they realise they aren't wearing the "pick up the phone to fix something and the Landlord will come running....and also pay for" hat. It takes even longer if say, you are dealing with some operations manager who wasn't involved with the signing of the Lease. They naturally assume it's the same as renting a house.

The natural reaction once they find out what they are really up for, always turn around and say - "Well, if that's the case, why didn't we just buy it." Indeed....a question for your boss I suppose. The answer of course is that the boss who signed the Lease would rather employ his capital elsewhere - presumably receiving a much larger return that just owning the commercial premises.


is the fixing of toilet part of the outgoing ??

No, but if you typically look at roughly section 5, there will be a huge big list of maintenance items that you are required to do.....it will go on for pages and pages. In there, will most likely be that you are responsible for not only the toilets, but also all the plumbing fixtures and pipes in and even under the building.

Count yourself lucky it was only a toilet. One day the main sewer line might explode, and you'll be up for fixing that too....and that'll be in the 100's of thousands, not just 100's. As I said, brace yourself Nelly.

I'd strongly suggest you pay the plumber, and then immediately get back to concentrating on your business making revenue from whatever activity you do there, rather than nickel and dime your Landlord.
 
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On the resi line....Subject to building inspection? If a plumbing issue were to occur as you point out Dazz?

Are there insurance policies available to tenants to cover this example i wonder. There must be a way to hedge against such dramatic instances surely...

Cant see why a building inspection wouldnt be par the course for Commercial...
 
Are there insurance policies available to tenants to cover this example i wonder. There must be a way to hedge against such dramatic instances surely...

Don't know Reeco, I simply palm that responsibility off to the Tenants.

How they discharge that responsibility (via pay or claim on their insurances) is up to them. I'm too busy looking after my side of the contract to worry about what they need to do and how they manage their business.
 
Don't know Reeco, I simply palm that responsibility off to the Tenants.

How they discharge that responsibility (via pay or claim on their insurances) is up to them. I'm too busy looking after my side of the contract to worry about what they need to do and how they manage their business.

Might be applicable to you in marketing terms. To attract vendors maybe? You could allay any fears a tenant might have.

Imagine if this poster came to you with these concerns for one of your properties prior. Depending on the client some commercials maybe more high risk then others so i guess it may or may not get a deal over the line.. Small detail but when you have a CIP on some heavy downtime already you dont wanna spook anyone.

Guess it depends on the industry your targeting i spose
 
the best lessons in life can be learnt from mistakes you have made yourself. Commercial leases are potent documents. Flick thru the lease to where you get to the make good section and as Dazz said, brace yourself. In my experience it is not uncommon to see what amounts to a basic renovation upon exit. All backed up with personal gaurantees from all and sundry including aunt nelly who probably didn't read the document either
 
The issue with leases is that they are couched in legal terms and open to interpretation that would make both side's lawyers rich if tested in court. Bottom line is that tenants pay for everything, except, in SA, Land Tax. The toilet is your issue, our toilet blocked up and while we paid the plumber to try to fix it, it turned out to be a mains sewer blockage and so eventually only the Water authority could fix it.

The 'make good' on exit is usually enforced rigidly, often to the extent that the landlord would actually be better off if they didnt enforce it. One lessee had spent '000s on bathroom fittings; as well as internal fittings. They were happy to leave the quite generic fittings, which were of good quality, but the lessor said they had to go when the lease expired. Cost them quite a lot of moneyto remove them. But figured it was well spent when they also returned the bathroom to 'original' - sans new bathroom fittings. As they had taken photos of the original bathroom (which badly needed doing up) they were quite simply returning it to the original (disgusting) condition.

Take photos of everything before you move on - our PM didnt when we started a new lease as tenants, and she claimed the premises were in excellent condition. We were able to prove they weren't. We got our bond back.

We did learn a lot from the experience though.
 
hi everyone,
we operate a business in a leased commercial building. in the agreement we signed, we are supposed to pay rates and outgoings. What's included in outgoings?? recently the toilet in the commercial building was faulty, a plumber came and fixed it. the owner refused to pay saying it is our responsibility. is he right? is the fixing of toilet part of the outgoing?? please help.

