Entrepreneur visa

The Australian Department of Immigration & Border Protection (DIBP) is making changes to the visa system as part of the National Innovation and Science Agenda.

 

It is intended that these changes will help Australia attract and retain the best and brightest entrepreneurial talent and the skilled, talented people Australia needs to drive ideas from research to commercial reality.

 

On 10 September 2016, DIBP launched a new Entrepreneur visa’ stream and amended the ‘points test’ for the skilled migration programme.

 

The Entrepreneur visa is part of the Business Innovation and Investment visa programme. Entrepreneurs interested in applying for the Entrepreneur visa will need to submit an Expression of Interest (EOI) in SkillSelect and be nominated by a State or Territory government.

 

Key eligibility criteria includes:

• Applicants must be undertaking, or proposing to undertake, an entrepreneurial venture in Australia.
• The entrepreneurial venture must not be related to residential real estate or labour hire or involve purchasing an existing business or franchise.
• Applicants must also be under 55 years of age, have a competent level of English, and have at least 30 per cent interest in their entrepreneurial venture.
• There must be one or more funding agreements in place for at least $200,000 between the entrepreneur or venture and a third party funding body or bodies.
• Sources of third party funding are limited to state and territory governments, Commonwealth agencies, Publicly Funded Research Organisations, and investors registered as a Venture Capital Limited
• Partnerships (VCLP) or Early Stage Venture Capital Limited Partnerships (ESVCLP). Agreements outlining funds from a combination of these sources are also acceptable.
• Applicants must have a business plan outlining their plans for their venture in Australia.

An Entrepreneur visa holder can progress to permanent residency after four years if they can meet a measure of success, which includes factors such as business turnover, employment of Australians and ability to obtain significant financial backing.

Read More»

Victorian retail landlords – remember your notice obligations

Landlords of premises regulated by the Retail Leases Act 2003 (Vic) (RLA) should diarise the various dates needed for them to comply with their notice obligations under Sections 28 and 64 of the RLA, especially if they wish to avoid unintentionally extending the term of the lease.  In this regard, even though the relevant lease document may clearly record the last day of the lease, that date may be extended by Sections 28 and 64, which may have consequences for a landlord who requires the premises to be vacated by a particular date.

Section 28 provides:

• If a lease contains an option exercisable by the tenant to renew the lease for a further term, the landlord must notify the tenant in writing of the date after which the option is no longer exercisable.  That notice is to be given at least 6 months and no more than twelve months before the date the option is no longer exercisable (Last Date);
• However, the landlord is not required to provide that notice if the tenant exercises or purports to exercise the option before being notified of that Last Date;
• If the landlord fails to provide the notice to the tenant within the required timeframe, the lease is taken to provide that the Last Date is extended to a date which is 6 months after the date landlord notifies the tenant;
• If that extended date is after the term of the lease ends, the lease continues until the extended date;
• However, if the tenant exercises the option prior to the extended date, the new lease commences at the expiry of the old lease, rather than the total term of the lease being extended.

Consequently, an unplanned extension of the term of the lease may occur where a landlord fails to provide, or is late in providing, a Section 28 notice to the tenant and where the tenant does not eventually exercise its option.

Section 64 provides:

• If the tenant under a lease does not have an option to renew the lease for a further term, the landlord must at least 6 months but no more than twelve months before the lease term ends, give written notice to the tenant:
  • offering the tenant a renewal of the lease on the terms specified in the notice; or
  • informing the tenant that the landlord does not propose to offer the tenant a renewal of the lease;
• An offer to renew the lease cannot be revoked without the tenant’s consent for sixty days after it is made;
• If the landlord fails to give the notice within the required time frame:
  • the landlord must give the tenant a notice containing that information; and
  • the lease continues on the same terms and conditions until the day being 6 months after the notice was actually given to the tenant.

Accordingly, a failure by a landlord to give a Section 64 notice to a tenant may have the effect of extending the term of the lease (and, accordingly, the date upon which the premises may be vacated) to a date which is 6 months after receipt of the notice.

