Retail and Commercial Leases Act set for a shake up

The wait for landlords and tenants may soon be over as proposed changes to South Australia’s retail and commercial leasing laws have been tabled with a Bill in Parliament.

In April 2016 retired District Court Judge Mr Alan Moss released a review of the Retail and Commercial Leases Act 1995 (SA) (“the Act”) making a host of suggested changes to the Act (“the review”). Whilst the review outlined some important changes to the Act that were widely welcomed, many industry professionals were concerned with some of the suggested changes.

Importantly, and perhaps to the relief of many industry professionals, some of the recommendations set out in the review are not contained in the Bill. Industry professionals should note:

• Registration – The Bill does not include mandatory obligations to register leases thus avoiding an unnecessary increase in “red tape”.

• Bank Guarantees – The Bill does not require bank guarantees provided as security to be held by the Small Business Commissioner (“SBC”). Such a change may have made it more difficult for landlords to draw down on the bank guarantees with the potential for tedious applications to the SBC. There is also no cap on the maximum amount of any bank guarantee.

• Termination upon business failure – Arguably the most controversial proposal in the review was the notion that a tenant should have a legislative pathway to terminate a lease if their business was failing. This was strongly opposed by the property industry on the basis landlords also require security of tenure and such a change would jeopardise investment in South Australian property. The Bill makes no mention of this right.

Industry professionals will be pleased to note the Bill includes some sensible and pragmatic changes including:

Threshold	Clarification that the current $400,000 p.a rental threshold is exclusive of GST (consistent with industry expectations). Mechanism for the Valuer-General to review the threshold every 5 years.
Operation of Act	Clarification that the Act can cease or commence application at any point in time -depending on rental increases and/or changes in the statutory threshold.
Public Companies	Clarification that a public company has the meaning set out in the Corporations Act 2001. Some parties may still be concerned the proposed change will not impact on overseas public companies and their subsidiaries who may still continue to (inadvertently) receive the protection of the Act.
Information Brochure	Landlords will now be required to provide potential tenants with a retail leasing “information brochure” to be published by the SBC.
Disclosure Statement	Removal of the requirement to serve a disclosure statement on renewal of a lease.
Minimum 5 year term	Clarification that a period of holding over greater than 6 months does not imply that a new 5 year term is granted.
Certified Exclusionary clauses	Power for SBC (in addition to lawyers) to sign certified exclusionary clauses.
Return of Bank Guarantees	Requirement that landlords return bank guarantees within 2 months of a tenant fulfilling its obligations under the lease. Ability for tenant to obtain compensation for loss or damage suffered as a result of the landlord failing to return a guarantee.

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Whilst perhaps not representing wholesale changes to the Act, the Bill if implemented in its current form, is a positive step for landlords and tenants alike and provides some much needed clarity on certain aspects of the Act.

If you’d like to know more about the Bill and how it may impact your business contact Sam Richardson at Cowell Clarke on 08-8228 1240 or email [email protected]