Contents

OVERVIEW ............................................................................................................ 1

Lease or tenancy ........................................................................................................ 1

Lease or licence .......................................................................................................... 1

Formality .................................................................................................................... 2

Types of lease............................................................................................................. 4

Application of the Retail and Commercial Leases Act 1995 ....................................... 5

Applicability of the Competition and Consumer Act ................................................. 6

Personal Property Securities considerations ............................................................. 7

GETTING THE MATTER UNDERWAY ...................................................................... 8

First steps ................................................................................................................... 8

DISCLOSURE STATEMENTS ................................................................................. 11

THE COMPONENTS OF A LEASE .......................................................................... 12

Defining premises .................................................................................................... 12

Use of premises........................................................................................................ 12

Suitability for proposed use – retail ......................................................................... 13

Commencement date .............................................................................................. 13

Duration in general .................................................................................................. 13

Statutory term for a retail shop lease ...................................................................... 14

Periodic leases ......................................................................................................... 15

Geographical restrictions – retail ............................................................................. 15

Security deposit ....................................................................................................... 15

Premium/key money – retail ................................................................................... 16

Outgoings ................................................................................................................. 16

Retail – advertising, promotion and marketing plans .............................................. 17

Retail – trading hours ............................................................................................... 18

Rent review .............................................................................................................. 18

Consumer price index (CPI) information .................................................................. 20

Leases South Australia

A full commentary on the law and practice as it currently applies to

lease matters.

ALERTS – Retail and Commercial Leases (Miscellaneous) Amendment Act 2019 has not yet commenced. The Guide will be updated in due course.

Commentaries

Connect

By Lawyers

Comments &

Suggestions

Obiter

Lessee’s right to quiet enjoyment ............................................................................ 20

Compensation for disturbance – retail .................................................................... 21

Right to fixtures ........................................................................................................ 21

Lessor's rights ........................................................................................................... 21

Repair ....................................................................................................................... 22

Lessee's obligation to repair .................................................................................... 23

Rectification ............................................................................................................. 24

Preference to be accorded to existing lessee – retail .............................................. 24

Options to renew ..................................................................................................... 25

Form of renewal ....................................................................................................... 27

Option to purchase .................................................................................................. 28

DISPUTES, INTERFERENCE, BREACH AND FORFEITURE ........................................ 30

Disputes ................................................................................................................... 30

Relocation – retail .................................................................................................... 31

Demolition – retail ................................................................................................... 31

Breach of lease ......................................................................................................... 31

Forfeiture ................................................................................................................. 34

Self help .................................................................................................................... 35

Obtaining possession ............................................................................................... 35

Abandoned goods .................................................................................................... 35

CHANGE OF PARTIES ........................................................................................... 37

Change of ownership of leasehold by sublease or assignment ............................... 38

Surrender of lease .................................................................................................... 41

Stamp duty ............................................................................................................... 42

Mortgage of lease .................................................................................................... 42

Consent of mortgagee to lease ................................................................................ 43

Registration .............................................................................................................. 44

Electronic lodgement ............................................................................................... 44

Legal costs ................................................................................................................ 45

Original lease ............................................................................................................ 45

FURTHER INFORMATION .................................................................................... 46

APPENDIX – RESIDENTIAL TENANCIES ................................................................ 47

Overview .................................................................................................................. 47

Discrimination in choosing a tenant......................................................................... 47

Lease agreements .................................................................................................... 47

Joint tenants ............................................................................................................. 48

Costs ......................................................................................................................... 48

Stamp duty ............................................................................................................... 49

At the commencement of the lease......................................................................... 49

Rental bonds ............................................................................................................ 50

Rent payments and receipts .................................................................................... 50

Water usage ............................................................................................................. 50

Rent increases .......................................................................................................... 51

Alterations ................................................................................................................ 52

Landlord's obligation to repair ................................................................................. 52

Subletting ................................................................................................................. 52

Sale of rented premises ........................................................................................... 53

Termination notices ................................................................................................. 53

Goods left behind ..................................................................................................... 55

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Overview

The owner of real estate may allow someone possession of that real estate, giving that

person the right to use and enjoy the property to the exclusion of the entire world, including

the owner. Such a right is recognised as a proprietary right and thus protected by the law.

Ownership of the property does not pass and the owner retains the right to reclaim full

enjoyment at the expiration of the lease – a right known as the right of reversion.

The two key elements arising from this description of a lease are:

− Exclusive possession – The lessee must be exclusively entitled to enjoy the premises to

the exclusion of all others, including the lessor.

− Definite time span – The lease must be for some definable period of time. This might

be a fixed term, such as one year, or a periodic term, such as from week to week.

If the arrangement fails to satisfy either of these basic criteria it will not qualify as a lease

and will be regarded as a licence. A licence is a contractual relationship that does not attract

the benefits available to a proprietary interest.

Lease or tenancy

In the past the meanings of lease and tenancy may have differed, but the terms are now

interchangeable. To lease premises is the same as to rent them. Landlord means the same

as lessor, and tenant as lessee.

Lease or licence

A lease is a proprietary right and enjoys the protection of the law. The lessee is entitled to

enjoy the right until the lease expires and may enforce that right against the entire world. A

licence, however, is merely a contractual right between the parties to the contract. It is not

enforceable against third parties and may be revoked by the grantor, subject to contractual

remedies available to the licensee.

Babka P/L v Glenbarry P/L [2003] VSC 402

Sigma Constructions (Vic) P/L v Marvell Investments P/L [2004] VSCA 242

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Someone who enters onto land without the licence of the owner, such as a squatter, or

remains on land after a licence has been revoked, may be subject to the summary

procedure for possession. This is available even if the occupier’s name is unknown, but

should not be used if there are doubts as to whether the occupier is in possession under a

lease.

See Parker v Mielicki [2003] VSC 263 – family member, Williams and Nyrogen P/L v Rampino

[2002] VSC 343 – licence associated with contract of sale of land, Moar & Anor v Duman

[2007] VSC 266 – de facto, Collins, Julie Maree v Collins, David John & Hancock, Penelope

[2009] VCC 824 – family member, Byrne & Anor v Ritchie & Ors [2009] VSC 114 – procedure

not appropriate.

Formality

Validity

The common law has customarily required proprietary rights to be formally established:

indeed the fundamental requirement for creating interests in land is that this be done by

deed, which is a document formally executed under seal. An arrangement that does not

satisfy this level of formality will be invalid or void at law.

However, an exception has always existed for leases of less than three years which may be

created orally: s 30 Law of Property Act 1936. Provided that one of the parties can satisfy

the court of its essential terms, such a lease will be valid.

NZI Insurance Australia Ltd v Baryzcka and Adelaide Property Investments Pty Ltd

(Intervener) [2002] SASC 16

Enforceability

The modern equivalents to the statute of frauds require that, for contracts relating to land

to create a legal estate and be enforceable, they must be in writing and signed by the

parties. If not, such arrangements are unenforceable unless equity can be called on.

Ability of liquidator to disclaim lease

The High Court in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and

Managers Appointed) (In Liquidation) [2013] HCA 51 has held that a liquidator of an

insolvent lessor company has the ability to disclaim a lease under section 568(1) of the

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Corporations Act 2001 (Cth) with the effect of extinguishing the leasehold interest in the

subject land, and terminating the accrued rights of the lessee.

The High Court's decision turned on the finding that a lease is fundamentally a contract and,

as such, falls under the statutory power to disclaim contracts entered into by the company.

The court did not consider whether the leave of the court was required under section

568(1A) before disclaiming the lease.

Under section 568B(3) a court may set aside a disclaimer only if satisfied that it would cause,

to the affected party prejudice that is grossly out of proportion to the prejudice that setting

aside the disclaimer would cause to the company's creditors.

The lessee may make an application for the disclaimer to be set aside failing which the

lessee may claim in the liquidation as an unsecured creditor for losses suffered.

Equitable lease

Equity is a doctrine, applied by all our courts, which allows just results to be delivered

despite there not being compliance with technical legal rules. It regards as done that which

ought to be done.

Thus an agreement for a lease of more than three years that would legally be regarded as

void, because it was not executed as a deed, may be enforceable as an equitable lease. If

the agreement is either supported by something in writing or by part performance and the

lessee is not in any breach – that is, he comes ‘with clean hands’ – the lessor may be

compelled to grant a lease and execute any necessary documents.

NZI Insurance Australia Ltd v Baryzcka [2003] SASC 190

The principles in relation to an equitable lease were established in Walsh v Lonsdale (1882)

21 Ch D 9.

It has been held that the requirement of part performance does not apply to a lease but

rather to an agreement to lease, which is the relevant ‘contract’.

Laserbem P/L v Gainsville Investments P/L [2004] VSC 62

Agreement to lease

As equity has shown itself prepared to enforce an agreement to lease, it is often said that an

agreement to lease is as enforceable as a lease. This concept has been merged with modern

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legal concepts to establish the principle that, where it would be unconscionable for either

party to resile from the agreement, that party will be estopped from denying the existence

of the lease. To this extent, an agreement to lease is as enforceable as a lease. See Waltons

Stores (Interstate) Ltd v Maher [1988] HCA 7, Guilfoyle P/L v The National Mutual

Association of Australasia [2000] VSCA 25, Kellow-Falkiner Motors P/L v Nimorakiotakis &

Ors [2000] VSCA 1, IGA Distribution P/L v King & Taylor P/L [2002] VSC 440, Azkanaad P/L v

Galanos Bros P/L [2008] NSWCA 185 – no agreement and South Coast Oils (Qld and NSW)

P/L v Look Enterprises P/L [1988] 1 Qd R 680.

These rights however may be limited to the parties to the contractual agreement. See Chan

v Cresdon P/L [1989] HCA 63 and McMahon v Ambrose [1987] VicRp 66.

Registering standard terms and conditions

Under s 119A of the Real Property Act a copy of standard terms and conditions to be

incorporated in a lease may be registered at the Lands Titles Office. This allows shorter form

leases to be drawn incorporating those standard terms and condition by reference in the

lease. If the lease is drawn up in this way, the lessor must provide the lessee with a copy of

the standard terms and conditions, before the lessee executes the document.