If you require assistance with regards to drafting and serving Section 28 and Section 64 notices (in accordance with the provision of notices clause in your lease) please contact Andrew Bini, Senior Commercial Lawyer, at Nevett Ford Melbourne.

Read More»

Retail leasing Ministerial determination

It is not uncommon for a commercial  landlord to desire to have a lease fall outside the operation of the Retail Leases Act 2003 (Vic) (RLA), thereby enabling the landlord to claim land tax and lease preparation legal costs as an outgoing from the tenant. 

What constitutes a “retail lease” (being a lease which is regulated by the RLA) is set out in Section 4 of the RLA.  One of the exceptions to a lease being a “retail lease” is where the tenant is a body corporate or a subsidiary of body corporate whose securities are listed on a stock exchange located outside of Australia that is a member of the World Federation of Exchanges (WFE) (see Section 4 (2)(d) of the RLA).

However, much confusion has arisen in trying to determine whether the relevant overseas stock exchange is a member of the WFE.

In an effort to reduce the confusion, the Victorian Minister for Small Business, Innovation and Trade has made a determination dated 12 August 2016, pursuant to the Minister’s powers under clauses 4(2)(g) and 5 of the RLA, which has the effect of excluding the following tenants from the definition “retail premises”:

            “bodies corporate or companies or corporations whose securities are listed on a stock exchange outside Australia or the subsidiaries (including subsidiaries as defined in Section 9 of the Corporations Act 2001) of such bodies corporate, companies or corporations”.

It is expected that the determination will make it easier for landlords and their advisors to determine if the RLA will apply to leases to tenants or their subsidiaries who are corporations listed on overseas exchanges.

If you require assistance with retail leasing, please contact Andrew Bini, Senior Commercial Lawyer, Nevett Ford Melbourne Pty Ltd.

Read More»

Why do we need terms and conditions of trade?

Many of our clients who are suppliers of goods and services operate under formal written terms and conditions of trade.

Prudent clients usually have their terms and conditions periodically reviewed to ensure they provide the best available protection.

For example, in recent years many suppliers of goods have amended their terms and conditions to include new provisions under which the customer grants a security interest over the goods supplied in favour of the supplier, to support the customer’s payment obligations. The grant of the security interest enables the supplier to register that security interest on the register created under the Personal Properties Security Act 2009 (Cth) (PPSR).  Without registration of a security interest, a supplier might not have the ability to recover the goods, or amounts owed with respect to the goods, if the customer goes into liquidation or declares bankruptcy.

However, it is evident to us that there are many suppliers who trade without proper terms and conditions or with outdated terms and conditions which do not entitle the supplier to register security interests on the PPSR.

The simple answer to the question as to why terms and conditions of trade are necessary is twofold:

• to clearly set out the terms of the sale of goods and/or services arrangement (ie the contractual relationship) between the supplier and the customer; and
• to provide the some protection a supplier of goods may need in the event of non-payment.

Typically, when a supplier is dealing with a new customer the supplier will provide the new customer a credit application, usually accompanied by a director’s guarantee.  At this point we recommend the supplier also provide its terms and conditions of trade to the new customer and arrange to have the credit application, the director’s guarantee  and the terms and conditions of trade signed by the new customer.

Apart from the usual mechanical provisions regarding ordering of goods and/or services, price, delivery, price variation and variation and cancellation of orders, terms and conditions should clearly set out:

• the terms of payment;
• an obligation on the customer to pay interest on outstanding amounts at a specified rate if payment is not received on the relevant due date;
• a right in the supplier to charge the customer all costs (including legal costs) incurred by the supplier in pursuing and recovering unpaid amounts;
• retention of title (whereby title to the goods is not provided to the customer until such time as payment for the goods delivered have been received by the supplier) and the right for the supplier  to access the customer’s premises to recover the goods; and
• PPSR provisions enabling the supplier to register a security interest on the PPSR.

Of course, there may be other specific or unique provisions depending upon the nature of the goods and services to be provided.

We have experience in preparing and amending terms and conditions of trade for suppliers of goods and services of various types.

If you would like more information on terms and conditions of trade please contact Andrew Bini, senior commercial lawyer, Nevett Ford Melbourne.

