Property, Infrastructure & Development - Obtaining an Exemption from the Retail and Commercial Leases Act
Many of the leases and licences a council may enter into will be subject to the Retail and Commercial Leases Act 1999 (SA) (the Act). Often, the council as lessor, will find that the Act imposes requirements that prevent it from negotiating terms that are consistent with Council policy and/or conflict with terms negotiated in good faith with a prospective lessee. In such circumstances, it is important for Councils to be aware that an exemption from part of or the whole of the Act can be obtained.
We have been involved in numerous matters where councils have found an exemption from the Act necessary or expedient. These situations often arise where the provisions of the Act (which were drafted with commercial leasing activities in mind) have consequences unintended by parliament which can be unnecessarily obstructive in the context of community group or sporting club leases where the dynamics between a council and a lessee, and the terms of the resulting lease can be fundamentally different from commercial leasing practices.
A common example occurs where a lessee (ordinarily a community group) requests that the council undertake works or maintenance of a capital nature to their premises. A council and a lessee may agree that the lessee is to fund a proportion of the works or maintenance or is to repay a proportion of any funding the council provides.
Another example occurs with council owned facilities such as tourist parks or community centres. It is not uncommon that agreements are entered into with operators, lessees or managers involving obligations to make capital expenditure in the form of upgrades to the premises.
In both of these situations the Act will generally prevent a council, as lessor, from requiring the lessee to make or reimburse capital expenditure. Therefore in these circumstances the exemption option can be a useful tool for both parties to achieve their desired outcome.
Types of exemption
An exemption from the Act may be granted pursuant to section 77 of the Act. This section provides for two different forms of exemption.
Note that if council is seeking to exempt the minimum five year term imposed under the Act an exemption is not required. Instead, an exclusionary certificate signed by the lessee and witnessed by its lawyer will exclude the imposition of the minimum five year term.
The first form of exemption, pursuant to section 77(1) of the Act, is a Ministerial exemption. Under this section, the Minister (being the Minister to whom the Act has been committed, or who is otherwise vested with the administration of the Act), may grant an exemption in respect of an application by an interested person.
The Minister may exempt leases from any or all of the provisions of the Act. A Ministerial exemption may be granted in relation to a specific existing or proposed lease or any number of leases of a particular class (being leases with a common characteristic, for example leases with a common locality, common parties or a common purpose).
Additionally, the Minister may also grant an exemption from the Act in relation to specific premises or a number of premises of a particular class, as opposed exempting a lease itself.
Magistrates Court exemption
An exemption may also be obtained pursuant to section 77(2) of the Act by making an application to the Magistrates Court (Court). The Court may grant an exemption from any or all of the provisions of the Act in relation to an existing or proposed lease, or an existing or proposed premises.
However, unlike the Minister, the Court cannot grant exemptions in relation to a number of leases or premises of a particular class.
Conditions may be imposed on the exemption
The Minister or the Court may impose conditions on the grant of the exemption that the Minister or the Court deems appropriate.
Which exemption should be used?
Where council intend to exempt (in a single application), a number of leases or a number of premises which together could be described as a class of leases or premises, then an application to the Minister is required. As mentioned, the Court cannot grant an exemption to a class of leases or premises.
Otherwise, where the application pertains to a single lease or premises, an application may be made to either the Minister or the Court.
Keep the exemptions in mind
Councils should be aware that the obligations imposed under the Act are not inflexible. We often act on behalf of councils to obtain exemptions from the Court. We have also assited a number of councils obtain Ministerial exemptions.
The exemption option is worth considering when undertaking strategic planning of council asset management practices. An exemption of a part or the whole of the Act can provide significant advantages to council and should be considered when preparing council policies regarding leasing and licensing of council assets.
For more specific information on any of the material contained in this article please contact James McEwen on 8210 1209 or firstname.lastname@example.org or Peter Varacalli on 8210 1215 or email@example.com.