Part 5Rent and outgoings

Part 5—Rent and outgoings 21—Payment of rent when lessor's fitout not completed (1) This section applies to a retail shop lease if— (a) the liability of the lessee to pay rent under the lease commences on the lessee entering into possession of the retail shop (whether or not the lessee is required to enter into possession by a specified date); and (b) the lessor has fitout obligations under the lease. The lessor has fitout obligations under the lease if the lessor is required to provide finishes, fixtures, fittings, equipment or services before the lessee enters into possession of the shop. (2) A retail shop lease to which this section applies is taken to provide that— (a) the lessee is not liable to pay rent, or any other amount payable under the lease by the lessee (such as an amount payable in respect of outgoings), in respect of any period before the lessor has substantially complied with the lessor's fitout obligations; and (b) the lessor is not entitled to deny the lessee possession of the retail shop merely because the lessor has not complied with the lessor's fitout obligations under the lease (but this paragraph does not prevent the lessor from denying the lessee possession of unsafe premises on the ground that they are unsafe). 22—Restrictions on adjustment of base rent (1) In this section— base rent means rent, or that component of rent, that comprises a specified amount (whether or not there is provision for the amount to change). Turnover rent (rent determined by reference to the lessee's turnover) is not base rent because turnover rent is not a specified amount of money (it varies according to the lessee's turnover). (2) A retail shop lease must not provide for a change to base rent less than 12 months after the lease is entered into and must not provide for a change to that rent less than 12 months after any previous change to that rent, but this subsection does not apply to a change to base rent by a specified amount or specified percentage. For example, subsection (2) prevents a lease providing for an increase to current market rent more than once in 12 months. It does not prevent a lease providing for the rent to increase by $100 every six months. Nor does it prevent a lease providing for the rent to be increased to current market rent after 12 months and then to be increased by two per cent every six months after that. (3) A provision of a retail shop lease is void to the extent that it— (a) reserves or has the effect of reserving to one party a discretion to decide which of two or more methods of calculating a change to base rent is to apply on a particular occasion; or (b) provides for a method of calculating a change to the base rent but reserves or has the effect of reserving to one party a discretion to decide whether or not the base rent is to be changed in accordance with that method on a particular occasion; or (c) provides for base rent to change on a particular occasion in accordance with whichever of two or more methods of calculating the change would result in the higher or highest rent. (4) If a retail shop lease provides for a change to base rent in a way that may result in a decrease of rent1, a provision of the lease is void to the extent it prevents or enables the lessor or any other person to prevent the decrease. 1 A provision for the rent to change to current market rent. 23—Reviews to current market rent (1) A retail shop lease that provides for rent to be changed to current market rent is taken to include provision to the following effect: (a) the current market rent of the retail shop is the rent that, having regard to the terms and conditions of the lease and other relevant matters, would be reasonably expected for the shop if it were unoccupied and offered for renting for the use to which the shop may be put under the lease; (b) the value of goodwill created by the lessee's occupation and the value of the lessee's fixtures and fittings on the retail shop premises are to be ignored for the purposes of the assessment of current market rent; (c) if the lessor and the lessee do not agree, the amount of the rent is to be determined by valuation carried out by a person appointed by agreement between the parties to the lease or, failing agreement, appointed by the person for the time being holding or acting in the office of Chair of the South Australian State Committee of the Australian Property Institute Limited (or the holder of such other office representing property interests in the State prescribed by the regulations); (d) if a valuation is made to determine the rent, the valuer must give detailed reasons for the determination and must specify the matters (including, if relevant, incentives and concessions) taken into account in making the determination; (e) the parties to the lease are liable for the costs of a valuation under this section in equal shares. (2) However, there is no need for a valuation if the parties to the lease agree on the amount of the rent. 24—Turnover rent (1) If a retail shop lease provides for the determination of rent or a component of rent by reference to turnover, the lease is taken to include provision to the following effect: (a) if the turnover includes amounts realised on sale of items purchased from customers in the ordinary course of business, those amounts are to be reduced by the amount of any losses made on the resale or disposal of those items; (b) turnover does not include the amount of deposits and instalments received on account of lay-bys, hire purchase or credit sales, and later refunded to customers; (c) if the proceeds of a transaction have been included as part of turnover but a refund is later made to the customer, the turnover is reduced by the amount of the refund; (d) turnover does not include the amount of service, finance or interest charges payable to a financier in connection with provision of credit to customers (other than commissions on credit or store cards); (e) turnover does not include the price of merchandise exchanged between shops of the lessee if the exchange is made solely for the convenient operation of the business of the lessee and not for the purpose of concluding a sale made at or from the shop to which the lease relates; (f) turnover does not include the price of merchandise returns to shippers, wholesalers or manufacturers; (g) turnover does not include the proceeds of sale of the lessee's fixtures and fittings after their use in the conduct of business at or from the retail shop to which the