South Australia: Retail and Commercial Leases Act 1995 (SA)

South Australia Retail and Commercial Leases Act 1995 An Act regulating the leasing of certain retail shops; to amend the Landlord and Tenant Act 1936; and for other purposes. Contents Part 1—Preliminary 1 Short title 3 Interpretation 4 Application of Act 5 This Act overrides leases 6 When the lease is entered into 6A Valuer‑General to review prescribed threshold Part 2—Administration 7 Administration of Act 9 Commissioner's functions Part 3—Before the lease is entered into 11 Copy of lease to be provided to prospective lessee 12 Lessee to be given disclosure statement 13 Certain obligations to be void 14 Lease preparation costs 15 Premium prohibited 16 Lease documentation 18 Warranty of fitness for purpose Part 4—Security 19 Security bond 20 Repayment of security 20AA Return of bank guarantees Part 4A—Term of lease and renewal Division 1—Preliminary 20A Objects Division 2—Initial term of lease 20B Minimum 5 year term Division 3—Renewal of shopping centre leases Subdivision 1—Application of this Division 20C Application of Division Subdivision 2—Rules of conduct at end of term 20D Preference to be accorded to existing lessee 20E Implementation of preferential right 20F Notice of absence of right of preference 20G Consequences of failing to begin negotiations or give notice Subdivision 3—Remedies for non-compliance with rules 20H Failure to comply with rules Division 4—Other cases 20I Application of this Division 20J Notice to lessee of lessor's intentions at end of lease Division 5—General provisions 20K Certified exclusionary clause 20L Premium for renewal or extension prohibited 20M Unlawful threats 20N Exclusion of legal consequences for which express provision is not made Part 5—Rent and outgoings 21 Payment of rent when lessor's fitout not completed 22 Restrictions on adjustment of base rent 23 Reviews to current market rent 24 Turnover rent 26 Recovery of outgoings from lessee 29 Sinking fund for major repairs and maintenance 30 Land tax not to be recovered from lessee 31 Estimates and explanations of outgoings to be provided by lessor 32 Lessor to provide auditor's report on outgoings 33 Adjustment of contributions to outgoings based on actual expenditure properly and reasonably incurred 34 Non-specific outgoings contribution limited by ratio of lettable area 35 Determination of current market rent under options to renew 36 Opportunity for lessee to have current market rent determined early Part 6—Alterations and other interference with the shop 37 Lessee to be given notice of alterations and refurbishment 38 Lessee to be compensated for disruption etc 39 Demolition 40 Damaged premises 41 Employment restriction Part 7—Assignment and termination 43 Grounds on which consent to assignment can be withheld 44 Premium on assignment prohibited 45 Procedure for obtaining consent to assignment 45A Liability of lessee following assignment of lease 46 Lessor may reserve right to refuse sublease, mortgage Part 8—Additional requirements for retail shopping centres 50 Part applies only to retail shopping centres 51 Confidentiality of turnover information 52 Statistical information to be made available to lessee 53 Advertising and promotion requirements 54 Marketing plan for advertising and promotion 55 Lessor to provide auditor's report on advertising and promotion expenditure 56 Unexpended advertising and promotion contributions to be carried forward 57 Relocation 58 Termination for inadequate sales prohibited 59 Geographical restrictions 60 Associations representing lessees 61 Trading hours 62 Special provision for strata and community shopping centres 62A Casual Mall Licensing Code Part 9—Dispute resolution Division 1—Mediation 63 Responsibility of the Commissioner to arrange for mediation of disputes 64 Mediation of disputes 65 Stay of proceedings 66 Statements made during mediation Division 2—Intervention 67 Power to intervene Division 3—Jurisdiction of the Magistrates Court 68 Jurisdiction of the Magistrates Court 69 Substantial monetary claims Part 10—Retail Leases Fund 70 The Fund 71 Application of income 72 Accounts and audit Part 11—Retail Shop Leases Advisory Committee 73 Advisory Committee 74 Functions of Advisory Committee Part 12—Miscellaneous 75 Vexatious acts 76 Abandoned goods 77 Exemptions 78 Annual reports 79 Time for prosecutions 80 Regulations 81 Amendment of the Landlord and Tenant Act Schedule—Casual Mall Licensing Code 1 Interpretation 2 Casual mall licence policy 3 Provision of information 4 Obligations of lessor relating to casual mall licence policy 5 Sightlines to shopfront 6 Competitors 7 Special events 8 Adjustment of outgoings 9 Rectification of certain breaches Legislative history The Parliament of South Australia enacts as follows: Part 1—Preliminary 1—Short title This Act may be cited as the Retail and Commercial Leases Act 1995. 3—Interpretation (1) In this Act, unless the contrary intention appears— accounting period means a period fixed as an accounting period in a retail shop lease; certified exclusionary clause—see section 20K; collateral agreement includes a guarantee under which the guarantor guarantees the performance of the obligations of a lessee under a retail shop lease; Commissioner means the person holding or acting in the office of Small Business Commissioner; core trading hours means the hours for which a retail shop is required under a retail shop lease to be kept open for business; demolition of a building of which a retail shop forms part includes a substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop; disclosure statement—see section 12; enclosed shopping complex means a group of three or more retail shops under common ownership or management with a common area through which public access is obtained to all or some of the shops and which is locked to prevent public access through that area when those shops are closed for business; Fund means the Retail Shop Leases Fund; GST means the tax payable under the GST law; GST law means— (a) A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth; and (b) the related legislation of the Commonwealth dealing with the imposition of a tax on the supply of goods and services; lawyer means a person entitled to practise the profession of law in the State; lessee means the person who has the right to occupy a retail shop under a retail shop lease, and includes— (a) a sublessee; and (b) a prospective lessee or a former lessee; lessor means the person who grants or proposes to grant the right to occupy a retail shop under a retail shop lease, and includes— (a) a sublessor; and (b) a prospective lessor or a former lessor; Magistrates Court means the Civil (Consumer and Business) Division of the Magistrates Court; mediation of a dispute includes preliminary assistance in dispute resolution such as the giving of advice to ensure that— (a) the parties to the dispute are fully aware of their rights and obligations; and (b) there is full and open communication between the parties about the dispute; outgoings means a lessor's outgoings on account of the expenses of operating, repairing or maintaining the retail shop or a retail shopping centre in which the retail shop is located (including rates, taxes, levies, premiums or charges payable by the lessor) but does not include outgoings which are directly proportional to the level of a lessee's consumption or use and for which the lessee is required to reimburse the lessor under the lease; party means the lessor or the lessee under a retail shop lease; premium means money paid, or a benefit given, to or as directed by the lessor or the lessor's agent in connection with the granting, renewal, extension or assignment of a lease (and a reference in this Act to the payment of a premium extends to giving a benefit); public company has the same meaning as in section 9 of the Corporations Act 2001 of the Commonwealth; Registrar means the Principal Registrar of the