Hello Ross
Thanks for an interesting question.
Where the asset of the fund is business real property that is leased to a related party of the fund, there is a requirement, to avoid the asset from being an in-house asset, that there is a lease in place that is enforceable by legal proceedings – refer to section 71(1)(g) of the SIS Act.
However, from the facts as presented, none of the tenants are related parties.
Was there initially a written lease in place for the six tenancies, for a fixed period, the period has come to an end, and the arrangement is now a month-to-month arrangement?
It is assumed that there is audit evidence to show that rent is being paid in a timely manner for the six properties?
Whilst sharing your concerns that the absence of written lease agreements is far from best practice and is not something a trusted advisor would ever recommend, this does not necessarily mean the arrangement is something other than “arm’s length” so as to give rise to a breach of section 109 of the SIS Act.
As a reminder, section 109(1) says:
 The trustee or investment manager of a superannuation entity must not invest money of the entity unless the trustee or investment manager, as the case may be, and the other party to the relevant transaction are dealing with each other at arm’s length in respect of the transaction.
I take the view that you should convey your concerns about the lack of written leases in the Management Report.
That said, I would be happy to hear if other auditors take a contrary view.
Best regards
The Auditors Institute