lease relates; (h) turnover does not include the amount of discounts allowed to customers in the normal course of business; (i) turnover does not include the amount of uncollected credit accounts that are written off; (j) turnover does not include the net amount paid or payable by the lessee on account of any purchase tax, receipt tax, or other similar tax imposed at the point of retail sale or hire of goods or services; (k) turnover does not include the amount of delivery charges; (l) turnover does not include the amount received from the sale of lottery tickets and similar tickets (other than commission on those sales); (m) turnover does not include an amount of a prescribed class. (2) The lease is taken to provide for underpayments or overpayments of rent (resulting from actual turnover differing from projected or presumed turnover) to be adjusted within one month after the lessee requests the lessor in writing for such an adjustment and provides the lessor with information the lessor reasonably requires to make the adjustment. (3) The lessee may make a request for such an adjustment only once in the first 12 months of the lease term and thereafter only at intervals of not less than 12 months following the first request for an adjustment under the lease. (4) Subsection (3) does not prevent the lease providing for, or the parties otherwise agreeing to, more frequent adjustments than are provided for by this section. (5) A lessor must not require a lessee to provide to the lessor information about the lessee's turnover unless the retail shop lease provides for the determination of rent, a component of rent or outgoings by reference to turnover. (6) For the purposes of this section— turnover includes gross takings, gross receipts, gross income and similar concepts. 26—Recovery of outgoings from lessee (1) The lessee under a retail shop lease is not liable to pay an amount to the lessor in respect of outgoings except in accordance with provisions of the lease that specify— (a) the outgoings that are to be regarded as recoverable; and (b) how the amount of the outgoings will be determined and how they will be apportioned to the lessee; and (c) how the outgoings, or a part of them, may be recovered by the lessor from the lessee. (2) In this Part, the expression outgoings to which the lessee contributes refers to outgoings in respect of which the lessee is liable under the lease to make a payment to the lessor. (3) Costs associated with the advertising or promotion of a retail shop or retail shopping centre, or of a business carried on there, are not outgoings for the purposes of this section. 29—Sinking fund for major repairs and maintenance If a retail shop lease provides for the establishment of a sinking fund to fund provision for major items of repair or maintenance, the lease is taken to include provision to the following effect: (a) an amount paid by the lessee towards the lessor's outgoings on account of those major items of repair or maintenance is to be paid into the sinking fund; (b) so much of the balance standing to the credit of the sinking fund as remains unexpended from time to time for a purpose for which the sinking fund was established is to be held by the lessor in an interest bearing account; (c) amounts paid by the lessee for credit of the sinking fund, and the net interest earned by the lessor on the sinking fund, must not be applied by the lessor for a purpose other than payment of outgoings for which the sinking fund was established; (d) the lessor is liable to contribute to the sinking fund any deficiency attributable to a failure by the lessor or a predecessor in title of the lessor to comply with paragraph (c). The effect of paragraph (d) will be that a purchaser of the shop from the lessor will have to ensure that the sinking fund has been properly administered and maintained by the previous lessor because the incoming lessor will be liable for any shortfall. 30—Land tax not to be recovered from lessee (1) A retail shop lease cannot require the lessee to pay land tax or to reimburse the lessor for the payment of land tax. (2) However, the lessor's liability for land tax in respect of the premises may be taken into account in the assessment of rent. (3) This section does not apply to a retail shop lease entered into before a date fixed by regulation for the purposes of this section. 31—Estimates and explanations of outgoings to be provided by lessor (1) A retail shop lease is taken to include provision to the following effect: (a) the lessor must give the lessee a written estimate of the outgoings to which the lessee contributes under the lease, itemising those outgoings under the item descriptions used in the list of outgoings in the form of disclosure statement set out in the Schedule; (b) the estimate of outgoings must be given to the lessee in respect of each accounting period of the lessor during the term of the lease and must be given before the lease is entered into and thereafter during the term of the lease at least one month before the commencement of the accounting period concerned. (2) A retail shop lease is taken to include provision requiring the lessor, at the request of a lessee, to give the lessee information and explanations that the lessee may reasonably require about expenditure on outgoings to which the lessee is required to contribute and the basis on which the lessee's contribution to the outgoings is determined. 32—Lessor to provide auditor's report on outgoings (a) the lessor must, within three months after the end of each accounting period, give the lessee a written report containing a statement of all expenditure by the lessor in the accounting period towards which the lessee is required to contribute in a form that facilitates comparison with the relevant estimate; (b) the report is to be prepared by a registered company auditor (within the meaning of the Corporations Act 2001 of the Commonwealth) and is to be prepared in accordance with accounting standards (within the meaning of the Corporations Act 2001 of the Commonwealth); (c) the report is to include a statement by the person who prepared the report whether or not the amounts paid by the lessee in respect of outgoings were properly payable by the lessee and whether or not the total amount of outgoings in respect of which the lessee contributed (that is, the estimated total expenditure by the lessor on outgoings) exceeded the total amount actually expended by the lessor in respect of those outgoings during the period concerned; (d) the report may be a composite report (that is, it may relate to more than one lessee) so long as each lessee to which it relates is able to determine from the report whether or not the amounts paid by the lessee in respect of outgoings were properly payable by the lessee; (e) the report need not be prepared by a registered company auditor, and need not comply with paragraphs (c) and (d), if it does not relate to outgoings other than the emergency services levy, water and sewerage rates and charges, local government rates and charges, and insurance so long as the report is accompanied by copies of receipts for all expenditure referred to in paragraph (a). 