VIC Commercial Lease - Do I Have to Pay for Capital Improvements?

Hi Mark K

It will ultimately depend on what your lease says, so firstly, I would have a good read of it and see if it says anything expressly about capital expenditure. If you have a standard form commercial lease, I would check the special or additional terms and conditions first. (I'm not overly familiar with the VIC
standard form commercial leases).

Outgoings generally include 2 types: (1) statutory outgoings which include council rates, water, sewage, state gov car park levies and land tax, and (2) secondary outgoings being costs associated with the operation upkeep or maintenance of the building including air conditioning units, electricity, elevator maintenance, common area maintenance and repairs, fire protection, pest control, plant hire, landscaping, and general expenditure.

Generally, capital improvements and maintenance do not get passed on to lessees unless they have agreed to some exceptions such as “full repairs”, for instance where property is heritage listed and therefore needs significant on-going capital expenditure. However normally where this is the case, the lessee would pay nominal minimal rent in return for the on-going capital expenditure.