Introduction

The Retail and Commercial Leases (Miscellaneous) Amendment Bill 2019 passed through the South Australian Parliament on 12 December 2019 and will come into effect following formal proclamation in early 2020.

The bill will make a number of important amendments to the Retail and Commercial Leases Act 1995 ("Act"). It is essential that South Australian real estate professionals and lessors and lessees of retail and commercial premises are aware of these changes.

Application of the Act

  • The amendments make it clear that a lease is capable of moving in and out of the application of the Act during the term of the lease in certain circumstances where there is a change in the rent or the prescribed rental threshold, or where there is a change in the status of the lessee or the lessor during the term of the lease.
  • Lessees who are overseas companies listed on a stock exchange outside of Australia, or who are subsidiaries of such companies, will now be excluded from the application of the Act. This clears up a position which was ambiguous under the wording of the existing legislation.
  • The Act will now also not apply where the lessor is the Crown, or an agency or instrumentality of the Crown, or a municipal or district council. This is the first time that the application of the Act has been excluded as a result of the identity of the lessor.
  • There is also a new exception to a lease moving in and out of the application of the Act as a result of changes in the rent or the prescribed rental threshold. If a lease is registered, and at the time of registration the rent is above the prescribed rental threshold (currently at AU$400,000 (exclusive of GST)), and subject to certain procedural requirements being met, the amendments now provide for the registered lease to remain outside of the application of the Act, regardless of any increase in the prescribed rental threshold, or decrease in rent, which would otherwise bring the lease within the operation of the Act.

Regular reviews of the Prescribed Threshold

The amendments provide for regular reviews of the prescribed rental threshold by the Valuer-General. The first review is to be conducted approximately two years after the commencement of the amendments. Further reviews will then be conducted every five years.

GST

The amendments clarify the application of GST and provide that amounts under the Act (including both the prescribed rental threshold and security bond amounts) are exclusive of GST.

Disclosure of information by the lessor

The amendments require a lessor or a lessor's agent to disclose additional information. The increased requirements include:

  • Providing a prospective lessee with a written copy of the proposed lease (but not necessarily including all commercial terms) and an information brochure (if any) published by the Small Business Commissioner as soon as negotiations are entered into with the lessee.
  • Providing a signed disclosure statement in duplicate to the lessee prior to entering into a lease.

In addition:

  • A disclosure statement is no longer required to be provided by a lessor for a renewal of a lease.
  • A lessee must, within 14 days of being served with a disclosure statement, return a signed acknowledgement of receipt to the lessor or the lessor's agent.

Security bonds and bank guarantees

  • A lessor can now require a security bond from a lessee for up to three months' rent (exclusive of GST). This is a significant increase from the current maximum of four weeks' rent.
  • The amendments now provide that a lessor must return a bank guarantee to a lessee within two months of a lessee completing the performance of the obligations under the lease for which the bank guarantee was provided as security, unless the bank guarantee has expired or been cancelled, or there are current court proceedings in relation to the bank guarantee. A lessor may be liable to pay compensation to a lessee if the lessor does not comply with this obligation.

Holding over

The amendments also provide that a period of holding over exceeding six months after the termination of an earlier lease does not imply a minimum five year term. This means that there is no longer any concern that an implied five year term will arise when a lessee holds over after the termination of an earlier lease.

Certified exclusionary clause

A certified exclusionary clause may now be signed by the Small Business Commissioner as an alternative to a lessee's solicitor. The Commissioner may charge a prescribed fee for providing a certificate.

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