Types of lease

Residential leases

A residential lease is governed by the Residential Tenancies Act. It may be in writing, verbal

or implied. At the time a lease is entered into, the lessor must give the lessee the prescribed

Information Brochure, which summarises the mutual obligations and rights. For more

information on residential leases refer to Residential tenancies in the appendix below.

Commercial and industrial leases

These leases are governed by the Retail and Commercial Leases Act and are substantially in

the same form as a retail lease without those matters specific to shopping centres.

Unlike a retail lease, note that no disclosure statement is required for a commercial or

industrial lease.

Rural leases

These leases are not covered by specific legislation.

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Right to emblements

A lessee of an agricultural property enjoys the additional common law right to the produce

of the land. This may be enforced even after termination of the lease.

Hohn & Anor v Mailler [2003] NSWCA 122

Retail leases

Retail leases are governed by the Retail and Commercial Leases Act 1995. No form of lease is

prescribed, but a lessor must give a lessee a disclosure statement in the prescribed form

before the lease commences. This form is included in the precedents.

Casual mall licences

South Australia is the only state with regulations governing the lease of part of a common

area in a shopping centre. The Casual Mall Licensing Code is found in the Schedule to the

Retail and Commercial Leases Act.

Under the code, landlords cannot grant a casual mall license unless they have a casual mall

licence policy. Landlords must meet a range of disclosure requirements and there are

restrictions on granting licenses that may compete unreasonably with adjacent tenants.

Retail leases are dealt with in detail below.

Application of the Retail and Commercial Leases Act 1995

The Retail and Commercial Leases Act applies to premises that are a retail shop or a retail

shop and adjacent dwelling. A retail shop lease is taken to have been entered into when the

parties have executed the lease, the lessee enters into possession of the shop as lessee, or a

party begins to pay rent as a lessee under the lease or proposed lease.

The definition for a retail shop is broad and includes all business premises at which goods

are retailed to the public or at which services are provided, and other premises classified by

regulation.

Exclusions from the scope of the Act

The Act does not apply to retail shop leases where:

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− the annual rent exceeds $400,000 (retail and commercial leases regulations regulation

4); or

− the lease is for 1 month or less; or

− the occupation rights arise under a sale or purchase of property, a mortgage or a

defined scheme; or

− the lease is to a public company or its subsidiaries, insurance companies, local councils

or to the crown: s 4.

Premises may also be excluded by regulation. For example, regulation 4 Retail and

Commercial Leases Regulations excludes premises where the lessor is a body corporate and

the lessee has a controlling interest; or the lessee and lessor are both bodies corporate and

the same person has a controlling interest in each.

The Act does not specifically provide for unconscionable or misleading and deceptive

conduct. However, s 75 of the Act provides that no party to a lease may engage in conduct

that is, in all the circumstances, vexatious in connection with the exercise of a right or power

under the Act or the lease.

Applicability of the Competition and Consumer Act

Whilst the lessor has usually had the upper hand in negotiating and setting lease terms,

competition and consumer legislation has sought to equalise negotiating power. Where

State legislation does not provide ready remedies for misleading and deceptive conduct,

many lessees relied on such concepts under Federal legislation to deal with disputes,

particularly during the economic downturn of the early 1990s.

Jaldiver P/L & Ors v Nelumbo P/L (1993) ATPR (Digest) 46-097

IOOF Australia Trustees (NSW) Ltd ACN 000 329 706 v John Pravit Tantipech & Anor [1998]

FCA 924

Building industry energy efficiency

The Building Energy Efficiency Disclosure Act 2010 (Cth) imposes disclosure obligations in

respect of properties over 2000 square metres.

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Personal Property Securities considerations

Although dealings relating to land cannot be registered on the Personal Property Securities

Register (PPSR), the implications of the Personal Property Securities Act 2009 (PPSA) for

landlords and tenants and their personal property need to be carefully considered when

entering into a new lease and on assignment.

Leases often encompass personal property such as fit out owned by the landlord made

available under the lease, or plant and equipment owned by the tenant left in the premises

on abandonment.

In such situations, the PPSA can operate to deprive the true owner of their rights if not

recorded on the PPSR. For example, unless a landlord registers a security interest on the

PPSR in relation to their personal property which is in the possession of a tenant, they may

not be adequately protected against claims on the property by third parties including the

tenant’s financier.

At the time of entering into a new lease or on assignment, a landlord should consider

whether registration of a security interest is required in relation to any personal property.

Consideration should also be given to the inclusion of a clause in the lease to allow the

landlord to enforce security interests in personal property. Any such clause must be

reasonable, should be confined only to the relevant personal property concerning the lease

and should not affect the tenant’s ability to obtain finance or provide security to their

financier.

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Getting the matter underway

First steps

Taking good instructions

The use of precedent Retainer Instructions ensures that all important issues are considered,

instructions which cannot be contradicted later are recorded, costs discussed and the scope

of the retainer clearly defined.

Identifying the client

Depending upon the circumstances, simply sighting photographic identification may be

enough. The ‘100 point identification’ method used by financial institutions, where a

passport or drivers licence is worth 70 points and two other forms of identification are

required to exceed 100 points, is more rigorous and generally accepted.

For further information on identification processes in the context of land transactions, see

the ARNECC Model Participation Rules Guidance Note 2 – Verification of Identity and the By

Lawyers dedicated Verification of identity – Electronic lodgements for real property

commentary.

Professional safeguards

At the same time as verifying the identity of the client, a conflict of interest check can be

made enabling any potential conflict to be resolved from the outset of the matter.

It is also important to have in place procedures to keep the client’s personal and bank

details safe. Assistance on this issue can be found at the Law Council of Australia’s Cyber

Precedent.

Before accepting a retainer consider whether the firm has the requisite time, resources and

expertise to act in the matter. The lure of potential fees for undertaking unfamiliar work

risks delays, complaints, bad client relationships, compromised reputation and at worst

negligence suits.

Likewise, the scope of the work that the firm will do should be considered and clearly set

out in the costs agreement. Many complaints against lawyers stem from the lawyer or the

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client misunderstanding the scope of the retainer. If the client expects the lawyer to do

something that the lawyer has no intention of doing then dissatisfaction is inevitable.

Communication

A common complaint is the difficulty clients experience communicating with their lawyers.

Agreement on when, how often and the best way to contact each other makes for a happy

relationship. Some clients do not use email, so reports on the progress of their matter must

be by letter or phone call and many lawyers only take calls at certain times. These types of

constraints need to be understood.

Time estimates

Clients often have either no concept or a completely incorrect understanding of how long

matters are likely to take.

Informing and advising them about realistic time frames for their matter is a critical part of

the lawyer’s role. The machinations of legal process are a complete mystery to most

non-lawyers. It is therefore important for the client to have a realistic estimate of how long

a transaction or case may take and to be kept informed as the matter progresses and time

frames change.

Costs estimates

The same applies to costs. Disclosure of costs and disbursements is a lawyer’s professional

responsibility and done properly creates good client relations and avoids complaints.

Costs disclosure should be a genuine estimation of the work involved in the matter. It is an

opportunity for the lawyer to consider the instructions, scope the work and tell the client

what will be involved for each stage and how much it will cost. A genuine and considered

costs estimate, updated if things change, will mean that the client is always informed and

approves the expenditure.

The costs agreement formalises the arrangement, confirms the scope of the retainer and

protects both parties. If the costs disclosure needs to be altered due to delays, or changes to

instructions, a written variation needs to be provided to the client.

The lawyer/client relationship

It is useful to discuss with clients the key characteristics of the lawyer/client relationship at

the commencement of a matter.

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Most clients have only a vague idea that their relationship with their lawyer is in a special

category. Spelling it out for them and formally acknowledging the uniqueness of the

relationship can clear the air and instil confidence from the start, making instructions easier

to obtain and communications more effective.

The lawyer/client relationship is a fiduciary relationship. The client places their trust in the

lawyer, who acts in the client’s best interests with the utmost good faith, subject only to

their overriding duties to the court and the law.

The duties of a solicitor to their client are to:

− Act in a client’s best interests;

− Be honest and courteous in all dealings in the course of legal practice;

− Deliver legal services competently, diligently and as promptly as is reasonably possible;

− Avoid any compromise to their integrity and professional independence;

− Provide clear and timely advice to assist their clients;

− Follow a client’s lawful, proper and competent instructions;

− Avoid any conflict of interests;

− Maintain client’s confidences;

− Disclose any updates or changes regarding costs to the client;

− Honour any undertakings given in the ordinary course of legal practice.

The relationship is a privileged relationship, meaning that any confidential information to

which the lawyer becomes privy cannot be disclosed, either voluntarily or under legal

compulsion, unless the client consents. This privilege exists both at common law and under

the Evidence Acts in each state and the Commonwealth. It is regularly applied in courts of all

jurisdictions.

Clients should be informed of that privilege and assured that their confidences will be kept.

This might extend to an explanation of the firm’s security systems and privacy policies.

Establishing trust with a client is critical. Taking the lawyer/client relationship seriously and

treating it as a priority from the start assists in establishing that trust.

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Disclosure statements

Disclosure statements for retail leases

Disclosure statements s 12 and draft leases s 11 are requirements of the Retail and

Commercial Leases Act. A copy of the lease and the prescribed retail tenancy guide must be

made available as soon as negotiations commence. And before the lease is entered into the

lessee must be given a disclosure statement in the form prescribed in Schedule 1 of the

Retail and Commercial Leases Regulations.

If no disclosure statement is given the lessee may apply under s 12 of the Act to a

Magistrates Court for an order to avoid the lease in whole or in part, vary the lease, require

the lessor to repay money paid by the lessee or to pay the lessee compensation.

The lessee should sign an acknowledgement of receipt of the lessor's disclosure statement

before signing the lease.

On renewal, a disclosure statement update should be done which, together with the

original, constitutes the new disclosure.

Disclosing lease and fit out costs for retail leases

If the disclosure statement discloses in sufficient detail the obligation to fit out, refit or

provide fixtures, plant or equipment for the lessee to obtain an estimate of likely costs, and

the lessee agrees to this by signing the disclosure statement, those costs become his

financial responsibility: s 14. In that case, the lessee will own the fittings even though they

may be affixed to the premises.