Magistrates Court of South Australia; renewal of a retail shop lease extends to the lessor and the lessee entering into a new retail shop lease for the retail shop (whether on the same or different terms); retail shop means— (a) business premises— (i) at which goods are sold to the public by retail; or (ii) at which services are provided to the public, or to which the public is invited to negotiate for the supply of services; or (b) business premises classified by regulation as premises to which this Act applies, but does not include business premises of a class excluded by regulation from the ambit of this definition; retail shop lease or lease means an agreement under which a person grants or agrees to grant to another person for value a right to occupy a retail shop for carrying on a business— (a) whether or not the right is a right of exclusive occupation; and (b) whether the agreement is express or implied; and (c) whether the agreement is oral or in writing, or partly oral and partly in writing; retail shopping centre means a cluster of premises with the following attributes: (a) at least five of the premises are retail shops; and (b) the premises are all owned by the same person, or have (or would if leased have) the same lessor or the same head lessor, or comprise lots within the same community plan under the Community Titles Act 1996 or units within the same strata plan under the Strata Titles Act 1988; and (c) the premises are located in the one building or in two or more buildings that are either adjoining or separated only by common areas or other areas owned by the owner of the premises; and (d) the cluster of premises is promoted as, or generally regarded as constituting, a shopping centre, shopping mall, shopping court or shopping arcade; statutory rights of security of tenure means the rights conferred on a lessee by Part 4A Division 2 and, if the retail shop lease relates to premises in a retail shopping centre, by Part 4A Division 3; subsidiary includes a subsidiary within the meaning of section 9 of the Corporations Act 2001 of the Commonwealth. (1a) For the purposes of this Act— prescribed threshold, in relation to rent payable under a retail shop lease, means— (a) the amount of $400 000 per annum exclusive of GST; or (b) if a greater amount is prescribed by the regulations for the purposes of this definition and the Act—the amount so prescribed. (2) In the interpretation of this Act, accepted practices and interpretations in the industry concerning the leasing of retail shops are to be taken into account. 4—Application of Act (1) This Act applies to a retail shop lease if the premises to which the lease applies consist of a retail shop or a retail shop together with an adjacent dwelling. (2) However, this Act does not apply to a retail shop lease— (a) on or after the relevant day (whether the lease was entered into before or after that day), subject to subsection (3), during any period in respect of which the amount of rent payable under the lease exceeds the prescribed threshold (regardless of whether the Act applies or does not apply to the lease at the time the lease is entered into or renewed because of the amount of rent payable under the lease); or (b) if the lease is for a term of 1 month or less; or (c) if the right of occupation arises under— (i) an agreement for the sale and purchase of premises; or (ii) a mortgage; or (iii) a scheme under which a group of adjacent premises is owned by a company and the premises comprising the group are let by the company to persons who jointly have a controlling interest in the company; or (d) if the lessee is— (i) an ADI; or (ii) a body corporate authorised by law to carry on the business of insurance; or (iii) the Crown or an agency or instrumentality of the Crown in right of the State, another State or Territory, or the Commonwealth; or (iv) a municipal or district council or other authority with powers and functions of local government; or (e) if the lessee is— (i) in the case of a lease entered into on or after the relevant day—a public company, or a subsidiary of a public company, other than a public charitable company or a subsidiary of a public charitable company; or (ii) in the case of a lease entered into before the relevant day or a lease renewed after the relevant day (whether on the same or different terms) pursuant to a right or option conferred by a lease entered into before the relevant day—a public company, or a subsidiary of a public company (including a public charitable company or a subsidiary of a public charitable company); or (f) if, in the case of a lease entered into on or after the relevant day—the lessee is a body corporate whose securities are listed on a stock exchange outside Australia and the external territories or a subsidiary of such a body corporate; or (g) if, in the case of a lease entered into on or after the relevant day— (i) the lessor is— (A) the Crown or an agency or instrumentality of the Crown in right of the State; or (B) a municipal or district council or other authority with powers and function of local government; and (ii) the lessee is of a class specified by the regulations for the purposes of this paragraph. (3) Despite subsection (2)(a), this Act does not apply to— (a) a retail shop lease— (i) that is lodged for registration by the lessor within 3 months after both parties have executed the lease, and in relation to which the lessor has provided written notice of lodgement to the lessee within 1 month of lodgement; and (ii) that remains registered for the term of the lease; and (iii) under which, at the time the lease is lodged for registration, the rent payable exceeds the prescribed threshold; or (b) any renewal of a retail shop lease referred to in paragraph (a)— (i) that is, following execution by both parties, lodged for registration by the lessor not later than 2 months after the day on which the lease would, but for the renewal, expire, and in relation to which the lessor has provided written notice of lodgement to the lessee within 1 month of lodgement; and (ii) that remains registered for the term of the renewed lease, despite the fact that— (c) the prescribed threshold is subsequently increased such that the rent payable under the lease or renewed lease (as the case requires) no longer exceeds the prescribed threshold (and the Act would otherwise apply in relation to the lease or renewed lease by virtue of the operation of subsection (2)(a)); or (d) the amount of rent payable under the lease or renewed lease (as the case requires) is decreased (for example, as a result of a review of rent under the lease), such that the rent payable under the lease or renewed lease no longer exceeds the prescribed threshold (and the Act would otherwise apply in relation to the lease by virtue of the operation of subsection (2)(a)). (4) Subsection (3)— (a) does not apply to, or in respect of— (i) a retail shop lease entered into before the relevant day (regardless of any registration of the lease on or after the relevant day); or (ii) despite any other Act or law, the renewal of a retail shop lease on or after the relevant day, pursuant to a right or option conferred by a retail shop lease entered into before the relevant day (regardless of any registration of the renewal of the lease on or after the relevant day); but (b) may apply to, or in respect of, a new retail shop lease (whether on the same or different terms) entered into by an existing lessee and lessor after the relevant day. (5) The regulations may exclude from the application of this Act (either conditionally or unconditionally) a specified class of retail shop leases. (6) To avoid doubt, this Act may, on or after the relevant day, apply, or cease to apply to a retail shop lease of a kind referred to in subsection (2)(d), (e), (f) or (g) depending on whether the lessee or lessor becomes, or ceases to be, a lessee or lessor of a kind referred to in the relevant paragraph during the term of the lease. (7) In this section— public charitable company means a public company limited by guarantee and registered under the Australian Charities and Not-for-profits Commission Act 2012 of the Commonwealth; relevant day means the day on which this section comes into operation. 