Read More»

Buying a business? Do your due diligence first!

Whether you intend on purchasing a small retail business or the business operations of a listed public company, the same fundamental approach should be applied: do your due diligence first!

As advisors to purchasers of businesses of various types and sizes, we are regularly involved in conducting legal due diligence.

However, a purchaser’s pre-contractual due diligence should not be limited to a lawyer’s review of legal matters, but should extend to:

• Inspection of plant and equipment: being a physical investigation by the purchaser (or preferably by qualified contractors on behalf of the purchaser) into the state of plant and equipment and other hard assets sold with the business.  If there are any problems with those assets, then the purchaser’s lawyer should be in a position to negotiate amendments to draft sale contracts requiring the vendor to rectify those problems prior to settlement.  Physical due diligence should also indicate whether the sale price reflects the true value of the physical assets being sold;
• Inspection of the premises including the landlord’s fixtures, fittings and installations.  Again this should be done by a qualified person on behalf of the purchaser and a report provided.  Issues arising out of that report should be dealt with in the sale contract to ensure the vendor rectifies issues prior to the purchaser taking possession of the premises and potentially becoming liable for hidden problems.
• Financial due diligence into the business including a detailed review of the financial statements of the business for at least the last five years.  The purchaser’s accountant should report on the financial status of the business including whether the purchase price is reasonable based on the business’s financial performance in recent years.
• Enquires with the local council and with owners of adjoining businesses as to potential changes to the local environment, such as the construction of roads, the construction of multi-level buildings adjacent to the business premises and other matters which might lead to business disruption in the future. 

Ideally legal due diligence will involve at least the following:

• An investigation into the status of the vendor:  If the vendor is a company, what is its registration status with ASIC?  In this regard, the assets of a deregistered company are vested in ASIC and cannot be dealt with by that company until re-registration, which may be problematic;
• Determining whether the vendor a trustee: If it is, then the sale contract should record the vendor as being the trustee of a trust to ensure the purchaser will acquire both legal and equitable title to the business assets;
• Personal Property Security Register searches to determine the existence security interests which may be registered over the assets of the vendor.  This will identify the parties from which the vendor must obtain releases of those security interests prior to or at settlement;
• An examination of significant contracts held by the vendor including the extent to which plant and equipment is leased by the vendor.  Also, significant customer contracts should be reviewed to determine whether those incomes streams can be assigned to the purchaser at settlement.  If they are not capable of assignment then, the sale price may have to be reduced to reflect the loss of those income streams;
• A review of the premises lease documentation including a determination of the extent of time remaining under the lease and options and, consequently, the amount of time the purchaser will have to obtain a return on its investment.  If there is insufficient time remaining under the lease we suggest the sale contract be made conditional upon the vendor obtaining the landlord’s consent to extending the term of the Lease as part of the transfer of lease documentation;
• A review of the status of all licences and permits held by the vendor to conduct the business which are to be transferred to the purchaser at settlement – thereby enabling the purchaser to lawfully conduct the business at the premises on and from settlement; and.
• Review of employment agreements and liabilities.

Once each area of due diligence has been undertaken and the material issues have been identified, it becomes the purchaser’s lawyer’s role when negotiating the sale contract to have included in the contract specific obligations on the vendor to rectify those issues prior to or at settlement.  Of course, that depends on how willing the vendor is open to bearing the cost of rectifying those issues.

Quite often impatient purchasers pay the price for poorly conducted and/or limited scope due diligence.  Although sale contracts may offer some form of vendor warranties (covering things such as the operational condition of plant and equipment) they can be little comfort to a purchaser when after settlement the vendor has disappeared overseas on vacation or doesn’t have the finances to compensate the purchaser for breach of a vendor warranty.  On that basis, we firmly believe quality pre-contractual due diligence which extends beyond legal due diligence is prudent practice all purchasers should consider adopting.

At Nevett Ford Melbourne we have experienced commercial lawyers with extensive experience in assisting purchasers of all types of businesses.

