When you’re looking to lease a commercial property, take note if the asking rent is a ‘Gross’ rent or a ‘Net’ rent.
Importance of Rent Types: ‘Gross’ or ‘Net’?
We have seen the delay of many leasing processes simply because this point wasn’t clear from the outset and the prospective tenant didn’t ask the owner or the agent.
Thoroughly Review Lease Documentation
When it comes to the costs you’ll have to pay, don’t assume it’s the same in every property. Have a solicitor act on your behalf to review any formal lease documentation, giving you a thorough understanding of what terms (and costs!) you are agreeing to, before you sign. The investment of a little time and money at the start of the leasing process may save you a lot of pain and money in the long run.
Understanding ‘Net’ Rent
‘Net’ rent means you’re liable to pay the property’s base outgoings, such as council rates, water rates, strata levies, building insurance, land tax. The type of property will also determine the outgoings you will be asked to pay. Clearly, in the instance of a Torrens title property, you won’t be paying any strata levies unlike a strata title property.
Property Outgoings in Torrens Title Complexes
Property outgoings in a large Torrens title complex (such as a multiple unit complex or multi-storey office building) will include base costs plus general upkeep, air conditioning and lift repairs and maintenance, grounds keeping, cleaning, fire protection, security, and common electricity.
Additional Costs to Consider
Depending on the nature of the property, outgoings of 20-40% on top of base rent is not unusual. In most cases, regardless of whether you are paying a ‘Gross’ rent or ‘Net’ rent, you’ll still be liable for operational expenses such as electricity, phone and internet, so bear this in mind and plan to have your own accounts connected for your new premises in good time.
In conclusion, understanding the difference between ‘Gross’ and ‘Net’ rent is crucial when leasing a commercial property. Failure to clarify this aspect from the beginning can lead to delays and misunderstandings.
For expert guidance and assistance with your commercial real estate needs, don’t hesitate to reach out to Chapman & Frazer Commercial real estate. We have the knowledge and expertise to help you navigate the leasing process and make informed decisions.