5—This Act overrides leases (1) This Act operates despite the provisions of a lease. (2) A provision of a lease or a collateral agreement is void to the extent that the provision is inconsistent with this Act. 6—When the lease is entered into For the purposes of this Act, a retail shop lease is taken to have been entered into when— (a) both parties have executed the lease; or (b) a person enters into possession of the retail shop as lessee under the lease; or (c) a person begins to pay rent as lessee under the lease or proposed lease (but not if the payment is an advance payment of rent made to secure the premises), (whichever happens first). 6A—Valuer‑General to review prescribed threshold (1) The Valuer‑General must, within the last year of each prescribed period and in accordance with the regulations, conduct a review of the prescribed threshold for the purposes of this Act. (2) On completing a review, the Valuer‑General must forward to the Minister a report on the review and the conclusions reached by the Valuer‑General as to whether or not, as a result of the review, the Valuer‑General recommends that for the purposes of this Act the prescribed threshold in relation to rent payable under a retail shop lease should be increased. (3) The regulations may make provision with respect to the conduct of a review by the Valuer‑General including (without limitation), by specifying requirements (if any) in relation to— (a) matters to be taken into account by the Valuer‑General; and (b) consultation to be undertaken by the Valuer‑General. (4) In this section— prescribed period means— (a) the period ending on 30 October next following the second anniversary of the commencement of this section; and (b) each successive period of 5 years thereafter. Part 2—Administration 7—Administration of Act The Commissioner is responsible for the administration of this Act. 9—Commissioner's functions The Commissioner has the following functions: (a) investigating and researching matters affecting the interests of parties to retail shop leases; and (b) publishing reports and information on subjects of interest to the parties to retail shop leases; and (c) giving advice (to an appropriate extent) on the provisions of this Act and other subjects of interest to the parties to retail shop leases; and (d) investigating suspected infringements of this Act and taking appropriate action to enforce this Act; and (e) making reports to the Minister on questions referred to the Commissioner by the Minister and other questions of importance affecting the administration of this Act; and (f) administering the Fund; and (g) any other functions assigned to the Commissioner by or under this Act. Part 3—Before the lease is entered into 11—Copy of lease to be provided to prospective lessee (1) A person who, as a lessor, or acting on behalf of a lessor— (a) offers to enter into a retail shop lease; or (b) invites an offer to enter into a retail shop lease; or (c) indicates by advertisement by any means that a retail shop is for lease, must, as soon as the person enters into negotiations with a prospective lessee (and before a retail shop lease is entered into), provide the prospective lessee with a written copy of the proposed retail shop lease (but not necessarily including the particulars of the lessee, the rent or the term of the lease). Maximum penalty: $8 000. (2) At the time a copy of the proposed retail shop lease is provided to the prospective lessee under subsection (1), the lessor, or a person acting on behalf of a lessor, must also provide the prospective lessee with a copy of the information brochure (if any) about retail shop leases published by the Commissioner. Maximum penalty: $800. Expiation fee: $120. (3) This section does not apply to or in respect of the renewal of a retail shop lease. 12—Lessee to be given disclosure statement (1) A lessor, or the lessor's agent, must, before a retail shop lease is entered into, give the lessee a disclosure statement for the lease signed by or on behalf of the lessor in accordance with the requirements set out in subsection (4). Maximum penalty: $8 000. (1a) A disclosure statement for a retail shop lease is not required to be given in respect of a renewal of a retail shop lease. (2) A disclosure statement is a written document stating or containing— (a) the address of the shop; and (b) the lettable area of the shop; and (c) the permitted uses of the shop; and (d) the term of the lease; and (e) the hours during which the lessee will have access to the shop outside trading hours; and (f) the date on which the shop will be available for occupation; and (g) the amount of the base rent payable under the lease and the basis on which the base rent may be changed; and (h) any other rent payable under the lease and the basis of its calculation; and (i) each category of outgoings the lessee is to be liable to pay or reimburse (in whole or part), and an estimate of the lessee's annual liability for outgoings of each category; and (j) whether the amount the lessee is required to pay towards outgoing includes a margin of profit for the lessor and, if so, the percentage profit or the basis on which the profit is to be calculated; and (k) the nature of any other monetary obligations imposed on the lessee under the lease and, if possible, an estimate of the annual cost of complying with those obligations; and (l) whether any right to renew or extend the term of the lease is given by the lease and, if so, the nature of the right; and (m) the legal consequences of breach of a term of the lease (including the consequences of early termination of the lease by the lessee); and (n) a warning that oral representations made by the lessor or the lessor's agent on which the lessee has relied should be reduced to writing and signed by or on behalf of the lessor before the lessee enters into the lease; and (o) a warning that the lessee should obtain independent legal and financial advice before entering into the lease. (3) If the shop is situated in a retail shopping centre, the disclosure statement must also state— (a) the address of the retail shopping centre; and (b) the number of shops in the retail shopping centre and their total lettable area; and (c) the number of parking bays available for the use of customers of the shop and the number of parking bays available for use by the lessee and the lessee's employees; and (d) the nature of the facilities and services provided by the lessor; and (e) whether changes to the retail shopping centre are proposed and, if so, the nature of the changes; and (f) the core trading hours; and (g) the current tenant mix and any proposed changes to the current tenant mix; and (h) whether the lessor is prepared to give the lessee an assurance that the current tenant mix will not be altered to the lessee's disadvantage by the introduction of a competitor; and (i) whether there is a tenant association and, if so, the nature of the association, the voting rights of members, and the contributions payable by members; and (j) whether contributions are or may be required towards the costs of advertising and promoting the shopping centre and, if so, the estimated annual contribution to be required from the lessee. (3a) A disclosure statement must comply with requirements of the regulations about the form in which it is to be presented. (4) A disclosure statement provided under subsection (1) must be served on the lessee— (a) by personal service on the lessee or the lessee's agent; or (b) by leaving it for the lessee at— (i) the lessee's usual or last known place of residence or business; or (ii) in the case of a lessee that is a company, the