Read More»

Be prepared for small business unfair contract laws

Further to our blogs of July 2015 http://nfcommerciallawyers.blogspot.com/2015/07/proposed-protection-to-small-businesses.html and April 2016 http://nfcommerciallawyers.blogspot.com/2016/04/protection-to-small-businesses-from.html, from 12 November 2016 amendments to the Australian Consumer Law will come into operation which are aimed to protect small businesses from unfair terms in standard form contracts.

Standard form contracts are contracts where the terms and conditions are set by one party and the counter-party has little or no opportunity to negotiate those terms. For the purposes of the new law, they include contracts:

• for the supply of goods or services or the sale or grant of an interest in land;
• where at least one of the parties is a “small business”, being a business employing less than 20 people;
• where the upfront price payable under the contract is no more than $300,000 or $1,000,000 if the term of the contract is greater than twelve months;
• entered into on or after 12 November 2016 and variation to existing contracts occurring after that date.

Examples of unfair terms include:

• terms which enable a party (but not the other party) to avoid or limit their obligations;
• terms which enable a party (but not the other party) to terminate the contract;
• terms that penalise a party (but not the other party) for breaching the contract; and
• terms that enable a party (but not the other party) to unilaterally vary the terms of the contract.

Unfortunately, only a court or tribunal will be able to to determine whether a term of a contract is in fact unfair. That is, it is not the role of the Australian Competition and Consumer Commission to make a determination on whether a clause in a contract is fair or unfair.

The effect of a term being determined unfair will render that term void. However, the balance of the contract should continue to bind the parties to the extent that the contract is capable of operating without the unfair term.

Certain contracts are excluded from the operation of the law which include contracts entered into before 12 November 2016 (unless renewed on or after that date), shipping contracts, constitutions of companies, managed investment schemes, certain insurance contracts and contracts in sectors exempted by the Minister.

If you think that a term in a standard form contract is unfair, the ACCC recommends you request the other party to remove the term or amend it so that it is no longer unfair. The ACCC further recommends that in the absence of a satisfactory outcome, that the aggrieved party seek a declaration from a court that the relevant term is unfair. Accordingly, it is not possible for a party to a standard form contract to unilaterally declare that a term in a contract is unfair and claim it has no impact on that party.

It is recommended that parties who impose standard form contracts on small businesses structure a compliance program aimed at identifying potential unfair terms in their precedent documents and take steps to amend those terms ahead of 12 November 2016.  A compliance program would entail:  

1. a review of existing contractual arrangements to identify counter-parties who qualify as small businesses;
2. identifying which of those contracts with small businesses are in fact standard form contracts;
3. identifying potentially unfair terms within contracts with those small businesses;
4. determining how to deal with those unfair terms; and
5. amending precedent documents to ensure all standard form contracts entered into with small businesses on and after 12 November 2016 comply with the new laws.

If you require assistance with reviewing your standard form contracts please contact Andrew Bini.

Read More»

Enforcing Chinese Arbitration Awards in Australia

With so much trade between China and Australia the question arises of how to resolve disputes when agreements are breached.


Many commercial agreements now include arbitration provisions for resolving disputes.


Disputes between Chinese companies and their Australian counterparts may be subject to the United Nations Commission on International Trade Law (UNCITRL) and its arbitration rules.


Where contracting parties have an arbitration clause in their agreement and a dispute arises the parties submit to arbitration and an award is made.


Once an award is made for money in favour of the Chinese company, the question is how does that company enforce its award against a company based in Australia.


An award made in China can be recognised and enforced in Australia under the International Arbitration Act 1974 in an Australian court that has jurisdiction over the amount of the award.


The Chinese company needs to ascertain the state in Australia in which the Australian company has its registered office and may then take proceedings in that state in the appropriate court to have the award recognised.


The Australian company can object to the recognition of the award on grounds set out in section 8 of the Act.


The main grounds for objection are that the award is not final, in the sense that it can or is subject to appeal or that the making of the award was induced or affected by fraud or corruption.


If the Australian court decides that an objection is not valid the award becomes an order of that court. Depending on the amount, the award/order can be enforced by a warrant to seize the Australian company’s goods or commencing winding up proceedings under the Corporations Act 2001.


If you require assistance in recognising and enforcing an award in Australia please contact Greg Doran in our litigation department.

