More often than not, business will lease premises to occupy from a landlord. In South Australia, the leasing of business premises is covered under the Retail and Commercial Leases Act 1995 (SA) (‘the Act). There are similarities and differences between leasing residential property and leasing retail or commercial property. Generally however, it could be said that retail and commercial leasing is more complex given the complex nature of the Act and its accompanying regulations.
The Act applies to any lease where the business sells retail goods or provides services and the annual rent on that lease does not exceed $400,000. The lease must also have been entered into for a period of at least 5 years though there are some exceptions. Where the lease term is less than five years, the Act will extend the lease term to meet the 5-year minimum. The Act stipulates the information that a landlord must provide to prospective tenants as well as what expenses can and cannot be recovered from the tenant.
In commercial leases, the responsibility for repairs to the premises lies with the tenant. The exception to this rule is for structural defects to the premises, though the distinction may sometimes be difficult to make.
To incentivise prospective tenants, landlords might provide certain concessions or benefits, such as contributing to the cost of a fit-out or assisting in the fit-out. Any such incentives should be clearly worded to minimise confusion and disputes.
As tenants, businesses must obtain their landlord’s consent to alter any aspect of the premises. Businesses that are contemplating making any additions or fixtures need to be aware of risks in doing so. Unless such additions or fixtures are classified as trade fixtures, the additions might be considered to become a part of the landlord’s premises. If that were to happen, the business would not be able to recover their additions or their cost at the end of the lease.
In addition to the above, there are many other concerns and issues that a business should consider before entering into a lease agreement. Some leases may subject tenants to onerous obligations such as taking percentages from the tenants’ profit or stipulating business hours. It is important to know your rights as a tenant before you sign the lease agreement. If you would like to discuss a lease agreement, are in a lease dispute or would like to assign your lease, simply email us at firstname.lastname@example.org or call at 08 8410 9069 to arrange an appointment.
Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.