company's registered office, with someone apparently over the age of 16 years; or (c) by serving it by post on the lessee or the lessee's agent at the lessee's or agent's address provided by the lessee or agent for the purpose; or (d) by transmitting it by fax or email to a fax number or email address provided by the lessee or lessee's agent for the purpose (in which case the disclosure statement will be taken to have been served at the time of transmission); or (e) in any other manner prescribed by the regulations. (4a) Service by post is effected by addressing, prepaying and posting the disclosure statement, and service will be taken to have occurred when the disclosure statement would be delivered in the ordinary course of post. (4b) A lessee or lessee's agent must, within 14 days of being served with the disclosure statement, return a signed acknowledgement of receipt of the disclosure statement to the lessor or the lessor's agent. (5) If a disclosure statement is not given as required by subsection (1), or contains information that at the time it is given is materially false or misleading, the Magistrates Court may, on application by the lessee, make one or more of the following orders as may be appropriate in the circumstances of the case— (a) an order avoiding the lease in whole or part; (b) an order varying the lease; (c) an order requiring the lessor to repay money paid by the lessee; (d) an order requiring the lessor to pay compensation to the lessee; (e) an order dealing with incidental or ancillary matters. (6) However, an order cannot be made under subsection (5) on the ground that a disclosure statement is incomplete or contains information that is materially false or misleading if— (a) the lessor has acted honestly and reasonably and ought reasonably to be excused; and (b) the lessee has not been substantially prejudiced. 13—Certain obligations to be void (1) An obligation to make or reimburse capital expenditure may only be imposed by or under a retail shop lease or a collateral agreement in the following cases: (a) a lessee may be required to pay or reimburse the cost of making good damage to the premises arising when the lessee is in possession or entitled to possession of the premises; and (b) a lessee may be required to fit or refit the shop, or to provide fixtures, plant or equipment, if the disclosure statement discloses the obligation and contains sufficient details to enable the lessee to obtain an estimate of the likely cost of complying with the obligation; and (c) a lessee may be required to contribute to a sinking fund to cover major items of repair or maintenance if reasonable details of the lessee's obligation are disclosed in the disclosure statement. An obligation that may be imposed under this subsection is called a permissible obligation. (2) A provision of a retail shop lease or a collateral agreement under which a lessee is required or may be required to make or reimburse capital expenditure is void unless the obligation imposed by or under the provision is a permissible obligation. (3) A provision of a retail shop lease or a collateral agreement under which the lessee is required to compensate the lessor for depreciation of the premises attributable to ordinary wear and tear is void; but this subsection is not intended to prevent such depreciation being taken into account in the calculation, or assessment, of base rent. 14—Lease preparation costs (1) If the lessee is liable to pay an amount to the lessor for legal or other expenses incurred by the lessor in connection with the preparation and registration of a retail shop lease (preparatory costs), the lessee cannot be required to make the payment until provided with a copy of any account given to the lessor for the expenses. Preparatory costs include— (a) fees charged by a mortgagee for producing a certificate of title for the land over which a retail shop lease is to be registered or for consenting to the lease; (b) the costs of attendances on the lessee by the lessor, or a lawyer or registered conveyancer acting for the lessor. (2) The lessee's liability for preparatory costs cannot exceed— (a) the actual amount of the government fees for registration of the lease; and (b) one-half of the other preparatory costs. (3) However, this section does not limit the recovery of preparatory costs incurred by the lessor from a person who enters into and then withdraws from negotiations with the lessor. 15—Premium prohibited (1) A lessor must not seek or accept the payment of a premium in connection with the granting of a retail shop lease and a provision of a retail shop lease is void to the extent that it requires the payment of a premium in connection with the granting of the lease. (2) If a lessor or a person acting on behalf of a lessor contravenes this section— (a) the person is guilty of an offence and liable to a penalty not exceeding $15 000; and (b) the lessee is entitled to recover from the lessor as a debt any payment made or the value of any benefit conferred by the lessee and accepted by or on behalf of the lessor in contravention of this section (whether or not the person is convicted of an offence under paragraph (a)). (3) This section does not prevent a lessor— (a) from receiving payment for a right or option to enter into a retail shop lease if, when a retail shop lease is entered into, the payment is refunded or applied towards rent payable under the lease; or (b) from receiving from the lessee payment under a contract with the lessee for carrying out work on the premises before the lessee goes into occupation; or (c) from requiring payment of preparatory costs as permitted by this Act; or (d) from receiving payment of rent in advance; or (e) from securing performance of the lessee's obligations under the lease by requiring a security bond or a guarantee from the lessee or another person (eg a guarantee by the directors of a lessee company guaranteeing performance of the company's obligations under the lease); or (f) from seeking and accepting payment for goodwill of a business that has been conducted by the lessor; or (g) from seeking and accepting payment for plant, equipment, fixtures or fittings that are sold by the lessor to the lessee in connection with the granting of the lease; or (h) from seeking and accepting payment for the grant of a franchise in connection with the granting of the lease; or (i) from seeking and accepting payment of an amount of a prescribed class. 16—Lease documentation A retail shop lease is taken to include provision to the following effect: (a) if the lease is not to be registered—the lessor must provide the lessee with an executed copy of the lease within 1 month after the lease is returned to the lessor or the lessor's lawyer or agent following its execution by the lessee; (b) if the lease is to be registered—the lessor must lodge the lease for registration within 1 month after the lease is returned to the lessor or the lessor's lawyer or agent following its execution by the lessee, and the lessor must provide the lessee with— (i) an executed copy of the lease; and (ii) confirmation that the lease has been registered, within 1 month of the date of its registration. 