Dazz makes a very good point. Without sighting your lease it's almost impossible to give you any sound advice.

Therefore, i will share with you some "general" lease insights that apply in the majority of commercial leases.

* Commercial leases are NOT like residential ones. People/businesses who rent commercial property often struggle to understand this concept and mistakenly think the landlord fixes everything.

* As a general rule of thumb in a commercial premises the tenant is responsible for all repairs and maintenance. Eg: Routine repairs, maintenance and servicing of air con, fire systems, roller doors, lights, plumbing fixtures (replace tap washers, unblock toilets, etc), repainting/recarpeting (usually specifically addressed in a redcoration clause in the lease).

* The exception to this is works of a capital or structural nature. Eg: Replacement of an air con unit that has reached the end of it's economic life. Repairs to the roof structure.

In your instance the plumbing issue might be a simple blockage in which case the cost of unblocking is your cost. If it is found that the actually problem is a collapsed section of pipe work, then this would fall under capital works and the landlord would be responsible.

Happy to give you some further advice if you wish to elaborate on your situation or if you would like some other advice.

Cheers,

MrPM.
 
In your instance the plumbing issue might be a simple blockage in which case the cost of unblocking is your cost. If it is found that the actually problem is a collapsed section of pipe work, then this would fall under capital works and the landlord would be responsible.


Unless of course something like this is in Lease.....in which case what you have written is not correct ;

(d) Tenant to promptly repair, maintain and keep in proper working order and free from blockage plumbing fittings, drains, water pipes, sewerage pipes, toilets and sinks, to the extent to which they are situated in or under the Leased Premises and provide services or Facilities to the Leased Premises;


Once again, it is impossible to intelligently comment unless first seeing the entire document to which the original poster refers.
 
if that were my clause, it would read like this

(d) Tenant to promptly repair and/or maintain and/or keep in proper working order and/or free from blockage any and/or all (including but not limited to) plumbing fittings, drains, water pipes, sewerage pipes, toilets and sinks to the extent to which they are situated in and/or under the Leased Premises and/or provide services and/or Facilities to the Leased Premises;
 
Tenants would actually let this slide? I suppose if its a high quality asset.

Depends on whether the comm Leasing market is tight or not...
For example, at the end of 2007, the office market in Perth was running at about zero vacancy rate, so when we submitted our proposed Lease to the prospective tenant, they hardly even read it...and this is a listed company too...all they wanted is to get their hands on the space, and quickly.

Needless to say they are a bit spewing now!

Boods
 
when we submitted our proposed Lease to the prospective tenant, they hardly even read it...and this is a listed company


Exactly. More common than one would think. When the head duck says "Yes we will take it".....normally they don't like being contradicted and undermined by some nit-picky little lawyer type.
 
Exactly. More common than one would think. When the head duck says "Yes we will take it".....normally they don't like being contradicted and undermined by some nit-picky little lawyer type.

Excellent. That's a win:win situation

A win for the head duck's ego :p :rolleyes: and, more importantly a win for the landlord ;)
 
Yeah, well it's a little more complicated than just that Player.


The head duck knows exactly what is strategically going on with the company. A successful enterprise won't mind paying over the odds for a top spot or nice infrastructure or good access to something they want, or just plenty of elbow room. They are concerned with the whole picture, and making revenue which swamps the puny amount of rent and outgoings they are going to flick to the Landlord. They aren't as stupid to sacrifice everything that is needed to add a significant ingredient to their mix. In short - they are usually "deal-makers".


His underling, the chief legal officer, will normally be a nit-picky twang who hasn't got a good handle on the overall strategic direction of the company and are usually as charasmatic as a dry cracker biscuit. They are usually more than willing to tell you 15 reasons as to why the deal shouldn't go ahead and how risky it is, and how it is physically and mentally an impossibility for them to write a sentence without including the words "subject to : and then reel off an impossibly long array of ridiculous excuses. In short - they are usually "deal-breakers".


