This paper relates only to South Australian law and is general in its contents. Formal advice should be sought in relation to any specific query you may have.

If I give inaccurate information about a property to a prospective tenant who subsequently leases the property, can I as an agent be sued by that tenant?

Yes, but if you are simply passing on what the lessor told you and you make it clear that you are not adopting or endorsing what the lessor told you then you should be safe. 

A prospective tenant signed an unconditional offer to lease, but is now refusing to sign the formal lease, is that tenant bound?

If the signed offer clearly identifies the four essential terms of a lease namely:

  • The premises;
  • The start date and term;
  • The premises;
  • The parties (ie the lessor and the lessee)

and was not expressed as being conditional then the tenant is quite likely to be bound even though they have not signed a formal lease (provided where the Retail and Commercial Leases Act 1995 (RCL Act) applies, a valid Disclosure Statement  was  given  and  signed  before the Offer was signed).

Does a Disclosure Statement always have to be given to a tenant?

Only in the case of leases to which the RCL Act applies. The RCL Act does not apply where the starting rent is more than $400,000 a year (exclusive of GST and outgoings), if no goods or services are provided from the premises to the public (eg the warehouse) or the tenant is a public company, a subsidiary of a public company, a company carrying on the business of insurance, a Council or State or Commonwealth Government body.

If a tenant is not in default does it have the right to assign its lease?

Provided the proposed incoming tenant is likely to be able to perform the lease, in the case of a retail shop, does not have inferior retailing skills to the assignor, is not proposing to change the use of the premises and makes the request for consent to the assignment in writing and provides a reasonable amount of detail about the incoming tenant then where the RCL Act applies, the answer is yes. If the RCL Act does not apply then it will depend on what the lease says. 

Can the lessor charge for consenting to an assignment?

No (other than payment of a reasonable sum for legal or other expenses incurred in connection with the consent). That would include reasonable fees to a managing agent for handling the consent process and investigating the proposed assignee.

Can a lessor refuse to consent to a Sublease?

Unless the lease document provides otherwise, the lessor can refuse to consent to a sublease and can do so unreasonably.

Can a landlord charge key money?

No, but it can charge an option fee provided the option fee gets credited to the rent.

Can a lessor require a tenant to pay rent quarterly in advance?

Yes (but a lessor cannot require payment of a security bond exceeding four weeks rent).

In the case of a lease entered into before 4 April 2011 where the rent was more   than $250,000  per  annum  (the  old  threshold under the RCL Act), but the rent is still less than $400,000 per annum (the new threshold), does the RCL Act now apply to the lease?

Quite possibly. Whilst there is a presumption against retrospectivity in interpreting legislation and there is some judicial authority for the proposition that the legislation should be interpreted in a manner which ensures that the parties to a lease must not have the rules applying to that lease changed. The judge in the case of WST Pty Ltd v GRE Pty Ltd (2012) SASCFC 146 made comments in support of the proposition that the RCL Act would now apply to the lease (and therefore, amongst other things, prevent a lessor from recovering land tax from the tenant). Although, in that case originally the RCL Act did not apply, but subsequently the rent went above $250,000 per annum and the lessor after the threshold was increased then sought to start  recovering land tax. I think there is a good chance that if the facts had been reversed – ie at the start of a lease the RCL Act did not apply because the rent was more than $250,000 per annum and the $400,000 threshold had not yet come in (4 April 2011), a court may well find that the RCL Act would not subsequently start to apply so as to let the tenant off the original obligation to pay land tax. 

If a tenant is operating a brothel from the premises can the lessor terminate the lease?

Yes. The lease is likely to be void on the grounds of illegality and even if that is not the case, the tenant is likely to be breaching the permitted use clause in the lease (assuming a relatively standard lease has been entered into) and breach of that term is quietly likely to be a repudiation of the lease by the tenant and almost certainly, would entitle the lessor to serve a notice of default requiring remedy of the breach within a reasonable period (which given the illegality would be almost immediate unless some other provisions in the lease said otherwise).

Does a lease which was subject to the RCL Act when it was entered into cease to be subject to the RCL Act following an assignment of the lease to a public company?

Yes.

Can a lease which was not subject to the RCL Act when it was entered into become subject to the RCL Act following an assignment?

Yes.

Does a Disclosure Statement need to be given in the case of a lease renewal?