18—Warranty of fitness for purpose (1) If the lessor under a retail shop lease had, before entering into the lease, notice from the lessee that the premises were required for carrying on a particular business, the lease is taken to include a warranty that the premises will, for the duration of the lease, be structurally suitable for the purpose. (2) However, the warranty is excluded if the lessor gives notice of the exclusion, in the manner and form required by regulation, before execution of the retail shop lease by the lessee. (3) An assignee or sub-lessee may sue on the warranty if the assignment or sublease is taken for the purpose of carrying on a business of the same kind. (4) In proceedings for breach of the warranty, it is a defence for the lessor to prove— (a) the premises were structurally suitable for the purpose when the retail shop lease was entered into; and (b) any change in the structural suitability of the premises is not attributable to the lessor. Part 4—Security 19—Security bond (1) A person must not— (a) require more than one security bond for the same retail shop lease; or (b) require the payment of an amount by way of security under a security bond if the total amount paid by way of security exceeds 3 months' rent (exclusive of GST) under the lease. Maximum penalty: $1 500. (1a) In connection with subsection (1)(b), the maximum amount of the security bond is to be calculated by reference to the rent payable during the first year of the lease (expressed as a monthly rent) but if a lease provides rent concessions, such as a rent‑free period or a period of rent at concessional rates, the concession will be disregarded. (2) However, if the rent payable under a retail shop lease increases, and at least two years have elapsed since the security under a security bond was given or last increased, the lessor may by written notice to the lessee require the lessee to increase the security by a specified additional amount but not so that the total amount of the security exceeds 3 months' rent (exclusive of GST) under the lease. (3) A notice requiring an increase in the amount of the security must fix the date by which the additional amount must be paid to the lessor and the date so fixed must be at least 60 days from when the notice is given. (4) A requirement to increase the security has effect as if it were a term of the lease. (5) A person who receives an amount by way of security must— (a) give, within seven days of the payment, the person who has made the payment a receipt stating the date payment was received, the name of the person from whom the payment was received, the amount paid, and the address of the premises to which the payment relates; and (b) pay the amount of the security to the Commissioner— (i) if the person is a registered agent—within 28 days of the date of receipt; (ii) in any other case—within seven days of the date of the receipt. Maximum penalty: $1 500. 20—Repayment of security (1) An application may be made to the Commissioner for— (a) payment of the whole amount of the security either to the lessor or the lessee; or (b) payment of a specified amount of the security to the lessor and the balance to the lessee. (2) The application— (a) must be in a form approved by the Commissioner; and (b) may be made jointly by the lessor and the lessee or by either the lessor or the lessee. (3) If the application is undisputed, the Commissioner must pay out the amount of the bond as specified in the application. An application is undisputed if it is a joint application by the lessor and the lessee; or an application by the lessor that the whole of the amount of the security be paid to the lessee; or an application by the lessee that the whole of the amount of the security be paid to the lessor. An application that does not fall into any of those categories, is liable to be disputed. (4) If an application is liable to be disputed, the Commissioner must give the respondent written notice of the application (in a form the Commissioner thinks appropriate) and inform the respondent that, if the respondent wants to dispute the application, a written notice of dispute must be lodged with the Commissioner within 14 days after service of the notice on the respondent. If the application was made by the lessor, the lessee is the respondent; if the application was made by the lessee, the lessor is the respondent. (5) If the respondent does not give the Commissioner written notice of dispute within 14 days after the date of the Commissioner's notice (ie the notice under subsection (4)), the Commissioner may pay out the amount of the security as proposed in the application. (6) If the Commissioner receives a written notice of dispute before the amount of the security bond is paid out under subsection (5), the Commissioner must refer the dispute to the Magistrates Court for determination. (7) A payment under this section will be made from the Fund. 20AA—Return of bank guarantees (1) A lessor who receives a bank guarantee for a lease must return the original bank guarantee to the lessee within 2 months (the maximum return period) after the lessee completes performance of the obligations under the lease for which the bank guarantee is provided as security. Maximum penalty: $8 000. (2) A lessor is not required to return a bank guarantee if it has expired or been cancelled. (3) The maximum return period does not run for any period during which the matter of the lessor's entitlement to claim or realise the bank guarantee is the subject of proceedings pending in a court. (4) A lessor who is unable to return an original bank guarantee is able to satisfy the requirement under this section, or an order of a court to return the bank guarantee, by providing any consent or release necessary to have the bank guarantee cancelled. (5) A lessor is liable to pay to the lessee compensation for— (a) any loss or damage suffered by the lessee as a result of any failure by the lessor to return a bank guarantee in compliance with this section, or an order of a court; and (b) reasonable costs incurred by the lessee in connection with the cancellation of a bank guarantee because the lessor was unable to return the original bank guarantee in compliance with this section, or an order of a court. (6) This section applies to a bank guarantee whether given in respect of a lease entered into or renewed before or after the commencement of this section. (7) In this section— bank guarantee means a guarantee from an ADI for the performance of the lessee's obligations under the lease. Part 4A—Term of lease and renewal Division 1—Preliminary 20A—Objects (1) The Parliament recognises that conflicts sometimes arise between a lessor's expectation to be able to deal with leased premises subject only to the terms of the lease and a lessee's expectation of reasonable security of tenure. (2) The objects of this Part are to achieve an appropriate balance between reasonable but conflicting expectations and to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a retail shop lease. Division 2—Initial term of lease 20B—Minimum 5 year term (1) The term for which a retail shop lease is entered into must be at least five years. The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into. (2) A lease is not invalidated by contravention of this section but the term of the lease is extended to bring the term (or aggregate term) to five years. Example— If a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years). (3) This section does not apply to a lease if— (a) the lease is a short-term lease (ie a lease entered into for a fixed term of 6 months or less); or (b) the lease arises when the lessee holds over after the termination of an earlier lease; or (c) the lease contains a certified exclusionary clause; or (d) the lessee has been in possession of the retail shop premises for at least 5 years; or (e) in the case of a retail shop lease that is a sublease—the term of the retail shop lease is as long as the term of the head lease allows; or (f) the lease is of a class excluded by regulation from the ambit of this Division. Division 3—Renewal of shopping centre leases Subdivision 1—Application of this Division 20C—Application of Division (1) This Division applies in relation to a retail shop lease of premises in a retail shopping centre entered into after the commencement of this Division. (2) However, this Division does not apply if— (a) the lease is a short term lease (ie a lease entered into for a fixed term of 6 months or less); or (b) the lease contains a certified exclusionary clause; or (c) in the case of a retail shop lease that is a sublease—the term of the retail shop lease is as long as the term of the head lease allows; or (d) the