Welcome to Aston’s Property Management Insights Edition – keeping you informed so you can stay focused.
EOFY REMINDER
Outgoings Reconciliations Explained.
As we approach the end of the financial year, many landlords and tenants within multi-tenanted commercial properties will
soon be preparing for their annual outgoings reconciliation.
For properties where outgoings are budgeted and recovered from multiple tenants, each tenant typically contributes towards the property’s operating expenses throughout the year based on an estimated budget. These expenses may include:
- Council rates
- Water rates and usage charges
- Land tax (where recoverable under the lease)
- Building insurance
- Cleaning, gardening and maintenance costs
- Essential Safety Measures (ESM) compliance
- Common area electricity and services
Whilst every effort is made to prepare accurate budgets, actual costs can vary throughout the year due to changes in utility charges, contractor pricing, insurance premiums, statutory charges, and unforeseen maintenance expenses. The reconciliation process ensures that tenants ultimately pay their proportionate share of the actual expenses incurred, rather than simply the estimated amount.
Once the reconciliation is completed, one of two outcomes will occur. If the actual expenses exceed the budgeted amount, the tenant may receive an invoice for the shortfall. Alternatively, if the tenant has contributed more than their share of the actual expenses, a credit may be applied to their account.
For many commercial properties, reconciliations are prepared after June 30, once all relevant invoices, rates notices and other expenses have been received and reviewed. For leases that fall under the Retail Leases Act, landlords are required to provide tenants with an annual statement of outgoings, including details of any overpayment or shortfall, within three months of the end of the accounting period. For most properties, this means the statement must be issued by September 30.
Whilst outgoings reconciliations are a necessary part of managing commercial properties, the goal is always to keep any adjustments to a minimum by preparing accurate budgets from the outset. This gives both landlords and tenants greater certainty and helps avoid any surprises at the end of the financial year.
If you have any questions about outgoings recoveries, budgeting, or lease obligations, please don’t hesitate to get in touch.
Get in Touch
Eleanor Krix, Associate Director, Property Management — 0431 702 455, eleanor@astoncommercial.com.au
Marc Hayden, Executive Director, Head of Property Management — 0412 592 849, marc@astoncommercial.com.au