Yes. In fact it is meant to be given before the renewal. Given that a lessor does not always know if a tenant is going to renew the lease, complying with this requirement can be problematical and the safest course would be to provide a disclosure statement to the tenant just prior to the date from which it can exercise its right of renewal.

What is the consequence of a lessor not giving a Disclosure Statement to a tenant in time or at all or providing a Disclosure Statement that has errors in it?

In some circumstances the lease might be able to be cancelled by the tenant and in other circumstances a lease may be varied. In the case of an error, it would need to be materially false or misleading, the tenant would need to have been substantially prejudiced and the lessor’s conduct would need to be such that the lessor has not acted honestly and reasonably. If no Disclosure Statement is given at all then there is strong chance that the tenant will be able to avoid the lease although the longer the tenant leaves it before seeking to cancel the lease, the lesser the tenant’s prospects of being able to cancel the lease will be. In Westside Investments v Wearn (2010) SADC 6, the District Court refused  to overturn a lease of premises at Burnside Plaza notwithstanding that no Disclosure Statement had been given to the tenant because the Judge considered that the tenant had not been substantially prejudiced by the failure to receive the Disclosure Statement as the Judge considered that the tenants “were well aware of what would be contained within a Disclosure Statement when they commenced trading”.

In the Farrooqui v Mazzocchetti (1998) SASC 6619, Justice Bleby in dealing with a claim for compensation by a tenant for failure by a lessor to provide a Disclosure Statement   said: “… it must be shown that the loss or damage for which compensation is sought was incurred or at least contributed to by the failure to provide the statement.”

When should a prospective tenant first be given a draft lease?

As soon as the agent or landlord enters into negotiations with the prospective tenant.

As an agent do I need a draft lease of premises before I advertise the premises for lease?

Yes. A draft copy must be available for inspection by a prospective tenant before advertisements are published and before offers to enter into leases are invited.

When does a lessor need a NABERS rating?

If you are marketing for lease premises of 2,000 square metres or more then the lessor is required to register a building energy efficiency certificate on the building energy efficiency register and the building energy efficiency certificate must include a NABERS energy star rating for the building, an assessment of tenancy lighting in the area of the building that is being leased and general energy efficiency guidance. However, if the property is newly constructed, is undergoing major refurbishment or a certificate of occupancy has been issued which is less than two years old or if the relevant area is held under a strata or community title, then exemptions will be available

Can a tenant be required by its landlord to open for trade on a Sunday?

No (refer section 61 of the RCL Act).

Can a tenant be required to keep its shop open at other times?

Yes, if the premises are within an enclosed shopping complex, the compulsory hours are less than 54 hours a week and do not include time on a Sunday and have been approved in a secret ballot by majority of at least 75% of the votes cast.

Can a tenant be required to provide its turnover details to the lessor?

No (unless turnover rent is payable).

Can tenants be made liable for capital repairs?

No, other than for repairing damages caused by the tenant, required upgrades if appropriately flagged in the Disclosure Statement and contribution to a sinking fund where details of the required contribution were contained in a Disclosure Statement.

Is the landlord responsible for capital repairs?

Unless there is an express obligation on the lessor in the lease for such repairs then the answer is generally no. Although, it is likely to be implied into the lease that the lessor must maintain common areas and also, new buildings and additions are required to comply with the disability access standards under the Building Code of Australia and liability to complying with those standards may depend on what the lease document says.

Is stamp duty payable on lease surrender payments?

No if the tenant is making the payment and yes if the lessor is making the payment.

If a tenant has not signed a formal lease, but is in occupation and behind in the rent, can the lessor lock the tenant out?

Assuming the tenant is not bound by a formal lease document, the lessor will only be able to lock the tenant out if the arrears amount to six months unless the lessor can establish that the tenant had repudiated the lease (which means that it has demonstrated an intention no longer to be bound by the lease terms), which may be able to be done if the tenant has vacated or is refusing to pay anything under the lease and refusing to comply with its obligations as lessee.

If the lessor consents to the assignment of a lease and the assignee then goes into default, is the assignor/original tenant still viable?