If the lease provides for the lessee to pay the lessor an amount towards preparation,

stamping and registration of the lease – the ‘preparatory costs’ – the lessee is not liable to

pay until the lessor has provided him with a copy of the account, but only to the extent of:

− registration fees; and

− half the other preparatory costs, such as fees charged by a mortgagee for consenting

to the lease and costs of attendances on the lessee by the lessor or lessor's lawyer.

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The components of a lease

Defining premises

Incorrectly defining or describing the premises may give the lessee a right to damages.

Foong & Leong v Great Union P/L [2001] VCAT 1540

The definition of the lettable area in a lease must be appropriately drafted and scrutinised

to ensure that it encapsulates the intention of the landlord and the tenant. How the lessor

determines the lettable area, in practice, must be defined when the lease is drafted.

For the lessor this is critical in enabling the apportionment of costs to and recovery of costs

from the lessee. For the lessee the areas of a building defined as lettable will impact on the

proportion of the outgoings the lessee is liable to pay.

Ray Mullins & Sons P/L v Skycorp Investments P/L [2011] WASCA 49

Use of premises

The lessee is bound to use the premises as specified and failing to do so constitutes a

breach. If the lease provides that the use may be altered with the lessor’s consent, there is

no implied obligation that the lessor must not withhold consent unreasonably.

Re Archos [1994] 1 Qd R 223

A use that allows a wide range of activities, such as ‘any use permitted by Council’, is

preferable for a lessee in circumstances of the failure of the business as it provides a far

greater opportunity to find an assignee of the lease without a requirement for the lessors

consent to a change of use.

On the other hand, a lessor may wish to maintain control over the use of the premises and

the tenancy mix within a complex or may wish the use not to invoke the regulation found in

the retail leases legislation.

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Liquor licence

Where the permitted use requires a liquor licence for the premises the lessor should

consider including a clause requiring the transfer of the liquor licence to themselves or their

nominee when the lease ends thereby avoiding the loss of the licence.

Exclusive use

Care should be taken when drafting a lease with an exclusive use provision to ensure that no

subsequent lease in the same complex infringes the exclusive use.

Suitability for proposed use – retail

The premises must be suitable for the proposed use at the time the lease commences: s 18.

JF Hillam Pty Ltd v KL Mooney & PH Hill (1988) 48 SASR 381

If the lessor under a retail shop lease had notice from the lessee before entering into the

lease that the premises were required for a particular business, the lease will include an

implied warranty that the demised premises are structurally suitable for that purpose for

the duration of the lease: s 18(1). This may be expressly excluded from the lease by the

lessor.

Commencement date

A lease must have a specified or definable commencing date or it will be void.

Darling Point Securities P/L v Industrial Equity P/L (1991) NSW ConvR 55-589

(2001) 76 ALJ 86

Duration in general

A lease for one year is obviously of fixed duration. A lease from week to week, although

theoretically it might go on forever, is still regarded as of fixed duration since either party

could terminate it at the end of each repeating period. In contrast, arrangements ‘for the

duration of the war’ or ‘until the land is required by the council’ are not for a fixed or

determinable duration and therefore are not leases. They are, instead, licences.

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Prudential Assurance Company Ltd v London Residuary Body and others [1991] UKHL 10

Statutory term for a retail shop lease

Section 20B of the Retail and Commercial Leases Act provides for a minimum five-year term,

including options, for all retail leases. This term is worked out on the assumption that all

options given at the commencement of the lease are in fact exercised. A right or option of

renewal is not taken into account if given after the lease is entered into.

If the term is for less than five years, then, without affecting the validity of the lease, the

section extends the period by such time as is necessary to bring it to five years. For example,

if a lease is entered into for a term of three years, its term is extended by two years to five

years. If it is entered into for a term of two years with an option for a further one year after

that initial two years, the term is extended to four years – with the option for a further one

year after that initial four years.

This section, however, does not apply if:

− the lease is a short-term lease (i.e. For a fixed term of six months or less);

− the lessee holds over with the lessor’s consent and the holding over does not exceed

six months;

− the lease contains a certified exclusionary clause;

− the lessee has been in possession of the premises for at least five years; or

− the lease is a sublease, and the term is as long as the headlease allows; or

− the lease is excluded by regulation.

Leases excluded by regulation 7 are those where the right of occupation granted under the

lease is for less than an average of 15 hours in each week over the term of the lease and:

− the lessee is a close relative of the lessor; or

− the lessor is:

▪ an incorporated association within the meaning of the Associations

Incorporation Act 1985; or

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▪ a body established on a non-profit basis for a purpose of a kind referred to in

section 18(1) of that Act.

The certified exclusionary clause is one provided under section 20K of the Retail and

Commercial Leases Act by a lawyer, or a licensed conveyancer not acting for the lessor, and

which certifies in writing that the lessee has requested the certificate and understands that

section 20K of the Act does not apply to the lease. The certificate included in the precedent

retail lease is self-explanatory.

Periodic leases

Periodic leases roll on until terminated by notice of either party. In the absence of a contrary

agreement, the notice must expire at the end of the period after the period in which it is

given.

Geographical restrictions – retail

The lease must not restrict the lessee from carrying on business outside the retail shopping

centre either during or after the lease expires. However, it is permitted to restrict the lessee

from using the name of the centre in connection with a business carried on outside the

centre: s 59.

Security deposit

Many leases provide that the lessee pay a security deposit to secure compliance with the

lease terms. Special rules apply to residential and retail tenancies. Generally speaking, there

is no presumption that the lessor hold the security deposit in trust for the lessee and so the

lessor may use it as they see fit, merely being liable at the lease’s expiration to account to

the lessee for that sum. However, the lease may stipulate that the lessor hold that sum on

trust, in which case it must be kept separate and not mixed with the lessor’s funds.

Banksia Forge P/L v Veretta P/L (1992) V ConvR 54-440

A security deposit paid during negotiations will ordinarily be returnable to the prospective

lessee if the negotiations do not conclude in an enforceable lease.

Sydney Harbour Casino Holdings Ltd v NMBE P/L [1998] NSWSC 595

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A mortgagee exercising the power of sale will not be liable to the lessee for a refund of the

security deposit paid by the lessee to the mortgagor, or a right to damages that the lessee

may have against the mortgagor.

Security bond – retail

The lessor can only require the value of four weeks rent as security: s 19.

Citibank P/L v Simon Fredericks P/L [1993] VicRp 66

Piazza Grande P/L v Portis P/L (1993) V ConvR 54-460

Premium/key money – retail

Key money or any amount sought or given as a premium in connection with the grant of a

retail shop lease, or a renewal of a lease, or the assignment of a lease, is prohibited: s 15.

Outgoings

Whether the lessor or the lessee is responsible to pay outgoings in relation to the leased

premises will depend on the agreement. Leases often require the lessee to pay outgoings

such as rates and taxes, but what is included depends on how the obligation is phrased.

Insurance premiums are not outgoings.

FAI Traders Insurance Company Ltd v Savoy Plaza P/L [1993] VicRp 76

‘Costs and expenses paid or incurred’ includes administrative expenses associated with

calculation and collection of the lessee’s liability.

Thirty-Fourth Agenda Ltd v S E Dickins P/L (1992) V ConvR 54-432

‘Periodic expenses’ may include gardening and security expenses.

(1990) PLB Dec 25

Under section 73 Residential Tenancies Act lessees cannot be required to pay land tax

assessed in relation to the premises. In a retail lease land tax cannot be recovered from the

lessee, however the lessor’s liability may be taken into account in assessing the rent: section

30 Retail and Commercial Leases Act.

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Retail outgoings

Retail outgoings are not recoverable from the lessee unless the lease provides so, and

specifies how the amount is to be determined, apportioned and recovered by the lessor.

1. Costs of advertising or promoting a retail shop or retail shopping centre are not

outgoings for the purpose of section 26 Retail and Commercial Leases Act.

2. Sinking fund: A lessee may be required to contribute to a sinking fund for repair or

maintenance if reasonable details are disclosed in the disclosure statement.

3. Land tax is not a recoverable outgoing and a contrary provision is void. The lessor may

take land tax into account in assessing the rent.

4. Capital costs are recoverable only if they are ‘permissible obligations’ – that is, the

lease or the disclosure statement has specified them so that the lessee can estimate

the cost.

Before the lease is entered into and one month before each accounting period, the lessor

must give the lessee a written statement setting out estimates as to the lessee’s liability.

In addition to the statement of estimates of outgoings, the lessor must also provide an

auditor's report within three months of each accounting period which includes a statement

as to whether or not the amounts payable by the lessee were properly incurred. The report

must be audited unless the lessee is only liable to pay council rates, water and sewerage

rates and insurance premiums, provided receipts are provided with the report.

Retail – advertising, promotion and marketing plans

A lease provision requiring the lessee to advertise or promote its business is void under s 53

Retail and Commercial Leases Act. However if the lease requires the lessee to contribute

towards advertising and promotion costs incurred by the lessor, the law implies provisions

that the lessor must:

− give the lessee a marketing plan, a written expenditure statement, and an advertising

statement accompanied by an auditor's report on advertising and promotion

expenditure two months before each accounting period; and

− consider the lessee’s proposals for change; and

− carry forward unexpended contributions.

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Retail – trading hours

Under s 61 Retail and Commercial Leases Act trading hours can be regulated only if:

− the shop is within an ‘enclosed shopping complex’ – that is, 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;

− the lease does not reduce permitted hours to fewer than 50 hours per week;

− core trading hours do not exceed 54 hours per week, do not include Sundays, and

have been approved by 75% of lessees in the shopping complex.

Read these provisions together with the Shop Trading Hours Act 1977.

Rent review

Rent review during the term of the lease

In the absence of a review clause, rent will remain the same during the full term of the lease

and, depending on the option clause, possibly even through a further term. However, most

leases have a rent review clause which may provide for rent to be reviewed during the term

of the lease and on renewal by a fixed dollar amount, or a fixed percentage, or by reference

to an index (such as CPI), or the market.

Who can initiate a review

This will depend on the review clause, many of which provide that only the lessor can

initiate a review. If only one party is nominated as capable of initiating a review that party

may elect not to do so, in which case the current rent continues.

