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CONTACT US NOW - OBLIGATION FREE
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admin@FranchiseEase.com.au
·
Mon - Fri, 9 am - 6 pm
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Obligations as a Lessor

In South Australia (SA) retail shop leases are governed by the ‘Retail and Commercial Leases Act, 1995’ (the Act). Definition of a lessor and lessee Under the Act – A lessee is the person who has the right to occupy a retail shop under a retail shop lease. A lessor is the person who grants the right to occupy a retail shop under a retail shop lease.

What is a retail premise?

Retail premises mean either business premises at which goods are sold to the public by retail or, at which services are provided to the public, or to which the public is invited to negotiate for the supply of services business premises is classified by regulation as premises to which the Act applies.

What is a disclosure statement?

A disclosure statement is a written document setting out essential details related to the lease proposed to be entered into or renewed. It states among other things, the following: the address of the shop; the lettable area of the shop; the permitted uses of the shop; the term of the lease; the hours during which the lessee will have access to the shop outside trading hours; the date on which the shop will be available for occupation; the amount of base rent and other rents payable under the lease, and the basis of their calculation; 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; the legal consequences of breach of a term of the lease

What are the rights and obligations of lessor and lessee under the Act?

Documents to be provided to the lessee

The Act requires a number of documents to be provided by the lessor to the lessee. These include, but are not limited to- Lease negotiation The prospective lessee must be provided with a copy of the proposed lease as soon as the negotiations begin. A disclosure statement must be provided by the lessor before a lease is entered into or renewed; No disclosure statement is required if a lease is assigned.

The Lessor of a retail shopping center having a casual mall license policy must provide a copy of the policy and the licensing code to the new lessee, along with the disclosure statement. The lessee is not required to serve a disclosure statement upon the lessor at the time of entering in to the lease.

Lease Documentation

If the lease is not registered then the lessee must be given an executed copy of the stamped lease within 1 month of the lease being returned to the lessor or his lawyer after stamping. However if the lease is registered, the lessee must receive a copy of the registered lease within 1 month of its registration.

Adjustment of rent

In case of over-payment or under-payment of rent, it shall be adjusted within 1 month after- the lessee requests such adjustment from the lessor, in writing; the lessee provides information required by the lessor to make the said adjustment; The lessee may request adjustment of the rent only once in the first 12 months of the lease.

Payment of premium prohibited

The Lessor cannot seek or accept payment of a ‘premium’ in relation with the grant of a retail shop lease. Any provision of a lease which requires payment of such ‘premium’ shall be void.

Liability for costs related to lease

The Lessee can be liable to pay half of the preparatory costs borne by the lessor the full amount of any stamp duty or Government fees

Estimate and statement of outgoings

The lessor must be given a written estimate of his liability for outgoings before the lease is entered into and 1 month prior to the accounting period. The lessee must also be given an auditor’s report within 3 months after each accounting period.

Liability for outgoings

Where the lessee is liable for the outgoings, the lease must specify-

  • Outgoings payable by lessee
  • The calculation of the share of outgoings payable by the lessee
  • How the lessee’s share will be recovered
  • In case of a shopping centre, the lessee shall not be liable to pay for non-specific outgoings. Adjustment of contribution to outgoings
  • The adjustment between the actual and estimated expenditure must be made within 3 months after the end of each accounting period.

Assignment and sub-letting

The lessor is entitled to withhold consent to an assignment. The lessor must deal with the request expeditiously and is deemed to have consented after 42 days The lessor shall not seek or accept premium for an assignment.

Land tax

The lessee is not liable to pay land tax.

 Fit out obligation

The lessee is not liable to pay rent where the lessor has defaulted in his fit-out obligation.

Turnover rent confidentiality

 If the terms of the lease do not oblige the lessee to pay a turn-over rent, then the lessee cannot be required to disclose the turnover figures.

 Early termination for failure to achieve turnover

The lessor shall not provide for an early termination of the lease on the ground that the lessee has failed to achieve the specified turnover performance.

Termination rights

 If the disclosure statement is not provided or if it is materially false / misleading then the lessee may apply to the Magistrates’ Court for an Order: Avoiding the lease wholly or in part; or Varying the lease; or Requiring the lessor to pay monies; or Requiring the lessor to pay compensations; and/or Dealing with ancillary or incidental matters [Note: Such orders cannot be made if the lessor has acted honestly or reasonably]

Minimum term and notice of term end

The term of a lease must be at least 5 years. Between 6-12 months before the term of the lease ends, the lessor must by a written notice to the lessee- offer renewal of the lease on the terms laid down in the notice; or inform the lessee that a renewal of the lease is not being intended by the lessor. The lessor need not give such notice of renewal where either the lessee has right of renewal of the lease or has preferential rights. If the lessor does not give a renewal notice then the lessee may serve a notice on the lessor requesting extension of the lease. In such a case the existing lease is extended until the end of 6 months after the lessor gives the requisite notice.

Warranty of fitness for purpose

If the lessor was aware of the nature of business for which the premise was being taken, prior to the lease, then the lease is deemed to include a warranty of fitness for the purpose of the business.

Notice of works

Where the lessor intends to undertake any alteration or refurbishment of any building or center, he must provide 1 month written notice to any lessee whose business is likely to be affected by it.

Damaged premises

The lessee is not liable to pay rent or other outgoings for the period during which he cannot use the leased premises on account of damage caused to the building or shop, unless the damage was caused by him. If the leased premises are partially usable then the lessee shall be entitled to pay the proportionate amount of rent. Where the lessor notifies the lessee that repairing the damaged premises is impracticable or undesirable, the lease may be terminated by either party upon a 7 days’ notice. If the lessor is unable to repair the damage within reasonable time, the Lease may be terminated by the lessee by 7 days’ notice. Either party may recover damages for destruction caused to the leased property on the principles of Common Law and contractual entitlements.

Demolition

Where a lease provides for termination on the ground of a proposed demolition, then the following terms are implicit from such lease- The lease cannot be terminated until the lessor provides the lessee with details of the proposed demolition, indicating a genuine proposal to demolish within reasonable time after termination of the lease; At least 6 months’ notice of termination must be given to the lessee; Where notice has been given to the lessee, the latter may terminate the lease by giving a 7 days’ notice to the lessor. Lessees’ employees The terms of the lease cannot be framed in a manner as to limit the lessee’s right to employ persons of his own choosing.

Refurbishment

The lessee may be liable for refurbishments if the disclosure statement discloses such obligations.

Compensation for disturbance

 If the lessor – inhibits the lessee’s access; or alters or inhibits the flow of customers to the shop; or takes action that disrupts trading; or fails to take adequate steps to prevent disruption of trading; or fails to rectify breakdown of plant and equipment; or fails to clean, maintain or repair a retail shopping area then compensation may be payable by the lessor.

Security deposit

A lessor must not- Require more than 1 security bond for a lease; or Require payment of a security bond which is greater than 4 weeks’ rent.

 Merchants’ associations

The terms of the lease cannot restrict or prevent the lessee from forming, joining or participating in the activities of a merchants’ association.

Vexatious conduct

A party to the lease must not engage in conduct that is vexatious by nature.

Dispute resolution

Either of the parties have the right to refer a dispute arising out of the lease to the Commissioner for Consumer affairs, for mediation. In a matter where the claim exceeds $40,000 the same may be referred to the District court.

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