The approach to late fees in SA commercial leasing differs significantly from residential tenancies. While residential leases have little to no basis for charging late fees, commercial lease agreements commonly include explicit provisions for interest on overdue rent and other default penalties. Their enforceability is governed by the Retail and Commercial Leases Act 1995 (for retail shop leases), the Landlord and Tenant Act 1936 (for other commercial leases), the terms of the contract, and general principles of contract law.

Statutory Framework

In South Australia, the applicable law depends on the nature of the lease:

• Retail Shop Leases: Governed by the Retail and Commercial Leases Act 1995 (SA). This applies to most business premises where goods or services are provided to the public, provided the annual rent does not exceed the prescribed threshold (currently $420,000 exclusive of GST as of 1 July 2025).
• Other Commercial Leases: Governed by the Landlord and Tenant Act 1936 (SA) and the Law of Property Act 1936 (SA). This includes industrial warehouses, large-scale offices, and leases where the tenant is a public company.

Interest on Overdue Rent

The most common form of a "late fee" in SA commercial leases is an interest clause on overdue amounts. These clauses typically state that any rent or outgoings not paid by the due date will accrue interest at a specified rate from the date the payment was due until the date it is actually received.

Unlike some jurisdictions where late fees are statutorily capped at a specific percentage, South Australia does not set a legislative limit on the interest rate a commercial landlord can charge. However, under Section 22 of the RCLA (for retail) and common law (for all commercial), a clause requiring a payment that is "extravagant and unconscionable" in comparison to the greatest loss that could be proved to follow from the breach is void as a penalty (Paciocco v ANZ Banking Group Ltd [2016] HCA 28).

If SACAT or a court determines that the interest rate constitutes a penalty clause, it will be struck down as unenforceable.

No Statutory Grace Period

There is no statutory grace period for commercial rent in South Australia. Rent is due on the date specified in the lease. However, under Section 10(b) of the Law of Property Act 1936 (SA), a landlord has an implied power to re-enter and forfeit the lease if rent is in arrears for 14 days, unless the lease specifies a different period.

Landlord Remedies for Non-Payment

If a commercial tenant falls into significant rent arrears:

1. Informal Contact: First, contact the tenant to understand the reason for non-payment and attempt to negotiate a payment plan.
2. Formal Breach Notice: For rent arrears, a formal Section 10 notice is generally not required before re-entry under the Law of Property Act 1936 (which implies a 14-day arrears period), unless mandated by the lease agreement. For other breaches, a formal notice under Section 10 of the Landlord and Tenant Act 1936 (SA) is required, providing a "reasonable time" (typically 14 days) to remedy.
3. Apply to SACAT/Court: If the tenant fails to pay, apply to SACAT (for retail leases under the RCLA) or the Magistrates Court (for claims up to $100,000) or District/Supreme Court (for non-retail leases) for a termination order, possession, and debt judgment.
4. Claim Against Bond/Bank Guarantee: For Retail Shop Leases, all cash security bonds must be lodged with the Small Business Commissioner (SBC) within 7 days of receipt (28 days for agents). For Non-Retail Commercial Leases, bonds are held by the landlord or agent as per the contract terms.

Best Practices for SA Commercial Landlords

1. Draft Clear Interest Clauses: Your lease must specify the exact interest rate and how it is calculated. Vague clauses are difficult to enforce.
2. Don't Let Arrears Accumulate: Act as soon as the tenant falls behind. Waiting months to act weakens your legal position and increases financial exposure.
3. Maintain Comprehensive Ledgers: Keep meticulous, up-to-date payment records. This is the foundation of any SACAT application or court claim.

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