As a landlord, navigating the various obligations imposed by the Retail and Commercial Leases Act 1995 (SA) (RCLA) can be challenging. This article aims to provide landlords with an understanding of the notice requirements at the end of a commercial lease, specifically under section 20J of the RCLA.
Notice of intention at end of lease
When the expiration of a lease is approaching, section 20J of the RCLA requires that the landlord provide written notice to the tenant of the landlord's intention at the end of the lease. The landlord must provide such notice at least six months, but no longer than 12 months prior to the expiration of the lease.
The notice must specify the landlord's intentions, being either:
- offer the tenant a renewal or extension of lease on the terms and conditions specified in the notice; or
- notice to the tenant that the landlord does not propose to offer a renewal or extension of the lease.
A notice under paragraph (b) may include other information about the landlord's intentions, e.g. the landlord may intend to allow the tenant to remain in possession of the premises as a periodic tenant under a provision of the lease for holding over.
Offer not revokable
If the notice makes an offer of renewal or extension of lease, that offer cannot be revoked by the landlord for a period of one month after the notice is given.
Short-term leases
In the case of short-term leases (a term of 12 months or less), the notice period of six months and 12 months above will be reduced by one-half and the landlord will need to adjust the notice times accordingly.
Exemptions to section 20J
Section 20J does not apply to:
- leases of premises in a retail shopping centre; and
- leases with an existing right or option to renew or extend.
Importantly, if a tenant with an option to renew fails to exercise that option, the landlord will not be required to give any notice under section 20J of the RCLA.
Consequences of non-compliance
There are legal consequences for a landlord who fails to give the required notice under Section 20J of the RCLA. A tenant may give written notice to the landlord before the end of the term requesting an extension of the lease under Section 20J. If a tenant gives that written notice, the term of the lease is extended until the end of six months after the landlord gives the required notice to the tenant. However, during this extended term of the lease, the tenant may terminate the lease by giving one month's written notice to the landlord.
A landlord's non-compliance with Section 20J may significantly disrupt the landlord's plans for re-letting the property. A landlord may find itself in a difficult situation if a new lease has been entered into, but the existing tenant has not been given notice in accordance with section 20J. This may prevent the landlord from delivering vacant possession of the premises to the new tenant, which may expose the landlord to a claim by the new tenant for breach of the new lease.
Case study: Fresace Pty Ltd v Brian & Vivien Enterprises Pty Ltd; Brian & Vivien Enterprises Pty Ltd v Fresace Pty Ltd [2005] SADC 120
The decision in Fresace P/L v Brian & Vivien Enterprises underscores the importance of adhering to the requirements under section 20J. In this case, the landlord sought immediate possession of the premises at the end of the lease term, claiming that it had orally communicated its intention not to renew the lease to the tenant.
The Court held that informal and oral correspondence did not substitute for the requirement of written notice. Consequently, the Court found that landlord failed to comply with the statutory notice requirements, and the tenant was entitled to remain in possession of the premises until 9 October 2005, which was 6 months after the required notice period would have expired.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.