R & H Australia P/L v Salta Constructions P/L (1993) V ConvR 54-462

Compare:

Sheralex Nom P/L v Johnson Taylor P/L (1993) V ConvR 54-489

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The lessee may also be able to resist a review of rental on the exercise of an option to renew

the lease if the option clause nominates the lessor as the party capable of initiating a review

in those circumstances.

Highpoint Homemaker Centre (Vic) P/L v Sanstar P/L (1997) V ConvR 54-564

If the time for a review passes

If the lease provides for a review at a particular time but that time passes, the courts have

usually allowed either party, usually the lessor, to seek a review.

Innvale P/L v Barristers’ Chambers Ltd (1989) V ConvR 54-330

This may not be so if the lease provides that time shall be of the essence in relation to the

review.

G R Mailman & Associates P/L v Wormald (Aust) P/L (1991) 24 NSWLR 80

Retrospective review may even be available during overholding.

Frater Williams & Co Ltd v Australian Guarantee Corporation (NZ) Ltd (1995) ANZ ConvR 247

Rent review – retail

The base rent cannot be increased to current market rent more than once in 12 months.

However, the lease may provide for the rent to increase by a set amount at specified

periods during a year. It may also, for example, provide for the rent to be increased to

current market rent after 12 months and then be increased by, say, a fixed dollar amount, or

a fixed percentage, or by reference to an index (such as CPI), or the market.

Under s 22 — Restrictions on adjustment of base rent provisions are void to the extent that

they:

− reserve to one party a discretion to decide which of two methods to apply to calculate

a change or if a particular stipulated method of calculation will be used on a particular

occasion; or

− provide that the base rent increase can be decided by the higher or highest of two or

more methods of calculation; or

− enable the lessor to prevent a decrease in rent as a result of an agreed method of

calculating the change.

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Market rent review

The terms of a review to current market rent must be based on what would be reasonably

expected if the shop were unoccupied and offered for rental for the use to which the shop

may be put under the lease. 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 must be ignored in

making the assessment: s 35.

If the parties cannot agree, the Act provides for appointment of a valuer, with the costs of

valuation to be shared between them. There is no need for a valuation if the parties to the

lease agree on the amount of the rent.

Consumer price index (CPI) information

Recorded information is available by phone on 1300 135 070.

Information is also available at the Australian Bureau of Statistics.

Lessee’s right to quiet enjoyment

The lessee’s ‘right to quiet enjoyment’ of the leased premises is the right to possession, free

of interruption from the lessor or any other person. It is the lessee’s principal right under

the lease and is created by the lessor covenanting with the lessee to pass quiet enjoyment.

The lessor will be liable for any damage caused to the lessee as a result of the lessor’s

breach of this covenant. A lessee may be able to use breach of this right by the lessor as a

defence to an action for possession of the premises.

MEK Nominees P/L v Billboard Entertainments P/L (1993) V ConvR 54–468

Hirlmont P/L v Dybka & Anor [1998] QCA 305

A F Textile Printers v Thalut Nominees P/L & Ors [2007] VSC 73

By common practice the lessor is not responsible for any breach of the lessee’s quiet

enjoyment of the premises caused by a third party. However, some recent cases have held

the lessor liable for a breach by a third party.

Aussie Traveller P/L v Marklea P/L [1997] Q ConvR 54-485 – actions of another lessee

Southwark London Borough Council v Mills [1998] 3 WLR 49 – residential tenancy

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A shopping centre may be liable for the actions of customers using the common property in

such a way as to interfere with the lessee’s quiet enjoyment.

Chartered Trust PLC v Davies [1997] EWCA Civ 2256

See (1998) 72 ALJ 497

Compensation for disturbance – retail

A retail shop lease is deemed to provide that if particular kinds of disturbance occur – for

example, failing to rectify an equipment breakdown – and the lessor does not rectify the

problem as soon as reasonably practicable, under s 38 of the Act the lessor is liable to pay

the lessee compensation for loss or damage suffered as a consequence.

The lease may prevent or limit a claim for compensation under this section if the lessee’s

attention was specifically drawn to the possibility of the disturbance occurring before

signing the lease. Therefore it is prudent to include any such likelihood in the disclosure

statement.

Right to fixtures

By exceptions to the doctrine of fixtures, a lessee has the right to remove lessee’s

ornamental and trade fixtures at the expiration of the lease, subject to a contrary provision

in the lease.

Lessor's rights

As the lessor generally prepares the lease, it usually creates rights in favour of the lessor by

requiring the lessee to covenant to do, or not do, certain things and empowering the lessor

to enforce those covenants. A lessee will normally covenant to pay rent, pay outgoings

relating to the premises and legal costs on preparation of the lease, to maintain the

property, and to deliver up the property at the end of the term, et cetera. The lessee’s

failure to comply constitutes a breach of covenant, entitling the lessor to terminate.

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Repair

The lease has by common practice been prepared by the lessor’s solicitor. This meant the

lessor could specify the terms and conditions. It was normal practice to require a lessee to

deliver up the premises at the lease end in the same condition as they had been at the

beginning of the lease, fair wear and tear excepted. To achieve this, the lessee had to

maintain the premises in good repair. Thus it became common to impose a corresponding

liability to repair on the lessee.

This liability did not extend to undertaking structural repairs. However the dividing line

between structural and non-structural repairs has always been uncertain, particularly if the

lease is for a long period.

Alcatel Australia Ltd v Scarcella & Ors [1998] NSWSC 483

Gimtak P/L v Cathie & State of Victoria [1998] VSC 6

Even if the repairs were clearly of a structural nature, the common law did not impose an

obligation on the lessor to undertake structural repairs, except in the case of furnished

residential premises. However, it became common for the lessor to accept such an

obligation and this is now regularly included in leases.

Statutory reforms such as the Retail and Commercial Leases Act 1995 and the Residential

Tenancies Act 1995 have also moved towards equalising the obligations of the parties and

requiring the lessor to undertake necessary repairs in those particular situations.

Occasionally a lessor may assume a responsibility to maintain the premises in good and

substantial repair, thus relieving the lessee of that responsibility, but this is rare.

The responsibility to repair often overlaps with rent abatement clauses relating to the

lessee’s right to abate rent in the case of major damage by fire or storm.

Hirlmont P/L v Dybka & Anor [1998] QCA 305

In connection with the lessor’s obligation for structural repairs, recent cases have extended

the lessor’s liability for personal injury suffered on the premises, not so much on the basis of

the contractual lease between the parties, but rather on the basis of negligence and

foreseeability.

Northern Sandblasting P/L v Harris [1997] HCA 39

Assaf v Kostrevski (1999) NSW ConvR 55-883

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Jones v Bartlett [2000] HCA 56 – unsuccessful claim for injury to lessee’s invitee

Gration v C Gillan Investments P/L [2005] QCA 184

And to the lessor's agent:

Laresu P/L v Clark [2010] NSWCA 180

Lessee's obligation to repair

Lessors have by common practice sought to pass the obligation for repairs onto the lessee,

but if the lease creates an obligation on the lessor to repair, responsibility to do so usually

only arises after the lessor receives notice of the need for repair.

O’Brien v Robinson [1973] UKHL 1

However, if the lessor has an ongoing responsibility to maintain adjoining or associated

premises, such as common property, the obligation is continuous and no notice is required.

British Telecommunications P/L v Sun Life Assurance Society P/L [1995] 3 WLR 622

A lessor’s obligation to repair may require the lessor to remedy an inherent structural

defect.

Credit Suisse v Beegas Nominees P/L [1994] 4 All ER 803

An obligation on the lessee to repair and maintain a particular part of the premises, for

instance ‘the inside’, may create a ‘correlative obligation’ on the lessor to maintain another

part, such as ‘the outside’.

Barrett v Lounova (1982) Ltd [1990] 1 QB 348

In other jurisdictions the rationale of this case has been doubted.

Ali v Hazim [2002] VCAT 274

Also see article (2000) NZLJ April 105

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Two recent unsuccessful attempts by commercial lessees to force lessors to undertake

repairs on the basis of an implied obligation are:

Carbure P/L v Brile P/L and Ors [2002] VSC 272

Becker v Cariste [2001] NSWSC 663

If the lease includes a specific covenant requiring the lessor to undertake specific

rectification works, such as roof repairs, then the failure to do so will constitute a

repudiation entitling the lessee to terminate the lease.

G Vaccari Investments P/L v Vega Press P/L (1991) V ConvR 54-416

A failure by the lessor to undertake statutory repairs will justify termination by the lessee.

Weeks & Anor v Bond [1997] QCA 349 (residential property)

Rectification

Errors may be rectified by the court.

Thermoplastic Foam Industries P/L v Imthouse P/L (1990) ANZ ConvR 532

Preference to be accorded to existing lessee – retail

Except for leases which have a right of renewal, the lessor must presume that the lessee

wants a renewal or extension – unless the lessee notifies the lessor otherwise within 12

months before the end of the term.

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: s 20D Retail and Commercial

Leases Act.

If the lease grants the lessee a right of preference the lessor must, between 12 months and

six months before the lease ends, start to negotiate in good faith with that lessee for a

renewal or extension of the lease.

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Under s 20E before agreeing to a lease with another person, the lessor must:

− offer to renew or extend the existing lease on terms and conditions no less favourable

to the lessee than those of a proposed new lease; and

− provide the existing lessee with a copy of the lease or proposed lease (as renewed or

extended) and the required disclosure statement.

The offer to renew or extend must remain open for at least 10 business days after it is given

or until its earlier acceptance. If the lessee wishes to accept, this must be done in writing to

the lessor within the time stated, or the offer lapses.

The negotiations must continue until either the lessee rejects the offer, or the offer lapses,

or the lessee gives written advice that he does not want to continue negotiations.

These provisions do not apply to:

− a lease containing a certified exclusionary clause;

− fixed-term leases of six months or less;

− a sublease where the term is as long as the headlease allows; and

− a lease excluded by regulation.

Section 20H provides for fair dealing between lessor and lessee over a renewal of lease.

Disputes may also be referred to the Commissioner for Consumer Affairs for mediation, or

referred to the Magistrates Court.

Options to renew

Options to renew generally require the lessee not to be in default of any covenant as a

condition of exercising the right.