I think the ego thing has nothing to do with it.....and even if it did, as Skyhooks always used to sing...."Ego is not a dirty word." Apparently in polite society nowadays ego and egotistical tendencies seem to be the # 1 crime committed. Prolly cos the left wing hippies reckon they run the show nowadays.


We are all encouraged to run around like silent little worms, skulking around continually turning down the voltage on their bulb such that it never eminates from their bushel is apparently all the rage. Pffft to that.
 
Thanks for clarifying those complexities Dazz.

The win:win line was purely in jest. Glad I posted it however as your response with distinctions b/w deal makers and deal breakers is very insightful and how it plays out within the various echelons in the organisation.

This info is great for those new to this game.

Now where's that book?
 
His underling, the chief legal officer, will normally be a nit-picky twang who hasn't got a good handle on the overall strategic direction of the company and are usually as charasmatic as a dry cracker biscuit. They are usually more than willing to tell you 15 reasons as to why the deal shouldn't go ahead and how risky it is, and how it is physically and mentally an impossibility for them to write a sentence without including the words "subject to : and then reel off an impossibly long array of ridiculous excuses. In short - they are usually "deal-breakers".


I think the ego thing has nothing to do with it

To an extent I agree. Lawyers usually protect themselves by predicting everything that will go wrong- failure to do so leads to the negligence claims I'm afraid.

But there is some ego- sometimes acting for the landlord I will suggest some non substantive concessions so the other lawyer feels he has had a "win" and have justified their fee. Helps get things signed quicker.

The real ego thing is that I don't like letting clients get "screwed over" as it reflects badly on me and the next time I encounter the other lawyer/landlord/tenant/whatever they will think I am an easy mark and it makes the next battle twice as hard.

As for lawyers with no personality this is an unfortunate byproduct of HECS and reduced funding to Unis leading to the dropping of the elective courses "Personality 101" and "Wit and Charm 102".
 
To an extent I agree. Lawyers usually protect themselves by predicting everything that will go wrong- failure to do so leads to the negligence claims I'm afraid.

But there is some ego- sometimes acting for the landlord I will suggest some non substantive concessions so the other lawyer feels he has had a "win" and have justified their fee. Helps get things signed quicker.

The real ego thing is that I don't like letting clients get "screwed over" as it reflects badly on me and the next time I encounter the other lawyer/landlord/tenant/whatever they will think I am an easy mark and it makes the next battle twice as hard.

As for lawyers with no personality this is an unfortunate byproduct of HECS and reduced funding to Unis leading to the dropping of the elective courses "Personality 101" and "Wit and Charm 102".

There are always different ways of looking at the same situation.
Say what you will about lawyers and the legal profession but if you owned a nice chunk of office space, who would make a great, long term tenant?
A law firm, maybe? Ever seen one go broke? Cut their fees to the bone during recession? Downgrade their office to cheaper premises?

Good times or bad, the legal profession always seems to do OK and pay the rent and outgoings.

Just a thought ...
 
There are always different ways of looking at the same situation.

Indeed there are always a myriad amount of ways to look at things.....but as an efficient decision maker, one must eventually get off the pot and choose which angle you will finally go with.


Say what you will about lawyers and the legal profession but if you owned a nice chunk of office space, who would make a great, long term tenant? A law firm, maybe? Ever seen one go broke? Cut their fees to the bone during recession? Downgrade their office to cheaper premises?

Agreed, I have seen many of them make long term Tenants. Whether they are great long term Tenants is another matter entirely. I have seen many Leases whereby they have screwed the Landlord down on initial rent levels to induce them to come in, and then lock them up for very lengthy periods with very small escalations clauses locked in. The chump Landlord who agrees to their T&Cs usually gets a very long Tenant.....but by no means a good one. Try and throw just one 'at market review' in there to the Landlord's advantage and see how long the negotiations with the law firm last for.

Good times or bad, the legal profession always seems to do OK and pay the rent and outgoings.

Agreed they do....but that's the donkey period where no intelligence is needed. All of the smarts is in the upfront negotiations....i.e. the level of rent and outgoings is the crucial material concern.
 
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