Read More»

Our China Conveyancing Team Expands

We are delighted to announce the appointment of Peter (Chi-Yuen) Pang and William Spencer-He to our China Conveyancing Team.

Peter and William are experienced Australian trained lawyers and will add further depth to our expanding China Conveyancing Practice.

Peter has previously acted as an Academic Advisor for the China Law Society for a period of over 8 years, prior to that Lecturing at various Universities in Hong Kong and Australia.

William has acted as a Solicitor at various practices in Victoria.  Prior to this he has had experience as a professional translator for NAATI, the UN, the Government of Shanghai and for the State Council of the People’s Republic of China.  He is also a Lobbyist for the Mainland Chinese community in Australia and additionally has experience as a lecturer, broadcaster and news reporter in China.

Both Peter and William are fluent in Cantonese, Mandarin and English.

Peter will predominately be based in Hong Kong assisting our Hong Kong, Shenzhen and Guang Dong clients.  William will be predominately based in Beijing.

We also wish to congratulate Diane (Jing Pei) Xu on her admission as a Barrister and Solicitor of the Supreme Court of Victoria.  In the short term Diane will continue to assist with Melbourne based China Conveyancing Team before rotating through our other departments.

Read More»

Changes to SMSF “Safe Harbour” Guidelines

In an earlier article this year we mentioned the ATO’s Practice Compliance Guideline 2016/5 on what constitutes arm’s length borrowing terms for limited recourse borrowing arrangements (LRBA).

PCG2016/5 sets out the “Safe Harbour” terms on which SMSF trustees may structure their LRBA’s consistent with an arm’s length dealing.

For existing LRBA’s with related parties, PCG2016/5 states that the ATO will not select an SMSF for income tax review for the 2014-15 year or earlier years in certain circumstances provided that the SMSF entered into or amended its LRBA’s consistent with an arm’s length dealing by 30 June 2016.

However, since the release of PCG2016/5 the ATO has determined that many taxpayers may require more time in order to review the terms of their LRBA’s.  The ATO has advertised that it will not select an SMSF for income tax review purely because it has an LRBA for the 2014-15 income year and prior years, provided that the SMSF trustee ensures that any LRBA’s their fund has is on commercial terms, or is alternatively brought to an end by 31 January 2017.

It is anticipated that by September 2016 the ATO will provide further information and illustrative examples to assist SMSF trustees to make decisions about their LRBA arrangements.

If you require assistance in establishing an LRBA or amending your existing LRBA’s so that they are on arm’s length commercial terms by 31 January 2017, please contact Andrew Bini.

Read More»

When is FIRB approval required for the purchase of Australian commercial land?

There is much interest from offshore investors, or foreigners living in Australia on a non-permanent basis, in buying Australian commercial land, often for redevelopment or to enjoy an existing rental income stream.   

For a foreign purchaser (individual or corporation) of Australian residential property, they must obtain the approval of the Australian Government's Foreign Investment Review Board (FIRB) before signing a contract of sale.  However, a foreign purchaser buying commercial land, FIRB approval is not always required. 

What is commercial land?

Commercial land means any land in Australia (including any building on the land), except for:

1. land used wholly and exclusively for a primary production business;
2. land on which the number of dwellings that could reasonably be built is less than 10; or
3. land on which there is at least one dwelling (except commercial residential premises).  Examples of commercial residential premises are hotels, serviced apartments or retirement villages.  

In FIRB’s Guidance Note 14 which was last updated on 1 July 2016 (see https://firb.gov.au/resources/guidance/gn14/), FIRB approval is required if a foreign purchaser intends purchasing the following types of commercial real estate:

1. vacant land for commercial development, regardless of the value of the land;
    
2. developed commercial land that is valued at $252 million or more.  However, a different threshold may apply for a country investor or foreign government investor.  Commonly, if the value of the land the foreign purchaser intends to buy is less than $252 million, then FIRB approval is not required;    
    
3. if the land is considered to be 'sensitive', such as a land will be leased to the government, then a $55 million threshold applies.  

You should always seek professional advice before entering into a contract of sale for the purchase of Australian commercial land. 

