Commercial rent increases in South Australia are governed by the specific terms of the lease agreement, supplemented by the protections in the Retail and Commercial Leases Act 1995 for qualifying retail shop leases. As of 1 July 2025, the Act applies to retail shop leases where the annual rent does not exceed $420,000 (exclusive of GST).

How Commercial Rent Is Reviewed

Commercial leases typically contain detailed rent review clauses that dictate exactly when and how the rent will be adjusted throughout the lease term. However, for retail shop leases, Section 22(1) of the Retail and Commercial Leases Act 1995 (SA) mandates that rent cannot be reviewed more than once in each 12-month period.

Common rent review mechanisms in SA commercial leases include:

1. CPI (Consumer Price Index) Reviews

Rent is adjusted annually based on changes in the Consumer Price Index for Adelaide. This provides a predictable, inflation-linked increase for both parties.

2. Fixed Percentage Increases

A pre-agreed annual increase (e.g., 3% per annum) is applied on the anniversary of the lease commencement.

3. Market Rent Reviews

At specified intervals (commonly every 3-5 years), the rent is reset to reflect the current market rate for comparable premises. If the landlord and tenant cannot agree on the new rent, Section 19 requires the rent to be determined by a valuation carried out by a certified practicing valuer appointed by agreement or by the Small Business Commissioner.

4. Turnover Rent

Common in retail shopping centres, the tenant pays a base rent plus a percentage of their gross annual sales turnover above a specified threshold.

Notice Period

While the Act does not mandate a specific statutory notice period for all increases, Section 22(1) strictly limits the frequency of reviews to once every 12 months for retail shop leases. The specific notice period required to trigger a review is generally determined by the lease agreement.

Rent Increase Challenges

The Retail and Commercial Leases Act 1995 does not contain a standard statutory provision allowing tenants to challenge a rent increase simply because they believe it is excessive. Rent increases are governed by the contractual terms agreed upon in the lease. Disputes regarding market rent reviews are handled under Section 19 of the Act; if parties cannot agree, a certified practicing valuer must be appointed by agreement or by the Small Business Commissioner.

Ratchet Clauses Prohibited

Section 22(2) of the Act prohibits "ratchet clauses" in retail shop leases. A provision is void to the extent that it prevents the rent from being reduced or limits the extent of a reduction during a market rent review. If a market review reveals the current market rent is lower than what the tenant is paying, the rent must be reduced accordingly.

Land Tax Recovery

Under Section 30(1) of the Retail and Commercial Leases Act 1995 (SA), a retail shop lease cannot require the tenant to pay land tax or to reimburse the landlord for the payment of land tax. Any provision in a lease attempting to recover land tax from a retail tenant is void.

Best Practices for SA Commercial Landlords

• Engage Accredited Valuers: For market rent reviews, if agreement isn't reached, a certified practicing valuer must be appointed by agreement or via the Small Business Commissioner under Section 19.
• Track Review Dates: Missing a rent review date can mean forgoing a year or more of additional rental income. Use property management software to track these critical deadlines.

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