B S Stillwell & Co P/L v Budget Rent–A-Car System P/L [1990] VicRp 52

Compare with:

Caltex Properties Ltd v Pittard (1991) ANZConvR 613

Downward Bricklaying P/L v Goulburn-Murray Rural Water Authority [2003] VSC 171

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Email service of the renewal may be sufficient - Kegran Pty Ltd v Warrik Pty Ltd [2018]

NSWSC 1357

If the exercise is out of time

Courts have usually construed time limits strictly and a late exercise will be invalid.

Duncan Properties P/L v Hunter [1991] 1 Qd R 101

However compare:

Photo Art & Sound (Cremorne) P/L v Cremorne Centre P/L (1987) 76 ANZ ConvR 347

See Hillier v Goodfellow (1988) V ConvR 54-310

Bezden P/L v A Castellano Nominees P/L [2003] VSC 70

A lessee may not be entitled to protection when even just one day late.

Leads Plus P/L v Kowho Intercontinental P/L [2000] NSWSC 459

Late exercise of an option, whilst ineffective in itself, may constitute an offer to enter into a

new lease and the lessor’s acceptance may constitute an agreement for a new lease.

Traywinds P/L v Cooper [1989] 1 Qd R 222

Abjornson v Urban Newspapers P/L [1989] WAR 191

Duncan Properties P/L v Hunter [1991] 1 Qd R 101

Mossop & Others v Carpet Call (Vic) Pty Ltd [2009] SADC 89

A lessor may be estopped from denying the exercise of an option to renew.

S and E Promotions P/L; John McGrath and Stephen Bates v Tobin Brothers P/L [1994] FCA

1109

Lifoon P/L v Gillard & Ors; Hendriks & Ors v Gillard & Anor [2006] NSWCA 182

Compare Mossop & Others v Carpet Call (Vic) Pty Ltd [2009] SADC 89 where the lessee was

estopped from denying the exercise of the option.

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Even if the lessee does not have an option, the lessor may be estopped from denying that a

promise of a new lease ought to be enforced.

William Hollier & Anor v The Australian Maritime Safety Authority & Ors [1998] FCA 176

(Claim unsuccessful on the facts)

Can the lessee recall the exercise of an option to renew?

Once the lessee exercises the option to renew the lessor has a contractual right to require

the lessee to proceed with the renewal.

Yulin P/L v Japan Building Projects (Aust) P/L (1991) ANZ ConvR 390

Traywinds P/L v Cooper [1989] 1 Qd R 222

Antonino Giuseppina Ensabella & Sons Pty v Players On Downunder P/L [2000] VSCA 73

Is a purchaser of the freehold bound by the option?

It has long been held that an option falls within the lessee’s total interest under the lease.

Mercantile Credits Ltd v Shell Company of Australia Ltd [1976] HCA 9

In jurisdictions where leases are registered on title, the option has been held to be

enforceable against subsequent freehold owners.

Tenstat P/L v Permanent Trustee Australia Ltd (1992) 28 NSWLR 625 (registered lease)

Chaisumdet v Ming On Trading P/L (1990) ANZ ConvR 525 (unregistered lease)

Rent paid pending rent review will generally be on account of new rent, which will apply

from the commencement of the new term when finally fixed.

American Home Assurance Company v Grimes George St Garage P/L [2008] NSWCA 318

Form of renewal

The lessee is entitled to a lease that is identical to the expired lease and a renewal does not

present the lessor with an opportunity to review the lease. The only justified changes are

those necessary to reflect the effluxion of time and any change in the parties.

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The lessor retypes, prints out, or otherwise copies the exact terms of the expired lease, or

simply prepares a deed of renewal of lease which incorporates the expired lease by

reference and sets out the necessary changes.

Option to purchase

A right of first refusal or right of pre-emption in favour of a lessee may be included in a

lease. Such a right is regarded as different to an option to purchase. It is a purely contractual

right, giving the lessee no additional interest in the land.

Attorney-General v Methodist Church [1996] 1 NZLR 230

Walker Corporation P/L v W R Pateman P/L (1990) 20 NSWLR 624

However compare:

Bob Jane T-Marts P/L v Baptist Union of Victoria [1999] VSC 346

Robertson v Lagreg Investments P/L [2004] VSC 86

Pumps & Systems Pty Ltd v LP Reed Investments Pty Ltd [2009] SADC 110

The practical application of such clauses often causes difficulty for the lessor and care must

be taken in drafting. There must be some clearly definable end point to the lessee’s right or

the lessor may be unable to sell the property to a third party without constantly rechecking

with the lessee.

Most option clauses are only exercisable if the party having the benefit of the option is not

in breach of the primary agreement, in this case, the lease. However, it may be that a lessee

in breach of the lease may still be able to enforce the option if the lessee can show that the

lessor is estopped from relying on the breach to avoid the option.

Re Allen Reed and Yvonne Reed v James Lawrence Sheehan [1982] FCA 1

Phillip Webb P/L v 483 Whitehorse Rd P/L [2006] VCAT R78/2006

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Can the option be exercised out of time?

Time restrictions are usually interpreted strictly but a lessee seeking to exercise an option to

purchase out of time may be able to rely on equitable principles to excuse a minor time

delay.

Hillier v Goodfellow (1988) V ConvR 54-310

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Disputes, interference, breach and forfeiture

Disputes

Retail

Disputes commonly arise in shopping centres in relation to relocation, exclusivity, fit out

requirements, turnover rental, promotion funds and signage.

For other shops, shared parking and repairs and maintenance are often the cause of

argument. Old air conditioning units that constantly malfunction test the understanding of

the distinction between maintenance and replacement with neither party wishing to incur

any cost.

In professionally run centres, parking is organised, replacement lessees are readily found

and centre management administers rent and outgoings and contributions to promotion

and advertising in a professional fashion.

With leases of shops by mum and dad owners, the administration often falls behind and

contributions to outgoings or CPI increases in rentals are often overlooked and are sought

perhaps years after the event, causing conflict and trouble.

Including the outgoings in the rental and providing for payment of all outgoings other than

consumables by the lessor readily overcomes this administrative problem. However,

consider that while GST is payable on the rent, many outgoings do not attract GST.

Additionally, outgoings do not necessarily increase by the same amount by which rent

increases.

Part 9 of the Retail and Commercial Leases Act 1995 covers how disputes are to be handled.

Applications for orders are made in the Magistrates Court and if they involve a monetary

claim above $100,000 are referred to the District Court. Disputes may also be referred to the

Commissioner for Consumer Affairs for mediation. The commissioner may intervene in any

court proceedings which have already been commenced.

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Relocation – retail

If a retail shop lease provides for the lessee's business to be relocated, the lease is also

taken under section 57 to have other provisions to ensure that the disruption to the lessee is

minimised and allowing the lessee either to accept the offer of the alternate premises – on

the same terms as the existing lease – or terminate without penalty. The section does not

prevent the parties negotiating a new lease by which to relocate the lessee.

Demolition – retail

Demolition of a building of which a retail shop forms part includes a substantial repair,

renovation or reconstruction of the building which cannot be carried out practicably without

vacant possession of the premises.

The lessor may only terminate a lease on the grounds of a proposed demolition of the

building of which the retail shop forms part if the lease so provides. The lease must also

contains terms requiring the lessor to give six months notice of the event and allowing the

lessee to terminate on seven days notice within that six-month period. For a short-term

lease the lessor’s notice period becomes three months. If the demolition does not occur as

planned, the lessor may be liable to the lessee for compensation or damage suffered by the

lessee as a consequence of the early termination of the lease: s 39.

Breach of lease

The consequences of a breach depend on the terms of the agreement between the parties.

The lease may have detailed and specific clauses relating to breach and its consequences.

Broadly speaking, a breach that is not remedied entitles the other party to end the lease.

There will be no obligation to terminate, merely a right to do so.

Breach by lessor

If the lessor breaches the lease, usually by failing to honour the covenant for quiet

enjoyment, the lessee may:

− seek an order from the court requiring the lessor to comply with the lease;

− accept the breach as a repudiation of the lease and rescind the lease, thus bringing the

lease to an end.

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Laurinda P/L v Capalaba Park Shopping Centre P/L [1989] HCA 23

The lease may well require a party relying on a breach to give notice to the party in breach

to rectify that breach before rescinding.

World Best Holdings Ltd v Sarker [2010] NSWCA 24

After rescission, the rights of the parties under the lease come to an end and the parties

may enforce any rights existing at the date of termination, including the right to sue for

damages for breach of contract.

Nangus P/L v Charles Donovan P/L (In Liquidation) [1989] VicRp 17

After the lease is terminated, the lessee has no right to possession.

Breach by lessee

If, as is more common, the lessee has, or is alleged to have, breached the lease, the lessor

has a number of options:

− The lessor may elect to treat the lease as remaining in force and may take action

against the lessee from time to time in relation to those breaches. In this case, the

lease remains in force and the parties’ obligations continue. The lessee is entitled to

possession and obliged to pay rent, et cetera. By usual practice there has been no

obligation on the lessor to mitigate loss in such circumstances but see:

Vickers & Vickers v Stichtenoth Investments P/L (1989) 52 SASR 90

Compare:

J and S Chan P/L v Victor Geoffrey Mckenzie and Lynette Anne Mckenzie [1994] ACTSC 1

− The lessor may claim damages if the lessee undertakes renovation of the premises

without consent.

Tabcorp Holdings P/L v Bowen Investments P/L [2009] HCA 8

− The lessor may accept the breach as a repudiation and terminate the lease. The right

to do so depends on the seriousness of the breach and any notice requirements set

out in the lease. A breach must usually relate to a fundamental term of the lease

before breach constitutes repudiation.

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Progressive Mailing House P/L v Tabali P/L [1985] HCA 14 – repudiation justified

Shevill v Builders Licensing Board [1982] HCA 47 – not justified

Rokeba Nominees P/L v Mag Auto Spares P/L [2000] VSC 74

Apriaden P/L v Seacreast P/L & Anor [2005] VSCA 139

Gumland Property Holdings P/L v Duffy Bros Fruit Market (Campbelltown) P/L [2008]

HCA 10

Natwest Markets Australia P/L v Tenth Vandy P/L [2008] VSCA 207

Abandonment of the premises by the lessee is usually treated as a surrender by operation of

law or implied surrender (see above).