33—Adjustment of contributions to outgoings based on actual expenditure properly and reasonably incurred (a) within three months after the end of each accounting period, there is to be an adjustment between the lessor and the lessee to take account of any under‑payment or over-payment by the lessee in respect of those outgoings; (b) the adjustment is to be calculated on the basis of the difference between the total amount of outgoings in respect of which the lessee contributed (that is, the estimated total expenditure by the lessor on outgoings during the accounting period) and the total amount actually expended by the lessor in respect of those outgoings during that period as shown in the auditor's report, but taking into account only expenditure properly and reasonably incurred by the lessor in payment of those outgoings; (c) contribution by the lessee towards, and expenditure by the lessor in respect of, repairs and maintenance is not to be taken into account for the purposes of the adjustment to the extent that the contribution is, and the expenditure is in respect of, contributions required to be paid into a sinking fund as referred to in section 29. 34—Non-specific outgoings contribution limited by ratio of lettable area (1) A lessee under a retail shop lease in a retail shopping centre is not liable to contribute towards a non-specific outgoing of the lessor (that is, an outgoing not specifically referable to any particular shop in the retail shopping centre) unless the shop is one of the shops to which the outgoing is referable, and is not liable to contribute an amount in excess of an amount calculated by multiplying the relevant amount of that outgoing by the ratio of the lettable area of the shop to the total of the lettable areas of all the retail shops in the shopping centre to which the outgoing is referable. (2) In this section— excluded premises means premises in a retail shopping centre (such as office towers and entertainment annexes) that are leased or available for lease but are not retail shops; referable—an outgoing is referable to premises if the premises enjoy or share the benefit resulting from the outgoing; relevant amount of an outgoing means— (a) if the outgoing is wholly referable to retail shops—the total amount of that outgoing; (b) if the outgoing is partly referable to retail shops and partly referable to excluded premises—a proportion of the outgoing equal to the proportion that the total lettable area of the retail shops in the retail shopping centre bears to the total lettable area of retail shops and excluded premises. 35—Determination of current market rent under options to renew (1) A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: (a) the current market rent of the retail shop is the rent that, having regard to the terms and conditions of the lease and other relevant matters, would be reasonably expected to be paid for the shop if it were unoccupied and offered for renting for the use to which the shop may be put under the lease; (b) the value of goodwill created by the lessee's occupation and the value of the lessee's fixtures and fittings on the retail shop premises are to be ignored for the purposes of the assessment of current market rent; (c) if the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a person appointed by agreement between the parties to the lease or, failing agreement, appointed by the person for the time being holding or acting in the office of Chair of the South Australian State Committee of the Australian Property Institute Limited (or the holder of such other office representing property interests in the State prescribed by the regulations); (d) if a valuation is made to determine the rent, the valuer must give detailed reasons for the determination and must specify the matters (including, if relevant, incentives and concessions) taken into account in making the determination; (e) the parties to the lease are liable for the costs of a valuation under this section in equal shares. (2) There is no need for a valuation if the parties agree on the amount of the rent. 36—Opportunity for lessee to have current market rent determined early (1) A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: (a) the lessee is entitled to request a determination of the current market rent within the period that begins six months before and ends two months before the last day on which the option may be exercised under the lease, but may not make such a request if the lessor and the lessee have already agreed as to what the actual amount of that rent is to be; (b) the lessee makes a request by giving notice in writing of the request to the lessor; (c) if the lessee makes a request, the amount of the current market rent is to be determined (as at the time of the request) in accordance with the provisions of section 35, and the period within which the lessee must exercise the option is varied so that the last day on which the option may be exercised is 21 days after the determination of rent is made and notified to the lessee in writing or the last day of the term of the lease, whichever is the earlier; (d) the parties agree that the amount of rent determined under paragraph (c) is the current market rent for the purposes of the exercise of the option (even though it may be a determination of the current market rent as at some earlier time); (e) the parties to the lease are to pay the costs of the determination of current market rent in equal shares unless the lessee decides not to exercise the option to renew the lease in which case the lessee is liable to reimburse the lessor for the lessor's share of the costs (ie the lessee must bear the costs in their entirety). (2) If the term of the lease is 12 months or less, the periods of six months and two months in this section are shortened to three months and 30 days respectively.