Small Business - Landlord Increased The Rent by 30%

Hi everyone,

TL;DR Landlord on commercial lease wants to increase the rent by 30% and disguise them as "outgoings fee",

I need your option on our current commercial lease (NSW). We are in supply&install business and leasing a duplex workshop, it is about to expire and our landlord is proposing a rental increase by 30%.

There is an underground car park and there is a space without parking line that we sometimes use as storage temporarily.

Currently: We are paying $7k rent monthly (4% increase every year) + aircon maintenance + shared electricity on common areas with the neighbor (parking lights etc).

Proposed new rent:

  1. Rent 6.8k plus
  2. Storage fee 1.2k (they want to built a cage in that area I mention above and charge us)
  3. "Outgoings" fee 1.2k to cover gardening, repairs & maintenance plus "management fee" to manage these outgoings (I calculated it is around 5% out of total rent)

So in total the landlord wants to increase the rent by $2.2k (30%), not sure the legality of their proposed charges? Especially the "outgoings" part. Not only the landlord wants us to cover the repairs & maintenance, but they also want us to pay management fee as well. How absurd is that?!

Moving is an option but currently it is not a good timing to leave, not only it is costly but it will disrupt the business. I am not sure about commercial lease, but surely they can't just increase the rent by 30 percent like that?

Comments

  • +8 votes

    If your current lease is expiring, I pretty sure the landlord can increase it be any %.
    The increase related to your use of a storage area, and formalising that area, seems reasonable.
    The other outgoings are probably ok as well.

  • +2 votes

    Your comparable rent is increasing from $7000 (plus aircon maintenance & shared electricity) to $8000 (storage fee excluded for comparison). Unless the underground car park storage was included as part of the old rent, the storage fee 1.2k was given free in the past so should not be used for comparisons now. The substantial increase could be reduced by 1.2k simply by not using the car park area for storage.

  • +1 vote

    Are you exercising your option to continue the lease or are you renegotiating.

    If you're renegotiating, the landlord is free to set a new rental rate. Fair or not is irrelevant as your existing rental rate expired with your rental agreement.

    •  

      Pretty much this. Also I'd never sign a lease where the landlord doesn't agree to have a market review for rent at each option.

  •  

    I would venture to say your landlord sought legal advice prior to implementing the increases and I suggest you do the same

  • +1 vote

    Moving is an option but currently it is not a good timing to leave, not only it is costly but it will disrupt the business.

    Oddly enough, this is what your landlord is thinking too.

  • +1 vote

    Ask next door to match your current lease, give notice and move.

  • +1 vote

    Give these guys a call.
    NSW small business have some additional rights under standard commercial leases. Used to just be retail, but now every small biz, I believe.
    https://www.industry.nsw.gov.au/business-and-industry-in-nsw...

  •  

    Unless it's a really sought after location, you are in a good position to at least negotiate. The landlord knows you are always paying on time etc. plus if you didn't continue and he couldn't find anyone in the first month, he would be losing 1 month of rent. It would take a long time to make up for the lost income and that's just 1 month of vacancy.

  •  

    Thanks for everyone's replies. We will elect not try to negotiate further with the landlord and elect not to use the storage area.

    •  

      Best of luck. Every chance you can find somewhere not far away to store stuff hopefully.
      An increase of 30% must have come as one hell of a shock.
      Certainly has been a great response from those in the know, many a good suggestion made really.
      Might be interesting to hear of any progress…

  •  

    Your landlord could make a nice profit each month if you stay but consider that if you move and it takes 6 months to find a new tenant it would take ages to recoup the lost money. Rents and land values are going down so you could get a better deal anyway or just offer to pay the same rent as now or leave.

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