The Retail and Commercial Leases Act 1995 (SA) (commenced 1 October 1995) imposes specific structural requirements on retail shop leases, most notably the mandatory minimum 5-year lease term. These protections apply to retail shop leases where the rent does not exceed the prescribed threshold, which is $420,000 per annum exclusive of GST as of 1 July 2025. Non-retail commercial leases (such as industrial or office space) and leases exceeding this rent threshold are generally exempt from these specific statutory requirements.

The 5-Year Minimum Term

For retail shop leases covered by the Act, the total term of the lease (including any option periods) must be at least 5 years. This provision is designed to give small business tenants the security they need to establish and grow their operations.

Example: A landlord can offer a 3-year initial term with a 2-year option to renew (3 + 2 = 5 years minimum).

Exceptions to the 5-Year Minimum

The minimum term does not apply if:

• The tenant has received independent legal advice about the effect of waiving the minimum term, and a certified exclusionary clause is included in the lease. This certificate must be signed by a lawyer (who is not the landlord's lawyer) certifying they explained the waiver to the tenant (s 20B(3)).
• The lease is for a term of 6 months or less.
• The tenant is a publicly listed company or a subsidiary of one.
• The lease is for certain specific short-term or seasonal uses.
• The rent exceeds the prescribed threshold ($420,000 p.a. as of July 2025).

Written Lease Required

While there is no absolute statutory requirement that every commercial lease be in writing, practically all commercial leases in SA are in writing. Under the Real Property Act 1886 (s 116), any lease for a term exceeding one year must be executed in the appropriate form for registration to ensure legal indefeasibility.

Essential Clauses

A comprehensive SA commercial lease should include:

1. Permitted Use: The specific business activity the tenant is authorised to conduct on the premises.
2. Rent and Rent Review: The initial rent, payment frequency, and the exact methodology for future rent reviews (CPI, fixed percentage, market review).
3. Outgoings: A clear, itemised list of which operating expenses the tenant must contribute to (noting that land tax cannot be recovered from retail shop tenants under the Act).
4. Security Bond / Bank Guarantee: The amount and form of security required.
5. Maintenance and Repairs: A clear delineation of which repairs are the landlord's responsibility (typically structural) and which are the tenant's (typically internal fit-out and fixtures).
6. Make Good Obligations: What the tenant must do to restore the premises when the lease expires (e.g., remove fit-out, repair walls, repaint).
7. Assignment and Subletting: Under what conditions the tenant can transfer the lease or sublet part of the premises.
8. Option to Renew: Any options for the tenant to extend the lease beyond the initial term.

Land Tax Prohibition

A distinguishing feature of SA commercial law is that landlords cannot recover land tax from tenants under the Retail and Commercial Leases Act. This is a cost the landlord must absorb for leases covered by the Act. Any lease clause requiring a retail shop tenant to pay land tax is void (s 30).

Best Practices

• Disclosure Timing: The landlord must provide a disclosure statement to the tenant at least 7 days before the lease is entered into (s 12(1)).
• Information Brochure: Landlords must provide a copy of the proposed lease and the 'Retail Shop Leases Information Brochure' (published by the Small Business Commissioner) as soon as negotiations begin (s 11).
• Obtain Certified Exclusionary Clauses (If Applicable): If both parties genuinely want a retail lease term shorter than 5 years, ensure the tenant obtains independent legal advice and a solicitor (not the landlord's solicitor) provides the necessary certificate.

How Landager Helps

Landager stores all your commercial lease agreements centrally, allowing you to instantly verify permitted use clauses, check option renewal dates, and confirm make-good obligations. Our system tracks the critical 6-to-12-month renewal negotiation window required under the Act, ensuring you never miss a compliance deadline.

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