When is FIRB approval not required when buying commercial land?

Foreign purchasers do not require FIRB approval to acquire an interest in commercial land in following situations:

1.  the acquisition is pursuant to a last will and testament of a deceased person, or is a  devolution by operation of law;
2. The acquisition is from an Australian Commonwealth, State, Territory or local government or local governing body, or an entity wholly owned by the Australian Government;
3. the foreign purchaser will hold less than 10% of shares in a listed company that is acquiring the commercial real estate, or less than 5% of shares in an unlisted company,  and the foreign purchaser does not hold a management position within the purchaser company. 

Different rules may apply for the purchase of commercial residential premises. 

If you are unsure if FIRB approval is required, please contact Yuan (Nathan) Xu at nxu@nevettford.com.au or Yao (Chloe) Chen at cchen@nevettford.com.au for more information.

Read More»

Due Diligence and IPO’s

On 14 July 2016 ASIC released Report 484 “Due Diligence Practices in Initial Public Offerings”.  The Report outlines ASIC’s key findings from its review of due diligence practices of issuers of securities in relation to twelve initial public offers (IPO’s).  The Report is designed to help issuers of securities, their directors and advisors to conduct effective due diligence.

Due diligence practice is the process issuers adopt to comply  with their obligations under Part 6D.2 of the Corporations Act 2001 (Cth) in the preparation of IPO (and other rights issues) prospectuses.  The due diligence process involves among other things a thorough investigation into the issuer and its activities to ensure that all material information is contained within the relevant prospectus for consideration by investors.

Responsibility for the quality of the information in prospectuses lies with the issuers of securities and their directors who must ensure the prospectus is accurate and complete.

Typically the due diligence process comprises the establishment of a due diligence committee, the preparation of and adherence to a due diligence compliance program, the participation by directors, management and advisors of the issuer in investigating particular tasks and the verification of the content of draft prospectuses to ensure they do not contain false and misleading statements.

The key findings of the Report are as follows:

1. Poor due diligence often leads to defective disclosure, such as misleading and deceptive statements, statements with no reasonable basis or the omission of material information;
2. There was considerable variation in due diligence processes which led to different levels of investigation resulting in sometimes less desirable outcomes;
3. Some issuers adopted a “form over substance” approach to due diligence indicating less focus on actual disclosure in prospectuses and more on “ticking the boxes”;
4. Instances of superficial involvement by boards, despite significant directors’ liabilities under the Corporations Act;
5. Poor oversite by some Australian legal advisors of due diligence enquiries conducted by foreign advisors;
6. Inconsistent quality of contribution in the due diligence process between investigating accountants (who usually ranked high in their contribution) compared to legal advisors, which in some cases demonstrated a less consistent standard in conducting due diligence;
7. The costs of conducting due diligence may have an effect on the result.  It was found that a well-advised issuer would be better placed to mitigate risks.

The Report makes 5 recommendations for effective due diligence:

1. Issuers should adopt a due diligence process that promotes the oversight of the process, promotes investigations into the information contained in the prospectus, promotes record keeping of significant matters, promotes verification of all material statements contained in prospectuses and involves the continuation of the process after lodgement of the prospectus to capture any further material issues arising after lodgement;
2. Issuers should adopt a “substance over form” approach to ensure prospectuses comply with the law and promote informed decision making by investors who are relying on the content of prospectuses;
3. Directors should take an active role in the process and ensure that a robust due diligence process is undertaken;
4. Competent expert advisors should be engaged to identify material matters in the preparation of the prospectus; and
5. Australian advisors should focus on effective overside of due diligence carried by foreign legal advisors.

The clear message in the Report is that issuers should adopt a more rigorous approach to due diligence, their obligations under Part 6D.2 of the Corporations Act and to prospectus writing.

If you require assistance with IPO due diligence planning please contact Andrew Bini.

Read More»

Landlords and Essential Safety Measures

We often receive enquiries from landlords and tenants concerning essential safety measures obligations and whether it is the landlord or the tenant who must comply with those obligations.

