Commercial Leasing Insight – Returning Bank Guarantees

Recently we have seen an increase in the number of Landlords requiring bank guarantees as a form of security so it is important to understand that there are some legislated requirements in this area.

Since July 2020, the Retail and Commercial Leases Act has required Landlords to return an original bank guarantee to the Tenant within two months of a Lease ending. This applies to all current Leases and extended Leases whether they were entered into before or after July 2020

Landlords who fail to return a bank guarantee within the time frame risk a fine of up to $8,000.

Additionally, the Landlord may be liable to pay a Tenant compensation for loss or damage suffered and the reasonable costs of cancelling the bank guarantee.

Bank guarantees however do not need to be returned in the following circumstances: –

  • The bank guarantee has expired or has been cancelled.
  • A matter regarding the bank guarantee is currently before the Court.
  • The original bank guarantee is unable to be returned because it has been lost or accidentally destroyed provided that the Landlord gives permission for the bank guarantee to be cancelled by the bank.

In summary, Landlords need to keep any original bank guarantee secure, know if it has expired or has been cancelled and make sure that they return the original bank guarantee as soon as possible after the Lease has ended.

Need further advice on managing leases for commercial property in South Australia? Chat to the experienced team at Eastern Conveyancing and the Lease Bureau.

Written by Steve Evans
Director, The Lease Bureau