lease is of a class excluded by regulation from the ambit of this Division. Subdivision 2—Rules of conduct at end of term 20D—Preference to be accorded to existing lessee (1) If a lessor of premises in a retail shopping centre proposes to re-let the premises, and an existing lessee wants a renewal or extension of the term, the lessor must give preference to the existing lessee over other possible lessees of the premises. (2) The lessor is to presume that the existing lessee wants a renewal or extension of the term unless the lessee has notified the lessor in writing within 12 months before the end of the term that the lessee does not want a renewal or extension. (3) However, the lessor is not obliged to prefer an existing lessee if— (a) the lessor reasonably wants to change the tenancy mix in the retail shopping centre; or (b) the existing lessee has been guilty of a substantial breach or persistent breaches of the lease; or (c) the lessor requires vacant possession of the premises for the purposes of demolition or substantial repairs or renovation; or (d) the lessor— (i) does not propose to re-let the premises within a period (the relevant period) of at least 6 months from the end of the term; and (ii) requires vacant possession of the premises for the lessor's own purposes during the relevant period (but not for the purpose of carrying on a business of the same kind as the business carried on by the lessee); or (e) the renewal or extension of the lease would substantially disadvantage the lessor; or (f) the lessee's right of preference is, in the circumstances of the case, excluded by regulation. 20E—Implementation of preferential right (1) If an existing lessee of premises in a retail shopping centre has a right of preference, the lessor must, at least 6 months (but not more than 12 months) before the end of the term, begin negotiations with the existing lessee for a renewal or extension of the lease. (2) In particular, before agreeing to enter into a lease with another person, the lessor must— (a) make a written offer to renew or extend the existing lease on terms and conditions no less favourable to the lessee than those of the proposed new lease; and (b) provide the existing lessee with a copy of the lease or proposed lease (as renewed or extended) and the disclosure statement required in relation to it. (3) When a lessor offers to renew or extend a retail shop lease under this section— (a) the offer remains open for a reasonable period (at least 10 days not including any Saturday, Sunday or public holiday) after it is given or until its earlier acceptance; and (b) the lessee must notify the lessor in writing within the time stated in the offer whether the lessee accepts the offer; and (c) if notice is not given within that period, the offer lapses. (4) The negotiations are to continue until— (a) the lessee rejects an offer under this section (or the offer lapses); or (b) the lessee indicates in writing that the lessee does not want to continue negotiations for a renewal or extension of the lease. (5) The negotiations are to be conducted in good faith. 20F—Notice of absence of right of preference (1) If a lessee of a retail shop in a retail shopping centre does not have a right of preference, the lessor must, at least 6 months (but not more than 12 months) before the end of the term of a lease, by written notice— (a) notify the lessee of that fact; and (b) state why there is in the circumstances of the case no right of preference1. (2) If the term of the lease is for 12 months or less, the periods referred to in subsection (1) are to be reduced by one-half. Note— 1 See section 20D(3). 20G—Consequences of failing to begin negotiations or give notice (1) If the lessor fails to negotiate or give a notification to the lessee as required by this Subdivision and the lessee by notice in writing to the lessor given before the end of the term of the lease requests an extension of the lease under this section, the term of the lease is extended until the end of six months after the lessor begins the required negotiations or gives the required notice. (2) During an extension of the lease under subsection (1), the lessee may terminate the lease by giving not less than one month's notice of the termination in writing to the lessor. (3) If the term of the lease is for 12 months or less, the period referred to in subsection (1) is to be reduced by one-half. Subdivision 3—Remedies for non-compliance with rules 20H—Failure to comply with rules (1) If a lessor fails, in any respect, to comply with the rules prescribed in Subdivision 2 and the lessee has, in the circumstances of the case, been prejudiced by the failure, the lessee— (a) may lodge a notice of dispute with the Commissioner setting out the lessee's grounds of complaint and applying for mediation of the dispute; or (b) may apply to the Magistrates Court for orders resolving the dispute. (2) If a notice of dispute is lodged with the Commissioner under subsection (1)(a)— (a) the Commissioner (or a mediator appointed by the Commissioner) will attempt to resolve the dispute by conciliation; and (b) if the dispute is not resolved by conciliation, the Commissioner must, on application by either party, refer the dispute to the Magistrates Court. (3) On an application or reference under this section, the Court may make any order it considers appropriate to resolve the dispute. (4) In particular, the Court may— (a) order the lessor to renew or extend the lease, or to enter into a new lease with the lessee, on terms and conditions approved by the Court (but not to the prejudice of the rights of a third party who has in good faith acquired an interest in the premises); or (b) order the lessor to pay compensation (not exceeding 6 months' rent under the lease) to the lessee. (5) A fee prescribed by regulation is payable on lodging of a notice or an application under this section. Division 4—Other cases 20I—Application of this Division This Division applies to a retail shop lease other than one— (a) to which Division 3 applies; or (b) in relation to which a right or option to renew or extend the lease exists. 20J—Notice to lessee of lessor's intentions at end of lease (1) Not less than 6 months, and not more than 12 months, before the end of the term of a lease, the lessor must by written notice to the lessee either— (a) offer the lessee a renewal or extension of the lease on terms and conditions specified in the notice; or (b) inform the lessee that the lessor does not propose to offer a renewal or extension of the lease. (2) A notice under subsection (1)(b) may include other information about the lessor's intentions (for example, that the lessor intends to allow the lessee to remain in possession of the shop as a periodic tenant under a provision of the lease for holding over, or as a tenant at will). (3) An offer under subsection (1) is not capable of revocation for one month after it is made. (4) If the lessor fails to give a notification to the lessee as required by this section and the lessee by notice in writing to the lessor given before the end of the term of the lease requests an extension of the lease under this section, the term of the lease is extended until the end of six months after the lessor gives the required notice. (5) During an extension of the lease under subsection (4), the lessee may terminate the lease by giving not less than one month's notice of the termination in writing to the lessor. (6) If the term of a retail shop lease is 12 months or less, this section applies to the lease as if the periods of 12 months and 6 months referred to in the above provisions were reduced by one-half. Division 5—General provisions 20K—Certified exclusionary clause (1) Subject to this section, the rights conferred by this Part cannot be excluded or modified by contract. (2) However, the statutory rights of security of tenure may be excluded by a certified exclusionary clause. (3) A certified exclusionary clause is a provision of a retail shop lease in respect of which a certificate signed by the Commissioner, or a lawyer who is not acting for the lessor, is endorsed on the lease to the effect that— (a) the Commissioner or lawyer (as the case may be) has, at the request of the prospective lessee, explained the effect of the provision and how this Part would apply in relation to the lease if the lease did not include that provision; and (b) the prospective lessee gave the Commissioner or lawyer (as the case may be) apparently credible assurances that the prospective lessee was not acting under coercion or undue influence in requesting or consenting to the inclusion of the provision in the lease. (4) The Commissioner may require payment of a fee prescribed by the regulations for the provision of a certificate under this section. 