Under the Retail and Commercial Leases Act 1995 (commenced 1 October 1995), commercial landlords in South Australia have specific rules governing how much security they can request and how it must be managed. These rules primarily apply to "retail shop leases" falling within the Act's scope.

Maximum Bond Amount

For leases covered by the Retail and Commercial Leases Act, a landlord must not require or receive a security bond that exceeds the equivalent of three months' rent, exclusive of GST (RCLA 1995, s 19(1)(b)).

If the rent increases during the lease term, the landlord can request an increase to the security bond (RCLA 1995, s 19(3)), provided:

• At least two years have elapsed since the bond was given or last increased.
• The total bond amount does not exceed the current three months' rent cap.
• 60 days' written notice is given to the tenant.

Bond Lodgement

The requirements for lodging a security bond depend on whether the lease falls under the Retail and Commercial Leases Act 1995.

Retail Shop Leases

For leases covered by the Act (most retail and small commercial tenancies), cash security bonds must be lodged with the Small Business Commission SA.

• Landlords must lodge the bond within 7 days of receipt.
• Registered Agents must lodge the bond within 28 days of receipt (RCLA 1995, s 19(5)).

The bond is held by the Commission for the duration of the lease. Neither party can access the funds without mutual agreement or a court order.

General Commercial Leases

For commercial leases that fall outside the Act (e.g., large-scale offices, industrial warehouses, or where rent exceeds the prescribed threshold), there is no statutory requirement to lodge the bond with any authority. In these cases:

• The bond is typically held by the landlord or their agent in a designated trust account.
• The terms for holding and releasing the bond are governed entirely by the lease agreement.

Bank Guarantees

As an alternative to a cash bond, it is very common in SA commercial leasing for the landlord to accept a bank guarantee instead. Under a bank guarantee, the tenant's bank promises to pay the landlord a specified amount on demand if the tenant defaults.

• No Statutory Cap: While the cash bond is capped at 3 months' rent, there is no legislated limit on the value of a bank guarantee. However, common practice is for bank guarantees to be between 3 and 6 months' rent.
• Return: The landlord is required to return a bank guarantee to the tenant within two months after the tenant has completed performance of all obligations under the lease for which the guarantee was provided, such as "make good" requirements (RCLA 1995, s 20AA).

Returning the Cash Bond

At the end of a retail lease:

1. Mutual Agreement: If both parties agree on deductions, they submit a claim form to the Small Business Commission.
2. Dispute: If agreement cannot be reached through the Small Business Commission, the dispute must be referred to the Magistrates Court for determination, which has the jurisdiction to order the distribution of SBC-held bonds (RCLA 1995, s 20).

For leases outside the Act, bond returns follow the specific procedure outlined in the lease contract. If a dispute arises, it is handled as a breach of contract claim in the appropriate court (Magistrates, District, or Supreme Court depending on the amount).

Leases Outside the Act

For commercial leases that fall outside the scope of the Retail and Commercial Leases Act (e.g., annual rent exceeds the prescribed threshold of $420,000 exclusive of GST effective 1 July 2025 under the Retail and Commercial Leases (Prescribed Threshold) Amendment Regulations 2024, or the tenant is a publicly listed company), there are no statutory limits on the bond amount, no requirement to lodge the bond with the SBC, and no prescribed return timeline. Everything is governed entirely by the lease agreement.

Best Practices for SA Commercial Landlords

1. Lodge the Bond Promptly: A 7-day lodgement window is tight. Lodge the bond with the SBC within 48 hours to avoid any compliance risk.
2. Document the Property Condition: Conduct a thorough pre-lease and end-of-lease inspection with photographs and video. This evidence is critical if the bond dispute escalates to the Magistrates Court.
3. Track Bank Guarantee Expiry: If a tenant's bank guarantee has an expiry date, ensure it is renewed well before it lapses. If the guarantee expires, you lose your security.

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