Consequences of termination

If the lease is terminated by the lessee for breach by the lessor, then the lessee is entitled to

damages. However such situations are rare, as the lessee is ordinarily satisfied to be free of

the lease, or else would have sought specific performance.

If the lease is terminated by the lessor for breach by the lessee, then the lessor is entitled to

damages for loss of the bargain, indicated by the amount of rent that the lessor would have

received had the lease continued. There are a number of technicalities associated with such

damages, such as the common law duty to demand rent and the obligation to comply with

the applicable legislation.

Termination where no right or option to renew the lease exists – retail

Between 12 and 6 months before the end of the lease, the lessor must give the lessee

written notice:

1. either offering the lessee a renewal or extension of the lease on terms and conditions

specified in the notice; or

2. informing the lessee that the lessor does not propose to offer a renewal or extension.

This notice 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 – and may not

be revoked for one month after it is made.

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If the lessor fails to give this notice and the lessee requests an extension of the lease under s

20J by giving the lessor written notice of this at any time before the lease ends, the term of

the lease is extended until the end of six months after the lessor giving the required notice.

The lessee may terminate the lease by giving not less than one month's written notice of

termination to the lessor.

Where the term of the retail shop lease is 12 months or less, the periods mentioned in s 20J

become six months and three months.

Forfeiture

Forfeiture is the process whereby the lessor, relying on a breach of a fundamental term of

the lease by the lessee, treats the lessee’s rights under the lease as forfeit and thereby

becomes entitled to repossess the premises and re-enter. Forfeiture was usually aided by a

clause in the lease authorising re-entry on forfeiture. To prevent abuse of this power,

certain statutory restrictions are placed on forfeiture. Before exercising this right the lessor

must give the lessee notice of the breach and the opportunity to remedy the breach,

although such notice is not required in the case of a breach constituted by non-payment of

rent.

Rokeba Nominees P/L v Mag Auto Spares P/L [2000] VSC 74

The lessee may seek an injunction and apply to the court for relief against forfeiture. The

court has a wide discretion to grant such relief.

Chelfield P/L v Goldsea P/L [2003] QSC 40

Novasource Consulting P/L v Primelife Property Holdings P/L [2002] VSC 568

Tribalant P/L v Kirshu P/L [2007] VSC 449

MESATA P/L v Rastogi (Retail Tenancies) [2007] VCAT 1242

Lontav P/L v Pineross Custodial Services P/L [2011] VSC 278

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Self help

The lease passes the right to possession to the lessee. If the lease is terminated, the lessee’s

right to possession ceases and the lessor is entitled to repossess the property. If the lessor is

able to effect re-entry and repossess the premises without disturbing the peace, then the

lessor is entitled to do so. Securing the premises so as to deny the former lessee access

would achieve this outcome.

However, relief against forfeiture may remain available to the lessee until such time as the

lessor obtains an order for possession from a court.

Haniotis v Dimitriou [1983] VicRp 46

Vuksic v Metimex (1995) V ConvR 54-511

Obtaining possession

If a lease has been terminated and the lessee refuses to deliver up possession, the lessor

may issue proceedings.

Avin Operation P/L v Clover Pines P/L [2003] VSCA 58

Abandoned goods

If a lessee vacates the premises leaving goods behind, ownership of those goods remains

with the lessee and the lessor has no initial claim on them. If the lessee requests access to

the premises to remove the goods and is denied, the lessor is liable to an action for detinue

if he continues to hold the goods or conversion if he uses the goods. Even though the lessee

may owe the lessor money, at this stage the lessor has no rights over the lessee’s

possessions.

Kiwi Munchies P/L v Nikolitsis [2006] VCAT 929

Burnett & Anor v Randwick City Council [2006] NSWCA 196

Whilst the lessor is entitled to remove and store the goods the lessor is not obliged to do so

and, after giving notice to the lessee, may remove the goods from the lessor’s premises.

Haniotis v Dimitriou [1983] VicRp 46

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If the lessor does remove and store the goods and they are not claimed within three

months, the lessor may arrange to sell the goods but, after deducting the costs of removal,

storage and sale, must forward any balance to the unclaimed moneys fund.

AMP Society v Bellos [2000] ANZ ConvR 360

As an alternative, the lessor can obtain a judgement against the lessee for any money owing

and then issue a warrant for sale of the goods in satisfaction of the debt. The sheriff is

advised of the location of the goods and a sale by the sheriff may result in a payment to the

lessor as a judgement creditor.

Some standard leases provide that ownership of abandoned goods passes to the lessor. The

validity of such a clause is uncertain.

GM & MY Campbell & Co P/L v Cotton (1992) ANZ ConvR 610

As to the rights of third parties in relation to lessee’s goods see:

Auto-P Services P/L v Sakura Holdings P/L Vic Sup Crt 11/5/98

Special rules apply to residential tenancies.

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Change of parties

A lease is fundamentally a contract and the normal rules of privity of contract apply. But a

lease also relates to real estate, and property law has by common practice affected more

than just the parties to the contract. Rights arising from property law may therefore result in

the lease affecting more than just the parties to the original contract and may make those

rights enforceable against third parties, such as subsequent owners of the freehold or

leasehold.

Change of ownership of freehold

Lessor A may enter into a lease with lessee X, thus passing possession of the property to X

for the duration of the lease. But A still enjoys ownership of the property, which at that

stage is known as the right of reversion or reversionary interest. As property, that right may

be transferred to another person and A may sell the freehold to B, who will then be the

owner of the reversionary interest and entitled to receive the rents and profits from the

property.

It is not customary for lessee X to be invited to be a party to the contract for the sale of the

reversion and so there is no contractual relationship between lessee X and the new owner

of the reversion, B. Thus these parties cannot rely on contract law to enforce their rights

arising from the lease. Property law steps into the breach and provides that all the rights

and obligations of the lessor pass to B, thus allowing B to enforce the lease against X and

equally allowing X to enforce the lease against B.

Snowlong P/L v Choe and Others (1991) 23 NSWLR 198

The outgoing lessor must appreciate that, on sale of the reversion, the rights under the lease

pass to the new freehold owner and the old lessor loses the ability to enforce any rights

against the lessee. Any money owed by the lessee, such as arrears of rent, cannot be

recovered by the old lessor after settlement, unless special arrangements are made in the

contract of sale with B.

Ashmore Developments P/L v Eaton [1992] 2 Qd R 1

Vendor/lessor copy of lease

Where a property is sold subject to a lease the purchaser is entitled to insist on production

of the lessor’s copy of the lease. This is the document that entitles the lessor to possession

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of the premises on the termination or expiration of the lease and as such it forms part of the

vendor’s title.

A subsequent freehold owner will ordinarily be bound by any lease variations entered into

by a previous owner.

Figgins Holdings P/L v SEAA Enterprises P/L [1999] HCA 20

A subsequent freehold owner may not be obliged to return a security deposit paid by the

lessee to the former lessor as this is a personal, rather than proprietary, right.

Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] 1 All ER 1110

This would only appear to be the case if the subsequent freehold owner did not receive the

security deposit when acquiring the property. If the deposit was in fact transferred to the

subsequent freehold owner, the lessee might make a claim based on unjust enrichment.

A subsequent freehold owner is not liable to the lessee for any rights of set off that the

lessee may have had against the previous lessor.

Edlington Properties Ltd v J H Fenner & Co Ltd [2006] EWCA Civ 403

Also see (2006) 80 ALJ 639

Enforceability of guarantee on sale of freehold

Whilst formerly there was some doubt about this and some lessors required the guarantor

to specifically confirm the extension of the guarantee that is no longer necessary as there is

High Court authority that the guarantee is enforceable by the freehold purchaser.

Lang v Asemo P/L [1989] VicRp 67

Gumland Property Holdings P/L v Duffy Bros Fruit Market (Campbelltown) P/L [2008] HCA 10

Change of ownership of leasehold by sublease or assignment

Sublease

A third party may be introduced to the lease by way of a sublease of the lessee’s interest in

the land. A sublease is used when it is intended that the new arrangement will be for a

period of time less than the term of the lease. Thus all subleases must terminate at least one

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day before the head lease. The form of the sublease ought to mirror the form of the

headlease and may in fact be a copy of same, except for the parties and the date of

termination.

A sublease may contain an option to renew, but that will depend on the existence and

exercise of an option in the headlease.

Estoppel will apply to the relationship between lessee and sublessee.

Lee v Ferno Holdings P/L (1993) 33 NSWLR 404

Assignment

An assignment or transfer of lease is used where it is intended to transfer the whole of the

lessee’s interest in the property to the new lessee. The assignor, who is the current lessee,

passes their interest in the property to the assignee, the new lessee. The assignor does not

intend to reclaim an interest in the property before the lease ends.

Liability under sublease

The parties to a sublease intend the lessee to return to ownership of the leasehold at some

time before the lease expires. It is not intended that the lessee’s obligations will be

diminished, merely temporarily assumed by the sublessee, so the lessee remains primarily

liable for compliance with the lease, despite the sublease.

Lessor’s role in a sublease or assignment

The lessee is not normally a party to the transfer of the reversion to the lessor, but the

lessor is normally a party to any document dealing with the leasehold interest – whether by

way of sublease or assignment. This reflects the relative strengths of the parties.

Liability under assignment

The original lessee and the new lessee intend the original lessee to transfer all of the

lessee’s interest in the property to the new lessee. These parties may consider that the

original lessee is no longer liable under the lease. However lessors usually require original

lessees (assignors) to retain liability in relation to the property as a condition of the lessor’s

consent to the assignment.

The extent of this liability depends on the agreement signed by the parties. Liability would

not ordinarily extend beyond the term of the lease during which the assignment is made,

unless the agreement clearly provides otherwise.

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City of London Corporation v Fell [1993] UKHL 11

Lessor’s consent to sublease or assignment

The lessor’s consent has always been regarded as essential to enforceability of the sublease

or assignment. Virtually all written leases include a covenant either prohibiting a sublease or

assignment absolutely, or forbidding it without the lessor’s consent. If the lease allows a

sublease or assignment but requires the lessor’s consent, that term may allow the lessor to

withhold consent arbitrarily.

