Proposed Changes to SA’s Retail Leasing Legislation

 In Commercial & Property

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Following a review of the Retail and Commercial Leases Act 1995 (SA) (Act) by retired District Court Judge Alan Moss in April 2016 and consultation with the property industry, the Retail and Commercial Leases (Miscellaneous) Amendment Bill 2017 (2017 Bill) was introduced into Parliament. However, the 2017 Bill lapsed in March 2018 prior to the state election.

On 3 July 2019, the South Australian State Government introduced the Retail and Commercial Leases (Miscellaneous) Amendment Bill 2019 (2019 Bill) into Parliament. The 2019 Bill duplicates several of the amendments proposed under the 2017 Bill and proposes several further amendments. Some of these amendments are discussed below:

Application of the Act:

  • Clarification that the prescribed rent threshold ($400,000) for the Act to be applicable is GST exclusive.
  • The Valuer-General is to review this threshold within 2 years of the commencement of the 2019 Bill and every 5 years following.
  • “Public company” and “subsidiary” are to be defined as per section 9 of the Corporations Act 2001 (Cth).
  • The Act will apply to leases in which the tenant is a public company limited by guarantee and registered under the Australian Charities and Not-for-profits Commission Act 2012 (Cth).
  • The Act will not apply to leases in which the tenant is a company (or subsidiary of a company) with securities listed on a foreign stock exchange.
  • The Act can commence or cease to apply during the term of the lease, regardless of whether it applied or not at the commencement of the lease.

Exception – An exception exists for future retail shop leases and renewals with an annual rent in excess of the prescribed threshold that are registered within 3 months of execution. Regardless of any future increase in the prescribed rent threshold, the Act will not be applicable permanently.

Lease Document Obligations:

  • A landlord must provide a draft lease (but not necessarily including the particulars of the lessee, the rent or the term of the lease) to a prospective tenant once lease negotiations commence. Failure to do so may result in a fine of up to $8,000.
  • Disclosure Statements will no longer have to be provided for renewals of leases.
  • Failure to provide a signed Disclosure Statement may result in a fine of up to $8,000.
  • Tenants must provide a signed acknowledgement as to the receipt of the Disclosure Statement within 14 days of service.
  • Unregistered – If a lease is not being registered, the landlord must provide the tenant with a fully signed copy of the lease within 1 month of it being signed by the tenant.
  • Registered – If a lease is to be registered, the lease must be lodged for registration within 1 month of being signed. The landlord must provide an executed copy of the lease and confirmation of registration within 1 month of registration.

Security Bond & Bank Guarantee:

  • The maximum amount permitted for a security bond will be increased from 4 weeks’ rent to 3 months’ rent (exclusive of GST). This will continue to require lodgement with the Small Business Commissioner.
  • A landlord must return a bank guarantee to a tenant within 2 months of the tenant completing the performance of its obligations under a lease. Failure to do so may result in a fine of up to $8,000.

5 Year Term:

  • The Small Business Commissioner will be permitted to sign 5 year exclusionary clauses without the need for the tenant to engage a solicitor.
  • A hold over of any period after the expiry of the lease will not give rise to a new 5 year term. This addresses the consequences arising from the Supreme Court decision of Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc [2019] SASC 18. The case focused on the application of s 20B of the Act, commonly known as the “minimum five year term rule”. In this case, it was held that a holding over period of greater than 6 months can give rise to a new 5 year term.

The current law still remains and we are monitoring the progress of the 2019 Bill which is presently being debated in Parliament and is still subject to change.  If you are a landlord, tenant or property manager and want to understand the potential implications of this Bill being enacted, you can make an appointment with Commercial Lawyers, Michael Stannard or Anthony Mauriello.

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