Essential safety measures (ESM) are defined in Part 12 of the Building and Regulations 2006 (Vic) and are essentially a broad range of obligations ranging from sprinkler and air-conditioning systems, fire extinguishers, exit signs and compliance inspection, reporting and maintenance.

Until May 2015 there was much confusion in the property industry over whether a landlord could require a tenant to comply with the ESM provisions.  Many existing lease documents attempted to make it the tenant’s responsibility for complying with and bearing the cost of compliance with the ESM provisions. However, even if existing lease documents do allocate responsibility for compliance, the position has since been clarified by the VCAT Advisory Opinion (Building and Property [2015] VCAT 478) opinion handed down on 1 May 2015 (Opinion).

Summary of the Opinion

The Opinion was sought to clarify, amongst other issues, who (landlord or tenant) is responsible for the cost of complying with Section 251 of the Building Act 1993 (Vic).

Section 251 of the Building Act provides:

• if the owner of a building or land is required under the Building Act 1993 (Vic) to carry out any work or do any other thing and the owner does not carry out the work or do the thing, the tenant of that building or land or any mortgagee may carry out the work or do the thing; and

• a tenant may recover any expenses incurred by it from the owner as a debt due to the tenant and deduct those expenses from or set them off against any rent due to the owner. 

The main points in the Opinion are:

1. if a landowner is required to undertake work or do a thing under Sction 251 of the Building Act 1993 (Vic) and related provisions in the Building Regulations 2006 (Vic) (Building Act) including ESMs, the cost of undertaking that work or doing that thing must be borne by the landowner.  This applies to leases regulated by the Retail Leases Act 2003 (Vic)(RLA) and leases outside the scope of the RLA , such as commercial leases; and
   
2. for some obligations the landlord may agree with the tenant for the tenant to meet the requirements, but at the landlord’s expense.

Status of the Opinion

While the Opinion is not binding on courts or tribunals, it will clearly influence VCAT Members and Judges of the Magistrates’ Court, County Court and the Supreme Court.

On that basis:

1. landlord’s should consider the Opinion as being a statement of the law which will be applied by VCAT and the Courts;
   
2. landlords should not charge ESM outgoings to tenants;
   
3. and landlords should reserve their right to charge ESM outgoings to tenants at a later date, should the Opinion not become law.

Recovery of ESM Outgoings by Tenants 

There is commentary that some tenants are considering whether they have claims against landlords for ESM outgoings that have been incorrectly paid by tenants.  It is suggested that only tenants who have substantial claims which justify taking action may consider seeking reimbursements of those amounts from landlords.

However, landlords should not automatically repay such amounts without considering:

1. the effect of Statute of Limitations which limits claims back to six (6) years;
2. whether in fact, it is commercially viable for the tenant to make a claim, especially in a jurisdiction such as VCAT which does not provide orders as to costs;
3. the extent of any benefit received by the tenant for the payments;
4. the possibility of future amendments to the Building Act;
5. the possibility that the Opinion will not be adopted by a subsequent court or tribunal, especially on appeal; and
6. a consideration of the relevant provisions of the Building Act.

Please contact Andrew Bini if you would like assistance with your leasing matters.

Read More»

Liquor Licensing and changes of directors and shareholders of Licensees

Quite often we are engaged to assist with the purchase of a licensed business which usually occurs by way of a sale by a licensed vendor of its business assets to a purchaser which is accompanied by an application to transfer the liquor licence to the purchaser.

Where the licensee is a corporation, an alternative method exists for effecting the sale of the licensed business, which involves the sale of shares in that corporation to the purchaser and a change of directors of that corporation.  This method does not require an application to transfer the liquor licence (as the liquor licence remains with the licensed corporation) but will require compliance with the Liquor Control Reform Act 1998 (Vic) (Act) which provides as follows:

1. Section 103 (regarding change of directors of a licensed entity):

• If a person ceases to be a director of a body corporate that is a licensee, the licensee must notify the Commission in writing within 14 days after the person so ceases;

• A body corporate that is a licensee must not appoint a person as, or allow a person to become, a director of the body corporate without the approval of the Commission under Section 104 (Penalty: 5 penalty units).

