Clarity provided for Retail Leases in South Australia


This article applies to organisations party to a retail lease.

Retail and Commercial Leases (Miscellaneous) Amendment Act 2019 No.47 (SA)

The Retail and Commercial Leases (Miscellaneous) Amendment Act 2019 No.47 (SA) (the Amending Act) commenced on 1 July 2020 and has amended the Retail and Commercial Leases Act 1995 (SA) (the Act).

Background and Application of the Act

The amendments to section 4 of the Act are designed to clarify the Act’s application in response to the Diakou Nominees Pty Ltd v Gouger Street Pty Ltd & Ors [2017] SASC 72 decision of Justice Stanley.  Stanley J’s decision considered the Act’s application following the increase of the prescribed rental threshold in 2011 from $250,000 to $400,000 under the Retail and Commercial Leases Regulations 2010 (SA) (the Regulations).

For example, the Amending Act clarifies that it applies to a ‘retail shop lease’ for any period that it falls under the rent threshold (currently $400,000), regardless of whether the Act applied to the lease at the time of entering into it. However, if the rent threshold is subsequently increased under the Regulations, the Act will not apply to a lease or a renewed lease (registered in accordance with section 4(3) of the Act) that exceeded the earlier threshold at the time of entering into it, but which has subsequently fallen under the threshold due to the increase.

The Amending Act also qualifies the exclusion of public companies and their subsidiaries from the application of the Act, to specify that the exclusion does not apply to public charitable companies (being companies limited by guarantee and registered with the Australian Charities and Not-For-Profit Commission) or their subsidiaries from 1 July 2020 (this does not affect leases entered into before 1 July 2020 that are renewed after that date).

Additional disclosure obligations on lessors

The Amending Act amends section 11 of the Act, adding a further obligation on retail shop lessors (or persons acting on behalf of the lessor) to provide prospective new lessees with a copy of the information brochure (if any) about retail shop leases published by the Commissioner.

Importantly, the Amending Act also amends the penalty on the existing obligation in section 11(1) of the Act that requires lessors to provide a copy of the lease to a prospective lessee as soon as they enter into negotiations. The penalty is significantly increased from $500 to $8,000.

Service obligations for lessor disclosure statement

The Amending Act adds prescriptive service requirements for lessors serving a disclosure statement on a lessee under section 12 of the Act and requires the lessor or their agent to sign the disclosure statement before serving it on the lessee. Section 12(4) of the Act now requires service on a lessee (or lessee’s agent) using one of the following methods:

  • personal service;
  • leaving it for the lessee at the relevant residence or company address with someone over the age of 16 years;
  • post;
  • fax;
  • email;
  • a manner prescribed by the Regulations.

The Amending Act also inserts a significant $8,000 penalty on the existing obligation to provide the lessee with a disclosure statement under section 12(1) of the Act before a retail shop lease is entered into.

Other penalty and timing changes

The Bill amends various penalties and timings for relevant obligations throughout the Act that subscribers should be aware of, including:

  • Section 15 – prohibited premiums – penalty increase from $10,000 to $15,000;
  • Section 19 – security bond – penalty increase from $1,000 to $1,500;
  • Section 20 – repayment of security – timing to dispute application for payment increased from 7 to 14 days;
  • Section 20L – premium for renewal of extension prohibited – penalty increase from $10,000 to $15,000;
  • Section 20M – unlawful threats – penalty increase from $10,000 to $15,000;
  • Section 24(5) – providing information on turnover rent – penalty increase from $1,000 to $1,500;
  • Section 44 – premium on assignment prohibited – penalty increase from $10,000 to $15,000;
  • Section 51 – confidentiality of turnover information – penalty increase from $10,000 to $15,000;
  • Section 75 – vexatious acts – penalty increase from $5,000 to $8,000;
  • Section 77(4) – contravening conditions of exemptions – penalty increase from $500 to $800.

Conclusion

Organisations should review the application of the Retail and Commercial Leases Act 1995 (SA) in light of the changes to its application and take note of the increased penalties that apply from 1 July 2020.


Contact

For further information please contact the Law Compliance team:

Phone: 1300 862 667

Email: info@lawcompliance.com.au