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INSIGHTS

Types of Security

In relation to a lease that falls under the Retail and Commercial Leases Act, there are effectively 3 different types of security that a landlord can ask for when granting a Lease over commercial property in South Australia.

Firstly, a landlord can ask the tenant to lodge a bond with the Office of Small Business Commissioner (OSBC). This can be no more than the equivalent of three months’ rent. And when I say rent, I mean rent without any GST component.

The second most common type of security is a bank guarantee. There are no limits on the amount that the landlord can ask for but be aware that the costs to the tenant of providing a bank guarantee can be quite high.

The third type of security is rent in advance. We get asked to include clauses in leases that insist on the tenant keeping their rent one, two or three months in advance at all times during the term. This is quite acceptable under the Act and it means that if the tenant defaults at any point in time there is always an amount of rent to cover the period until the landlord can take action or the tenant remedies their breach.

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