2. Section 103A (which deals with the change of “associates” which includes shareholders) provides:

• A licensee must within 14 days after the occurrence of either of the following events notify the Commission in writing of the event;

• That a person has ceased to be a shareholder; and

• That a person has become its associate. (Penalty: 5 penalty units).

3. Section 104 (regarding the approval of directors) provides, amongst other things:

• A licensee may apply to the Commission for the approval of a person to be a director of the licensee;

• The Commission must give a copy of an application under section 104 to the Chief Commissioner of Police;

 

• The Chief Commissioner of Police may object to the application on the grounds that the person is not a suitable person to be director of the licensee; and

 

• Further provisions regarding the timing of the notification of objections and extension to time.

 

On that basis:

 

4. The resignations of the vendor’s appointed directors of the licensed corporation will need to be notified to the Victorian Commission for Gambling and Liquor Regulation (VCGLR) within 14 days after they have resigned as directors (ie usually within 14 days after settlement of the sale of shares);

 

5. The transfer of shares of the licensed corporation will need to be notified to VCGLR within 14 days after settlement;

 

6. The appointment of the new directors as nominees on behalf of the purchaser  cannot occur without the VCGLR’s approval under section 104 (1) of the Act.   

 

Accordingly, any sale documentation will need to accommodate the notification requirements under sections 103 and 103A and be conditional upon the purchaser’s nominee directors obtaining VCGLR’S approval.

 

We can assist with the sale and purchase of licensed businesses, notifications to VCGLR and applications for approval.

Read More»

Ask about incentives when buying property 'off-the-plan'

With purchasers finding it increasingly difficult to secure the purchase of a property at auction, many are turning to private sale negotiations to buy a property not yet constructed based on plans and specifications. This is called buying "off-the-plan" and is regulated by the Sale of Land Act 1962 (Vic). 

When negotiating to buy a property "off-the-plan" be sure to ask the selling agent or developer if they are offering any incentives to you as part of the sale.  Many developers do this to sweeten the deal and ensure a quick sale. 

There are many different incentives a selling agent or developer can offer.  The more common incentives we see in off-the-plan contracts are:

1. A one-off contribution by the vendor to the purchaser's legal costs of say $2,000 (including GST);
    
2. Inclusion of a 'blinds package' (window furnishings to all windows) which must be installed in the property by the settlement date;
    
3. A stamp duty rebate paid to you at settlement by the vendor provided you effect settlement on the due date.  The rebate might be a partial or full reimbursements of stamp duty liability, remembering that you are entitled to a reduced stamp duty liability when buying "off-the-plan";
    
4. A free or discounted purchase price for an accessory lot, such as an extra carspace or a storage area;
    
5. Interest which accrues on the cash deposit (the deposit being usually 10% of the purchase price) is payable to the purchaser at settlement.  This is on the basis the purchaser effects settlement on the due date and otherwise complies with all of the requirements of the contract;
    
6. A free optional upgrade of certain item/s in the fitout schedule or for electrical appliance/s in that fitout schedule;
    
7. Free variations to the standard fitout schedule or floor plan;
    
8. Any legal fees charged by the vendor's lawyer, if the purchaser nominates a substitute or additional purchaser/s, being waived;
    
9. Any special condition of the contract which passes on the cost of the vendor obtaining owners corporation certificate/s to provide to the purchaser prior to settlement being waived.  Note that each certificate usually costs $165 (including GST);
    
10. The defects liability period in the contract being extended from say 3 months to 6 months;
     
11. For investor purchasers, a guaranteed rental return being provided at no extra cost (called a 'rent guarantee') for a 1 or possibly 2 year period;
     
12. Some developers might offer other incentives like frequent flight points or a free air ticket to fly to the property prior to settlement to view it;
     
13. For investor purchasers, a vendor might offer a depreciation schedule for tax purposes at no extra cost.  That depreciation schedule would be provided at settlement to the purchaser to provide to their accountant.   

If you are looking to buy a property "off-the-plan" speak to our Property Department today.  Have the proposed contract of sale checked by us and we can discuss if you have been offered any incentives.  You may not have been, and it is worth asking the question in any pre-purchase negotiation. 

Read More»