What leasing fees and commissions are charged by commercial agents?
The owner of the property is generally responsible for paying the fee except where an agent has been engaged as a tenant representative.
Fees are not regulated and therefore vary between agents but they generally begin at around 11% of gross annual rent for short term leases. Fees increase progressively depending on the lease term to approximately 16% for a ten year lease. Please remember you should never select an agent based solely upon their fee structure, as the agent’s performance and final result tends to be far more valuable than the negotiation of lower fees.
Balmoral Partners is generally paid on a success basis. A fee is only payable to us where we successfully achieve a lease/sale.
What is meant by the term outgoings?
The term outgoings refers to the ongoing expenses relating to the operation and upkeep of a property. Outgoings are generally paid by the tenant in advance, and are estimated according to the previous year. At the end of the year the forecasted outgoings are compared to the actual outgoings and the difference is either reimbursed (in the case of a surplus) or collected (in the case of a deficit) from the tenant.
Outgoings will typically include, but are not limited to the following:
1. Land tax
2. Council rates
3. Water rates
4. Cleaning & maintenance of common areas
5. Management
6. Lift maintenance
What is the difference between gross rent and net rent?
Rent payable on a property will generally comprise two main components: rental amount and outgoings. A net rent does not include outgoings and these are payable in addition to the rental amount quoted. Where a gross rent is quoted, outgoings (excluding the tenant’s operational expenses such as power, phones etc) are included.
What is the typical lease term?
Lease terms vary from property to property according to the owner’s preferences, objectives, and individual perspective upon the property market. Lease terms can range from month-by-month leases to 10 years or more. Typical lease terms fall between 3-5 years.
What is an option period?
An option period refers to a clause in some leases which, upon lease expiry, allows the tenant to renew their lease for a pre-determined period of time.
What are incentives?
Incentives are bonuses offered by some property owners to encourage interested parties to lease their property. The level of incentive varies between properties according to the owner.
Incentives include, but are not limited to, the following:
1. Rent free periods
2. Cash payments
3. Fitout contributions
4. Signage rights
You should seek advice from your accountant regarding incentives prior to finalising negotiations.
Why do I need to pay a deposit in a lease?
The deposit payable on a lease varies but the size of the deposit is generally in proportion with the total rent payable on the property. A deposit is generally equivalent to between 1 and 2 months gross rent, and often includes GST & parking rates. When the lease commences, the deposit is credited towards the rental payments.
The deposit is assurance on behalf of the tenant which shows that they are serious about leasing the property. The owner will often require a deposit before solicitors are instructed to draw up the lease.
It is common for this deposit to be refunded less the lessor’s legal costs should the matter not proceed.
What is a security guarantee?
The security guarantee is provided by the tenant and takes the form of a bank guarantee. The security guarantee is effectively a sign of goodwill on behalf of the tenant and protects the owner against damage, unpaid rent or other breaches of a lease. An owner will generally require a security guarantee before the tenant will be granted access to the property.
Is my rent fixed for the term of the lease?
The rent payable is liable to change over the course of the lease. There are two main reasons for this change:
| Inflation: |
Rent payable is often indexed to inflation to ensure that the property is not losing value due to inflationary pressure. This is a standard component of most leases. |
| Property Market: |
The property market sometimes changes over the course of a lease, particularly in the case of long leases. For this reason rental is often reviewed according to the market rent every few years or at the beginning of an option period. |
What is included in my rent?
Rents typically include air-conditioning during normal business hours, lift operating costs, building insurance & maintenance, security, local rates and property taxes. Rents generally do not include cleaning of tenanted areas, power for tenant’s lighting, car parking, after hours air-conditioning and the tenant’s public liability insurance.
What is a ratchet clause?
A ratchet clause is a provision within some leases which prevents rental amount from decreasing below a set amount. This clause operates regardless of the state of the market.
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