20L—Premium for renewal or extension prohibited (1) A lessee cannot be required to pay a premium for the renewal or extension of a retail shop lease. (2) If a lessor or a person acting on behalf of a lessor seeks or accepts a premium for the renewal or extension of a retail shop lease— (a) the lessor is guilty of an offence and liable to a penalty not exceeding $15 000; and (b) the lessee may recover the amount of the payment as a debt (whether or not the lessor is convicted of the offence). (3) This section does not prevent a lessor from— (a) requiring payment from the lessee of a reasonable sum for legal or other expenses incurred in connection with the renewal or extension of a retail shop lease; or (b) receiving payment of rent in advance; or (c) requiring reasonable security from the lessee or another person to secure performance of the lessee's obligations under the renewed or extended lease; or (d) seeking or accepting payment for the grant of a franchise in connection with the renewal or extension of the lease. 20M—Unlawful threats A lessor or an agent acting for a lessor must not make threats to dissuade a lessee from— (a) exercising a right or option to renew or extend a retail shop lease; or (b) exercising rights under this Part. Maximum penalty: $15 000. 20N—Exclusion of legal consequences for which express provision is not made Except as expressly provided in this Part, there is no civil remedy for non-compliance with this Part. Part 5—Rent and outgoings 21—Payment of rent when lessor's fitout not completed (1) This section applies to a retail shop lease if— (a) the liability of the lessee to pay rent under the lease commences on the lessee entering into possession of the retail shop (whether or not the lessee is required to enter into possession by a specified date); and (b) the lessor has fitout obligations under the lease. The lessor has fitout obligations under the lease if the lessor is required to provide finishes, fixtures, fittings, equipment or services before the lessee enters into possession of the shop. (2) A retail shop lease to which this section applies is taken to provide that— (a) the lessee is not liable to pay rent, or any other amount payable under the lease by the lessee (such as an amount payable in respect of outgoings), in respect of any period before the lessor has substantially complied with the lessor's fitout obligations; and (b) the lessor is not entitled to deny the lessee possession of the retail shop merely because the lessor has not complied with the lessor's fitout obligations under the lease (but this paragraph does not prevent the lessor from denying the lessee possession of unsafe premises on the ground that they are unsafe). 22—Restrictions on adjustment of base rent (1) In this section— base rent means rent, or that component of rent, that comprises a specified amount (whether or not there is provision for the amount to change). Note— Turnover rent (rent determined by reference to the lessee's turnover) is not base rent because turnover rent is not a specified amount of money (it varies according to the lessee's turnover). (2) A retail shop lease must not provide for a change to base rent less than 12 months after the lease is entered into and must not provide for a change to that rent less than 12 months after any previous change to that rent, but this subsection does not apply to a change to base rent by a specified amount or specified percentage. For example, subsection (2) prevents a lease providing for an increase to current market rent more than once in 12 months. It does not prevent a lease providing for the rent to increase by $100 every six months. Nor does it prevent a lease providing for the rent to be increased to current market rent after 12 months and then to be increased by two per cent every six months after that. (3) A provision of a retail shop lease is void to the extent that it— (a) reserves or has the effect of reserving to one party a discretion to decide which of two or more methods of calculating a change to base rent is to apply on a particular occasion; or (b) provides for a method of calculating a change to the base rent but reserves or has the effect of reserving to one party a discretion to decide whether or not the base rent is to be changed in accordance with that method on a particular occasion; or (c) provides for base rent to change on a particular occasion in accordance with whichever of two or more methods of calculating the change would result in the higher or highest rent. (4) If a retail shop lease provides for a change to base rent in a way that may result in a decrease of rent1, a provision of the lease is void to the extent it prevents or enables the lessor or any other person to prevent the decrease. Example— 1 A provision for the rent to change to current market rent. 23—Reviews to current market rent (1) A retail shop lease that provides for rent to be changed to current market rent is taken to include provision to the following effect: (a) the current market rent of the retail shop is the rent that, having regard to the terms and conditions of the lease and other relevant matters, would be reasonably expected for the shop if it were unoccupied and offered for renting for the use to which the shop may be put under the lease; (b) the value of goodwill created by the lessee's occupation and the value of the lessee's fixtures and fittings on the retail shop premises are to be ignored for the purposes of the assessment of current market rent; (c) if the lessor and the lessee do not agree, the amount of the rent is to be determined by valuation carried out by a person appointed by agreement between the parties to the lease or, failing agreement, appointed by the person for the time being holding or acting in the office of Chair of the South Australian State Committee of the Australian Property Institute Limited (or the holder of such other office representing property interests in the State prescribed by the regulations); (d) if a valuation is made to determine the rent, the valuer must give detailed reasons for the determination and must specify the matters (including, if relevant, incentives and concessions) taken into account in making the determination; (e) the parties to the lease are liable for the costs of a valuation under this section in equal shares. (2) However, there is no need for a valuation if the parties to the lease agree on the amount of the rent. 24—Turnover rent (1) If a retail shop lease provides for the determination of rent or a component of rent by reference to turnover, the lease is taken to include provision to the following effect: (a) if the turnover includes amounts realised on sale of items purchased from customers in the ordinary course of business, those amounts are to be reduced by the amount of any losses made on the resale or disposal of those items; (b) turnover does not include the amount of deposits and instalments received on account of lay-bys, hire purchase or credit sales, and later refunded to customers; (c) if the proceeds of a transaction have been included as part of turnover but