Australian Mutual Provident Society v 400 St Kilda Rd P/L [1990] VicRp 56 and [1991] VicRp

80

Unless the lessor can withhold consent arbitrarily, it is an implied condition that consent will

not be arbitrarily withheld – that is, that it will not be unreasonably withheld.

If the lease requires the lessor to act reasonably, a lessor who fails to do so by unreasonably

withholding consent may be liable to the lessee for any consequential loss.

Arball P/L v Liu & Chow (1992) V ConvR 54-429

A lessor must be given adequate time to consider the request for consent and may reject

the application on commercial grounds.

Provident Capital Ltd v Zone Developments P/L [2001] NSWSC 843

Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205

Kids Campus Holdings P/L v Kelly & Anor [2007] VSC 282

In summary a lease may:

− prohibit subletting or assignment;

− allow subletting or assignment with consent and may specifically provide that consent

may be at the absolute discretion of the lessor; or

− allow subletting or assignment with consent and, if nothing else is provided, consent

cannot be unreasonably withheld.

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Assignment – retail

The outgoing lessee must request the lessor's consent, which must not be unreasonably

withheld, and must provide the incoming lessee with any disclosure statement previously

received by the lessee and updated information. The lessee may request the lessor to

provide an updated disclosure statement, but does not need to do so if the updated

information is otherwise available. If the lessee follows the procedural requirements in

relation to the disclosure statement as set out in section 45A, the lessee’s obligations and

liabilities under the lease are limited.

The lessor may take up to 42 days to consent to, or reject, the assignment of the lease. If the

lessor does not respond in this period, the assignment is deemed to have received consent:

s 45(d).

The lessor may withhold consent to assignment if:

− the assignee proposes to change use of the premises;

− the assignee is unlikely to be able to meet its financial obligations as lessee under the

lease;

− the assignee's retailing skills are inferior to the assignors; or

− the lessee has not complied with procedural requirements.

Surrender of lease

Surrender by agreement

The parties may agree, or be deemed to have agreed, to terminate the lease by the lessee

surrendering, and the lessor accepting the surrender.

Surrender of, possession

Tasita P/L v Sovereign State of Papua New Guinea (1991) 34 NSWLR 691

Surrender by operation of law

If a lessee abandons possession of the premises and the lessor acts in such a way as to

unequivocally indicate that the lessor regards the lease as at an end, usually involving the

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lessor resuming possession of the premises, then the law regards the lease as having been

surrendered by operation of law. This is also known as ‘implied surrender’.

Konica Business Machines Australia P/L v Tizine P/L (1992) 26 NSWLR 687

The lease ends when the lessor accepts the abandonment and the lessor is thereon entitled

to sue for damages for loss of the bargain. These damages are usually based on the rental

the lessor would have been entitled to receive under the whole term of the lease. Issues of

mitigation of damages may be relevant.

Progressive Mailing House P/L v Tabali P/L [1985] HCA 14

Wood Factory P/L v Kiritos P/L (1985) 2 NSWLR 105

Stamp duty

Stamp duty was abolished on leases first executed on or after 1 January 2004. Also exempt

are leases whose term commences on 1 January 2002 and whose average annual rental or

current market rent does not exceed $50,000 per annum.

However some documents are still required to be stamped, although exempt from payment

of duty. These include:

− Transfers of lease pursuant to a conveyance of land or a business. The document is

stamped ‘adjudged duly stamped’ if submitted with the business sale documents on

which ad valorem duty is payable.

− Surrenders of lease, where the lessee pays a consideration, or for no consideration. Ad

valorum transfer duty remains payable on a surrender of lease where the lessor pays

consideration.

Mortgage of lease

A lease is a proprietary interest in land. Like any other proprietary interest it may be used to

secure a loan. The lease may provide that the lessee obtain the lessor’s consent before

giving a mortgage over the lease. Failure to do this constitutes a breach of lease.

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On this topic generally see:

Church of England Collegiate School of St Peter v Chesser House P/L (1993) ANZ ConvR 110

Consent of mortgagee to lease

Unless the mortgagee has consented in writing before the lease of mortgaged land is

registered, it is not valid and binding against the mortgagee: s 118 Real Property Act.

Unless the proposed lessee ensures the freehold mortgagee’s consent to the lease, the

lessee is vulnerable to losing possession if the mortgagee wants possession on the lessor’s

default under the mortgage. The prior-in-time interest of the mortgagee will defeat the

lessee’s later-in-time interest.

Conversely, if the lease is created before the mortgage, the lessee has the prior-in-time

interest if the lease:

− is for less than a year and the lessee is in actual possession – the lease does not have

to be registered; or

− is for more than one year and is registered.

Sections 69 and 119 Real Property Act

R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100

Upheld Epworth Group Holdings Pty Ltd v Permanent Custodians Limited [2010] SASC 327

If the lessor and lessee have agreed to lease subject to the mortgagee’s consent, the lessor

cannot then request the mortgagee to withhold consent as a way of allowing the lessor to

avoid the agreement to lease.

Misiaris and Another v AFC Holdings P/L (1988) 15 NSWLR 231

The lease may provide a specific clause passing the costs of obtaining consents on to the

lessee. In the absence of such a clause it appears that the lessor is liable for these costs on

the basis that they are expenses associated with the lessor’s proof of his/her ability to lease

the land – similar to a vendor’s obligation to make title. A general clause requiring the lessee

to pay costs associated with the lease probably does not pass this cost on to the lessee.

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Registration

Leases in South Australia are not required to be registered. However, unless registered the

lease or agreement to lease is not valid as against any subsequent purchaser, reversioner,

mortgagee or encumbrancer of the freehold: s 119 Real Property Act.

The exception is where the lessee holds the premises for a term of less than 12 months and

is in actual possession of the premises at the time the subsequent purchaser or mortgagee

registers their dealing. Such a lease has priority of possession over the registered proprietor

for the term of the lease.

This is reinforced by s 69(h) Real Property Act, which qualifies a registered proprietor’s

absolute and indefeasible title in the same circumstances.

Under s 119 therefore the implication is that, if a lessee in actual occupation under a lease

for a term in excess of one year is to have the benefit of priority under the Act, that lease

must be registered.

R M Hosking Properties Pty Ltd v Barnes[1971] SASR 100

Epworth Group Holdings Pty Ltd v Permanent Custodians Limited [2010] SASC 327

There is no time limit for registering a lease, but an extension of lease must be lodged for

registration within two months of the lease expiring: s 153(2).

Electronic lodgement

From 3 August 2020, a Lease, Underlease, Surrender of Lease and Surrender of Underlease

must be lodged electronically.

See the detailed commentary A brief explanation of the transition to E-conveyancing for

information on transactions that must be completed electronically, transactions that can be

completed electronically and the full timeline for implementation.

See the PEXA Help Centre for detailed guidance on completing different transaction in the

workspace.

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Legal costs

Normally the lessor arranges for preparation of the lease. In the past, these costs were

passed on to the lessee. However, legislative reform has evened the balance. Section 14 of

the Retail and Commercial Leases Act limits the lessee’s liability for preparation costs.

Preparation costs for a residential lease must be borne by the lessor under s 50 of the

Residential Tenancies Act.

Original lease

Written leases are customarily prepared in duplicate so both the lessor and lessee hold a

‘copy’. The lease forms the basis of the lessee’s right to possess the property and to prove

that right they are entitled to hold the original lease. The lessor is entitled to retain the

certificate of title to the land to prove ownership.

Lessor’s obligations to provide executed and stamped copies

Recognising that the lease document is the basis of the lessee’s right to possess the

property, under s 16 of the Retail and Commercial Leases Act, a lease is deemed to provide

that:

− if the lease is not to be registered, the lessor must provide the lessee with an executed

copy of the lease – stamped where the duty is payable for pre-2004 executed

documents – within one month after the lease is returned to the lessor or the lessor's

lawyer or agent following payment of stamp duty on the lease;

− if the lease is to be registered, the lessor must lodge the lease for registration within

one month after the lease is returned to the lessor or the lessor's lawyer or agent

following payment of any stamp duty on the lease; and

− the lessor must provide the lessee with an executed copy of the stamped – where

necessary – and registered lease within one month after the lease is returned to the

lessor or the lessor's lawyer or agent following registration of the lease.

Practitioners who process more than 10 stamp duty related documents a year may find it

useful to register using RevenueSA’s RevNet, which enables duty to be assessed and paid

online.

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Further information

OTHER TRUSTED AND USEFUL RESOURCES

Energy efficiency information and programs for businesses – sa.gov.au

Magistrates Court

Australian Bureau of Statistics

RevenueSA’s RevNet

Department of Human Services

Housing SA

SACAT - Housing disputes

Tenancy bonds – sa.gov.au

RELATED BY LAWYERS PUBLICATIONS

Papers, articles and case law

It’s as simple as asking a question.

© By Lawyers. All rights reserved.

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Appendix – Residential tenancies

Overview

The Residential Tenancies Act and its associated regulations apply to most residential

tenancy agreements. The Residential Tenancies Regulations 2010 revoked the 1995 general

regulations and water rates regulations and prescribed the form of several notices required

to be used at particular times. Rights and obligations of housing cooperatives are also

covered by the Residential Tenancies Act but with some exemptions. Caravan park tenants

are covered by the Residential Parks Act.

References to the Act in this commentary are to the Residential Tenancies Act.

Discrimination in choosing a tenant

The landlord has the right to select a suitable tenant, but under the Act it is illegal to

discriminate against tenants who have children – though not if the landlord or agent lives in

the premises.

Other laws prohibiting discrimination, for example, on the basis of sex or race, apply.

Lease agreements

A residential lease agreement, whilst usually written, may be oral and may be of fixed or

periodic term. Forms of lease are not prescribed but examples are produced by the

Consumer and Business Services. Section 49 sets out in detail what a written agreement

must contain.

Fixed term lease agreement

This has a specific start and end date agreed at the start of the tenancy.

Section 79A states that if a residential tenancy agreement for a fixed term has not

terminated before the end of the fixed term or at the end of the fixed term by notice of

termination, the agreement continues as a residential tenancy agreement for a periodic

tenancy with a tenancy period equivalent to the interval between rental payment times

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under the agreement, and with the same terms as those applying under the agreement

immediately before the end of the fixed term.

Periodic lease agreement

This is for an indefinite period until lawfully terminated by either party.

