Hi, I have a commercial lease for a retail shop in Vic (stand alone, not a shopping centre), we pay outgoings etc, as per the normal case. Landlord has sent an invoice for photography as part of an "insurance audit". Insurance has also gone up by about 100% (doubled) since the estimate. I have 2 questions: 1) Has anyone ever heard of these insurance audits before? I've only been leasing for 2 years so don't know if its legit or they're just taking me for a ride. 2) Can outgoings be increased this high? The Retail Lease Act 2003 is vague, it says: Section 40 (2) - A tenant is not liable to contribute towards an outgoing of the landlord in accordance with subsection (1) in excess of an amount calculated as prescribed by the regulations. and the regulations say: Section 11 - Maximum outgoing: For the purposes of section 40(2) of the Act, a tenant is not liable to contribute towards an outgoing of the landlord in excess of an amount calculated by multiplying the total amount of the outgoing by the relevant fraction. But it doesn't seem to mention what the relevant fraction is. Thanks for your time reading. Peter.
Is this a commercial lease or a retail lease as defined under the retail leases act? Ie do you have a retail usage covered under the Act and is the lease compliant with the Act? Disclosure statement would have indicated the outgoings applicable, if you occupy the whole building you bear 100% of the outgoings. Has the usage changed (the insurance clause may have a clawback provision of the insurance increases due to the usage eg open fire for BBQ). How long have you been there? Have you queried or challenged the extent of the increase? The outgoings would list the costs that are your responsibility, the audit may not be recoverable by the owner.
Hi Scott, thanks for replying. 1. Lease says commercial lease but its for a retail shop, so my understanding from reading the law it is usage covered under the retail leases act, yes. 2. The lease is not really compliant, for example they have land tax and Fire Services as outgoings, but this is explicitly prohibited by the act. 3. No usage changes, same as day 1. Been in this shop 1 year. I have queried it and was brushed off with "you pay for anything to do with the property, outgoings are listed in the lease". The lease outgoings section says "insurance and other charges for insurances". I guess they are interpreting that to mean audit, but audit is not mentioned nor is an increase in the cost of the insurance. Obviously the land lord will charge whatever they can, no one wants to pay more than they have to, but my question is does the law put a cap on the increase in outgoings? Doesnt seem right to not cap them. To use a poor analogy, imagine buying a car, but someone else pays for it, everyone will get a Lamborghini.
@Peter KP Although there's no cap on increases, if the lease is non-compliant, I'd be having a chat with the solicitor who advised you that the lease was in order. V-Cat may be able to help if the outgoings are understated. If you didn't get legal advice, how did you sign the disclosure statement? Speak with a solicitor who specialises in retail leases or Fair Trading/V-Cat. Retail tenants and landlords | Victorian Small Business Commission Tenant Guide to Retail Leasing in Victoria | LegalVision
I have seen a fee for a insurance audit before. Its an assessment of the site etc and forms a essential element of a premium for an insurer to site assess the property risk issue/s. Some insurers wont accept poor risks and its how the check. That was QLD. And the second issue I see a bit with commercial outgoings is GST. eg Council rates PLUS GST when council rates / water dont have GST. That is correct if the landlord is registered for GST. But they must issue a tax invoice. Many commercial PMs have no idea and stuff it up. GSTD 2000/10
Perhaps all the tenants of the site should group together to employ someone like Scott NM to check the charges and read the leases ? or Paul the bean counter ?
I cant read a lease. Im not a lawyer. Hence I cant give tax advice on the lease. It would actually be legal advice. I can merely address GST administration and tax rules.