a refund is later made to the customer, the turnover is reduced by the amount of the refund; (d) turnover does not include the amount of service, finance or interest charges payable to a financier in connection with provision of credit to customers (other than commissions on credit or store cards); (e) turnover does not include the price of merchandise exchanged between shops of the lessee if the exchange is made solely for the convenient operation of the business of the lessee and not for the purpose of concluding a sale made at or from the shop to which the lease relates; (f) turnover does not include the price of merchandise returns to shippers, wholesalers or manufacturers; (g) turnover does not include the proceeds of sale of the lessee's fixtures and fittings after their use in the conduct of business at or from the retail shop to which the lease relates; (h) turnover does not include the amount of discounts allowed to customers in the normal course of business; (i) turnover does not include the amount of uncollected credit accounts that are written off; (j) turnover does not include the net amount paid or payable by the lessee on account of any purchase tax, receipt tax, or other similar tax imposed at the point of retail sale or hire of goods or services; (k) turnover does not include the amount of delivery charges; (l) turnover does not include the amount received from the sale of lottery tickets and similar tickets (other than commission on those sales); (m) turnover does not include an amount of a prescribed class. (2) The lease is taken to provide for underpayments or overpayments of rent (resulting from actual turnover differing from projected or presumed turnover) to be adjusted within one month after the lessee requests the lessor in writing for such an adjustment and provides the lessor with information the lessor reasonably requires to make the adjustment. (3) The lessee may make a request for such an adjustment only once in the first 12 months of the lease term and thereafter only at intervals of not less than 12 months following the first request for an adjustment under the lease. (4) Subsection (3) does not prevent the lease providing for, or the parties otherwise agreeing to, more frequent adjustments than are provided for by this section. (5) A lessor must not require a lessee to provide to the lessor information about the lessee's turnover unless the retail shop lease provides for the determination of rent, a component of rent or outgoings by reference to turnover. Maximum penalty: $1 500. (6) For the purposes of this section— turnover includes gross takings, gross receipts, gross income and similar concepts. 26—Recovery of outgoings from lessee (1) The lessee under a retail shop lease is not liable to pay an amount to the lessor in respect of outgoings except in accordance with provisions of the lease that specify— (a) the outgoings that are to be regarded as recoverable; and (b) how the amount of the outgoings will be determined and how they will be apportioned to the lessee; and (c) how the outgoings, or a part of them, may be recovered by the lessor from the lessee. (2) In this Part, the expression outgoings to which the lessee contributes refers to outgoings in respect of which the lessee is liable under the lease to make a payment to the lessor. (3) Costs associated with the advertising or promotion of a retail shop or retail shopping centre, or of a business carried on there, are not outgoings for the purposes of this section. 29—Sinking fund for major repairs and maintenance If a retail shop lease provides for the establishment of a sinking fund to fund provision for major items of repair or maintenance, the lease is taken to include provision to the following effect: (a) an amount paid by the lessee towards the lessor's outgoings on account of those major items of repair or maintenance is to be paid into the sinking fund; (b) so much of the balance standing to the credit of the sinking fund as remains unexpended from time to time for a purpose for which the sinking fund was established is to be held by the lessor in an interest bearing account; (c) amounts paid by the lessee for credit of the sinking fund, and the net interest earned by the lessor on the sinking fund, must not be applied by the lessor for a purpose other than payment of outgoings for which the sinking fund was established; (d) the lessor is liable to contribute to the sinking fund any deficiency attributable to a failure by the lessor or a predecessor in title of the lessor to comply with paragraph (c). Note— The effect of paragraph (d) will be that a purchaser of the shop from the lessor will have to ensure that the sinking fund has been properly administered and maintained by the previous lessor because the incoming lessor will be liable for any shortfall. 30—Land tax not to be recovered from lessee (1) A retail shop lease cannot require the lessee to pay land tax or to reimburse the lessor for the payment of land tax. (2) However, the lessor's liability for land tax in respect of the premises may be taken into account in the assessment of rent. (3) This section does not apply to a retail shop lease entered into before a date fixed by regulation for the purposes of this section. 31—Estimates and explanations of outgoings to be provided by lessor (1) A retail shop lease is taken to include provision to the following effect: (a) the lessor must give the lessee a written estimate of the outgoings to which the lessee contributes under the lease, itemising those outgoings under the item descriptions used in the list of outgoings in the form of disclosure statement set out in the Schedule; (b) the estimate of outgoings must be given to the lessee in respect of each accounting period of the lessor during the term of the lease and must be given before the lease is entered into and thereafter during the term of the lease at least one month before the commencement of the accounting period concerned. (2) A retail shop lease is taken to include provision requiring the lessor, at the request of a lessee, to give the lessee information and explanations that the lessee may reasonably require about expenditure on outgoings to which the lessee is required to contribute and the basis on which the lessee's contribution to the outgoings is determined. 32—Lessor to provide auditor's report on outgoings A retail shop lease is taken to include provision to the following effect: (a) the lessor must, within three months after the end of each accounting period, give the lessee a written report containing a statement of all expenditure by the lessor in the accounting period towards which the lessee is required to contribute in a form that facilitates comparison with the relevant estimate; (b) the report is to be prepared by a registered company auditor (within the meaning of the Corporations Act 2001 of the Commonwealth) and is to be prepared in accordance with accounting standards (within the meaning of the Corporations Act 2001 of the Commonwealth); (c) the report is to include a statement by the person who prepared the report whether or not the amounts paid by the lessee in respect of outgoings were properly payable by the lessee and whether or not the total amount of outgoings in respect of which the lessee contributed (that is, the estimated total expenditure by the lessor on outgoings) exceeded the total amount actually expended by the lessor in respect of those outgoings during the period concerned; (d) the report may be a composite report (that is, it may relate to more than one lessee) so long as each lessee to which it relates is able to determine from the report whether or not the amounts paid by the lessee in respect of outgoings were properly payable by the lessee; (e) the report need not be prepared by a registered company auditor, and need not comply with paragraphs (c) and (d), if it does not relate to outgoings other than the emergency services levy, wate