Generally speaking, a lessor does not need to release the assignor which will mean that the assignor is still liable notwithstanding that the lessor consented to the assignment. However, section 45A of the RCL Act limits the liability under a lease of an assignor following an assignment to two years or the expiry of the term during which the assignment takes place, whichever is the lessor. However, in some circumstances (including where the assignment involves the sale of a business) in order for the assignor to get the limited liability following the assignment, the assignor must serve on the assignee and the landlord an accurate assignor’s disclosure statement. That disclosure statement needs to include  sales figures for three years, details of ownership of fixtures and fittings, mortgages and encumbrances on the lease, outstanding notices in respect of the lease, outstanding notices from any authority and a copy of the original lessor’s disclosure statement together with details of changes since that statement was given. The assignor’s disclosure statement needs to be given to the proposed assignee before seeking landlord consent  and needs to be given to the landlord at the time of seeking such consent.

If the lessor consents to the assignment of a lease and the assignee then goes into default, is the assignor/original tenant still viable?

Generally speaking, a lessor does not need to release the assignor which will mean that the assignor is still liable notwithstanding that the lessor consented to the assignment. However, section 45A of the RCL Act limits the liability under a lease of an assignor following an assignment to two years or the expiry of the term during which the assignment takes place, whichever is the lessor. However, in some circumstances (including where the assignment involves the sale of a business) in order for the assignor to get the limited liability following the assignment, the assignor must serve on the assignee and the landlord an accurate assignor’s disclosure statement. That disclosure statement needs to include sales figures for three years, details of ownership of fixtures and fittings, mortgages and encumbrances on the lease, outstanding notices in respect of the lease, outstanding notices from any authority and a copy of the original lessor’s disclosure statement together with details of changes since that statement was given. The assignor’s disclosure statement needs to be given to the proposed assignee before seeking landlord consent  and needs to be given to the landlord at the time of seeking such consent.

If a company tenant goes into administration and is in arrears can the lessor terminate the lease and retake possession of the property?

No, the lessor cannot retake possession of the property without leave of the administrator or the Court. However, administration does not prevent a landlord from issuing notices under the lease to the company tenant, including notices of termination; it just prevents the enforcement of those notices.

An administrator has five business days from appointment to notify the landlord that they do not intend to exercise rights in respect of the lease. If the administrator does not provide such notification then the administrator becomes personally responsible for rent from the date five business days after commencement of the administration (but not for arrears before that time) whilst they remain in occupation. If the administrator elects not to use and occupy the property under the lease then the administrator has no responsibility for rent although at that point, the lessor will most likely be able to retake possession of the premises. Once an administrator is appointed, a landlord cannot distrain (without consent) although if the appointment of the administrator occurs after a distraint has commenced, the distraint is valid and will be able to be implemented in terms of auctioning off the goods distrained if the rental arrears are not paid. Although, if the company subsequently goes into liquidation, the proceeds of the distraint may be subject to clawback by a liquidator as a preference.

Can a lessor call up a bank guarantee once a tenant has gone into administration?

Yes.

What happens to the lease when a company goes into liquidation?

The landlord cannot distrain for rent, but is entitled to exercise any rights under the lease to terminate the lease. The liquidator can also elect to “disclaim” the lease. The liquidator is not personally liable for rent, including any arrears. However, if the liquidator does not disclaim the lease, the rent for the period whilst he is in occupation of the premises will become an expense of the liquidation, which means that the landlord will be entitled to a higher priority of payment for that rent compared  to other  unsecured creditors. The landlord can require a liquidator to decide whether or not to disclaim the lease by written notice and the liquidator then has 28 days to make a decision to whether or not to disclaim the lease. If the liquidator does not disclaim during that 28 day period then it loses the right to disclaim the lease and will become bound by it. A disclaimer of the lease does not prevent a landlord from pursuing its rights against guarantors of the lease.

Can a person who does not understand English well get out of a lease?

The “unconscionable conduct” provisions of the Australian   Consumer Law can operate to allow a tenant with a language disability to get out of a lease (and section 68 of the RCL Act might also enable a tenant to get out of a lease). In ACCC v Dukemaster Pty Ltd (2009) FCA 682 a tenant was given relief under a lease because of its inability to understand English and the significant disadvantage this caused them in oral and written communications with the lessor and its agent.

If a tenant exercises its right of renewal two days’ late, has it lost its right of renewal?

Quite possibly. The courts generally find that time is of the essence meaning that being even a day or two late in exercising the right to renew means the tenant loses that right. However, there are some cases where a tenant has been able to exercise the right late, but it would generally only be where there has been some conduct on behalf of the lessor which the court considered was such that the tenant should be given extra time.