In late December 2014, the Small Business Commissioner released an issues paper inviting public comment in respect of matters that have been raised in relation to the Retail and Commercial Leases Act 1995 (SA). Amongst other things, it identifies a number of 'grey areas' which have been causing uncertainty for both landlords and tenants for some time. The public is also invited to identify any other issues with the Retail and Commercial Leases Act 1995 (SA) that they would like the Small Business Commissioner to consider.
Some of the matters identified in the issues paper for consideration include:
- Whether the increase to the rent threshold (a key measure in determining whether the Retail and Commercial Leases Act 1995 (SA) (Act) applies to a lease) from $250,000 to $400,000 (which came into effect on 4 April 2011) applies to existing leases or only new leases entered into after 4 April 2011.
- If the $400,000 rent threshold is inclusive or exclusive of GST.
- The possibility of abandoning the rent threshold as a criteria for determining whether the Act applies to a lease and introducing a lettable area threshold.
- Whether a lease can fall in and out of the application of the Act (a lease may be subject to the Act on commencement but circumstances may change during the term whereby the lease may not be subject to the Act and vice versa). This would also then be linked to the payment of land tax by tenants and application of ratchet provisions as part of market rent reviews.
- Whether a Disclosure Statement should include details of incentives, allowances, rent free periods.
- Whether a Disclosure Statement should include, under make good obligations, a scope of required works and estimate of costs.
- The requirement for an Inspection or Condition Report to be provided and incorporated into a Disclosure Statement to assist in identifying tenants’ make good and yielding up obligations.
- Lease negotiation formalities (including what material needs to be provided to prospective tenants in Disclosure Statements and provision of draft lease documents) and the possibility of introducing penalties (or significantly increasing existing penalties) for failure to provide tenants with all requisite documents, details and information.
- Increasing the amount secured by security bonds that can be held by the Commissioner as well as possibly introducing legislation to limit, restrict or even remove the provision of bank guarantees as lease security.
- Mandatory registration of retail shop leases.
- Clarifying responsibility, as between landlords and tenants, for capital expenditure, maintenance and repairs.
- The ability for landlords to refuse consent to a request by a tenant to sublease their premises or mortgage their lease.
- General comments dealing with relocation and demolition clauses, damaged premises and the liability of lessee’s following assignment.
- Waiving the right to apply retrospective rent reviews (where a rent review opportunity has been overlooked).
- Liability for payment of document preparation costs for lease renewals or extensions and whether lease preparation costs should be capped or otherwise limited.
- Restricting or limiting the payment of lessor’s legal and other expenses relating to an assignment of a lease by the tenant (and whether this is a defacto premium).
- The introduction of a pro forma lease document for certain tenancies.
Anyone with an interest in leased premises may wish to consider making a submission.
Submissions can be made to the Office of the Small Business Commissioner, GPO Box 1264, Adelaide SA 5001.
The closing date for submissions is Friday 13 February 2015.
A copy of the Issues Paper can be found here.