The Tenant’s Guide to Gross Rent and Net Rent

When you’re looking to lease a commercial property, take note if the asking rent is a ‘Gross’ rent or a ‘Net’ rent.

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.  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.

‘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 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.

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.

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