Short fixed term lease

This is for 90 days or less.

Agreements which are inconsistent with the Act or purport to exclude, modify or restrict its

operation bind neither landlord nor tenant. Therefore if either party agrees to waive a right

prescribed by the Act, the waiver is unenforceable before the South Australian Civil and

Administrative Tribunal (SACAT) and the party attempting the evasion or prevention of the

Act’s operation is guilty of an offence and liable to a penalty of $8,000.

Joint tenants

When more than one person signs the lease, all those who sign are joint tenants and are

jointly and severally liable for the obligations of the tenancy. Therefore any one of them can

be liable for the full amount of the rent and the full cost of any compensation payable to the

landlord in respect of a breach of the agreement. The landlord can take action against one

or all of the tenants as he chooses.

The Act does not apply to disputes between joint tenants and the SACAT has no jurisdiction.

Disputes must be sorted out between the tenants or may be resolved using mediation or in

the Magistrates Court. The tribunal will pay out a bond lodged in joint names in equal

portions.

Costs

Normally the lessor arranges for preparation of the lease. In the past, these costs were

passed on to the lessee. However, legislative reform has evened the balance and under s 50

of the Act the lessor must now bear the costs of preparing a residential lease.

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Stamp duty

A general exemption applies for leases of residential premises that are to be occupied by the

tenant (lessee) as their principal place of residence for the term of the lease.

At the commencement of the lease

At the start of a tenancy, the landlord or agent must provide:

− a copy of the Consumer and Business Services Information Brochure, which

summarises the rights and obligations of the parties according to the Residential

Tenancies Act;

− a copy of the lease, if this agreement is required in writing;

− two signed inspection sheets containing comprehensive details about the fixtures and

fittings and their state;

− a signed copy of written lease, if this has been agreed;

− the tenant with a notice of short fixed term lease completed by the landlord, and

receive Part B of this as completed by the tenant;

− the premises in a clean and reasonable state, with locks sufficient to keep the them

secure;

− a written notice setting out the agent’s name, telephone number and address for

service or, if no agent, the landlord’s full name, telephone number and address for

service. The notice must also provide the full name and address of any person with

superior title to the landlord and if the landlord is a company the address of the

registered office of the company; and

− manufacturers' manuals, or written or oral instructions, about the operation of any

domestic facilities requiring instructions.

A provision in a lease which requires the tenant to have the carpets professionally cleaned

at the end of the tenancy is unenforceable. Section 69 of the Act requires only that the

tenant must give the premises back in a reasonable condition and a reasonably clean state.

So, if the carpet is not clean the tenant may do this or pay the landlord for getting it done.

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If the landlord has advertised, or intends to advertise, the premises for sale they must advise

prospective tenants before they enter into a lease agreement.

Rental bonds

The maximum amount that can be requested as a rental bond is four weeks rent where the

rent payable is up to $250 per week, and six weeks rent where the rental is over $250 per

week, regardless of whether or not the premises are furnished.

A receipt for the bond must be given to the tenant within 48 hours and the bond itself

lodged with the Commissioner for Consumer and Business Services, Residential Tenancies

Branch, within seven days of receipt, or for a registered agent within 30 days.

The amount of the bond may be increased if the tenancy has lasted for more than two

years.

For an approved tenant entitled to assistance from the Department of Human Services,

Housing SA will provide the landlord with a bond guarantee, enforceable when lodged with

the Residential Tenancies Branch.

Rent payments and receipts

The tenant can be required to pay two weeks rent in advance at the start of the tenancy. If

this happens, no further rent can be requested for two weeks.

Water usage

Section 73 of the Act provides that rates and charges for water supply are to be borne as

agreed between the landlord and tenant. However, if the lease agreement does not set out

the terms on which water usage will be charged and if the supply of water to the premises is

separately metered, then rates and charges for water supply are to be borne by the tenant.

In any other case, rates and charges for water supply are to be borne by the landlord.

If the landlord obtains the benefit of a water security rebate amount they must reduce the

amount payable by the tenant accordingly.

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If the charges are not written in or the terms are seen by the tenant to be unreasonable, the

tenant may apply to the SACAT for an order that these terms of the lease are harsh and

unconscionable.

No criteria cover water efficiency requirements in South Australia.

Water meters

If there is no individual water meter for a rented property, as may be the case for blocks of

units, the lease agreement must provide how the water usage charges are to be

determined. A guide to this is found in the fact sheet provided by the Consumer and

Business Services: Charging for water bulletin.

Charges limited to water usage

Only the water usage costs charged by the supplier can be charged to the tenant. Other

costs on the water bill, such as access charges, sewerage charges and levies such as the

River Murray levy, are the landlord’s sole responsibility. Tenants also cannot be charged

such things as late fees or administration fees for passing on the bill.

Rent increases

For a fixed term agreement the rent can only be increased during the term if it provides for

an increase. So, a provision that 'the rent may be reviewed in accordance with the Act' is

insufficient as the specific right to increase the rent during the agreement has not been

retained. A valid clause would be: 'the landlord has the right to increase the rent during the

agreement'.

For both fixed term and periodic agreements, an increase cannot occur until 12 months

after the start of the term – or 12 months since the last increase – and 60 days written

notice must be given. No notice of the increase is needed if the dates and increases are

clearly set out in the lease.

A series of residential tenancy agreements between the same parties and relating to the

same premises is treated as a single residential tenancy agreement unless at least 12

months have elapsed since rent for the premises was fixed or last increased.

An increase is also allowed on an extension, as long as there has been no increase in the

preceding 60 days.

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The rent payable under a residential tenancy agreement may be increased at any time by

mutual agreement between the landlord and the tenant.

Alterations

The Act provides that landlords and tenants share responsibility for maintaining the rented

premises in good condition.

Section 70 of the Act provides that the tenant must not alter nor make additions to the

premises without the landlord’s consent. A landlord must not unreasonably withhold his or

her consent to an alteration or addition to the premises that is necessary to ensure the

provision of infrastructure or a prescribed service. Tenants may remove fixtures which they

have put in, as long as this can be done without damaging the premises. If damage occurs,

the landlord has the option of compensation for the cost of repair or requiring the tenant to

perform the repair.

Landlord's obligation to repair

Section 68

The landlord is responsible for repairs necessary due to ordinary wear and tear. A tenant

may organise emergency repairs if he cannot contact the landlord to do so. If the state of

disrepair did not arise from a contravention by the tenant and the landlord has been

notified of the state of disrepair by the tenant but has failed to make the repairs, the tenant

will be able to recover reasonable compensation from the landlord in accordance with

section 68(3) of the Act.

Disputes over permission for alterations and liability for repairs can be taken by either party

to the SACAT for resolution.

Subletting

If a tenant wants a new or replacement co-tenant to move in and sign the lease, the tenant

first needs to ask the landlord for permission. A landlord cannot unreasonably refuse a

tenant's request to bring in a new co-tenant or sublet part of the premises, such as the

granny flat downstairs, spare room or parking space.

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However, even where a tenant sublets in breach of an agreement, the subtenant’s right of

occupation may not be affected. The landlord has 21 days after becoming aware (or after

they should have become aware) of the subletting without consent to terminate the

agreement but only if consent was not unreasonably withheld.

The relationship between the head-tenant and the subtenant is essentially the same as that

between the head-tenant and the landlord. The term of the subletting must be for one day

less than the head-tenant’s term of lease; otherwise it would be regarded as an assignment.

A landlord could reasonably refuse a subletting or co-tenancy request where, for example:

− it would result in overcrowding; or

− the person is listed on a bad tenant database; or

− the number of occupants permitted under the lease would be exceeded; or

− for any other good reason.

Sale of rented premises

The landlord must give the tenant written notice of the intention to sell the residential

premises not later than 14 days after the landlord enters into a sales agency agreement or

determines to make the premises available for inspection by prospective purchasers.

A landlord can terminate a periodic tenancy by giving 60 days notice.

The tenant may, by notice of termination given to the landlord, terminate the tenancy if

within 2 months after the start of the agreement, the landlord enters into a contract for the

sale of the residential premises and the landlord did not, before the residential tenancy

agreement was entered into, advise the tenant as required.

Termination notices

Fixed term tenancy

Both landlord and tenant may, by giving the other at least 28 days notice, terminate a fixed

term residential tenancy agreement at the end of the fixed term without specifying a ground

of termination. If the tenant does not vacate at the end of the notice, the landlord can apply

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to the SACAT for an order for possession of the premises. If this is granted, it is enforced by

a bailiff. However, if the tenant does not vacate and the landlord does not apply for a vacant

possession order, the tenancy continues as a periodic tenancy.

The parties may terminate at any time during the agreement by mutual consent.

Periodic tenancy

The tenant may give 21 days written notice, or the time equivalent to a single period of the

tenancy, whichever is longer, of termination to the landlord at any time.

The landlord may terminate in any of the following situations and must use the prescribed

form notice, giving 60 days notice, where the premises are:

− needed for the landlord’s own occupation or that of a close relative;

− to be demolished;

− sold;

− to be repaired or renovated and this cannot be done without vacant possession.

The landlord may also terminate a periodic tenancy with no reason given by giving 90 days

notice on the prescribed form.

Termination for tenant’s breach

− Rent arrears evictions

Unless the rent is paid by a specified date, the tenancy can be terminated on seven

days notice by using the prescribed form. The rent or any part of it must have

remained unpaid in breach of the agreement for 14 days. The landlord is not required

to make a formal demand for the rent before issuing the notice. The eviction notice

can specify any day after the day on which the tenancy is terminated under the notice

for the tenant to give up possession of the premises if the rent is not paid as set out in

the notice. See s 80. The landlord is entitled to compensation for any loss (including

loss of rent) caused by the termination of the tenancy, but the landlord must take

reasonable steps to mitigate any loss and is not entitled to compensation for loss that

could have been avoided by those steps.

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− Other breaches

Notice of termination for any other breach may be made on the prescribed form,

specifying the breach. The breach must be remedied within seven days or the

termination becomes effective.

− Section 86B allows for the tenant to terminate a residential tenancy agreement on the

ground of frustration, such as when the premises have been rendered uninhabitable.

Goods left behind

Dealing with abandoned goods in a residential tenancy is covered by s 97 of the Act.