3 FAQ's from Victorian retail leasing tenants

The following are typical of the FAQs we receive from tenants:

1. I have been given a Letter of Offer to lease retail premises by the landlord’s real estate agent.  What should I do now?
   

   Ideally, you should not sign the Letter of Offer before:

   1. conducting physical due diligence of the building structure and the landlord’s fixtures, plant and equipment contained within it.  In this regard, we recommend a building report be obtained from a qualified tradesperson.  Similarly, a suitably qualified tradesperson should inspect all landlord fixtures, plant and equipment within the premises, such as air-conditioning, for example.  Any problems arising out of those reports should be dealt with as amendments to the Letter of Offer, requiring the landlord to rectify those problems prior to the commencement of the Lease; and
   2. speaking to a retail leasing lawyer.  The lawyer should conduct legal due diligence of the premises and the landlord and advise you on the terms of the proposed Lease as described in the Letter of Offer.   If necessary, the lawyer may be able to negotiate any changes you may require to the Letter of Offer before it is signed.   The lawyer should also advise you on whether the Letter of Offer constitutes a binding agreement to enter into the proposed Lease. Many Letters of Offer we see require tenants to pay significant deposits to the landlord’s agent. Those deposits may be jeopardised if the tenant does not proceeding with the Lease after having signed the Letter of Offer.
2. After signing a Letter of Offer, I have been given copies the landlord’s Disclosure Statement signed by the landlord and Lease documents for execution.  What should I do now?
    
   Ideally, you should provide the documents to a retail leasing lawyer to:
   
    
   1. ensure the terms of the documents correspond with what you have agreed to in the Letter of Offer and to check the terms of the documents against the requirements of the Retail Leasing Act 2003 (Vic) (RLA);
   2. advise you on the wider legal terms of the Lease which were not mentioned in the Letter of Offer;
   3. seek amendments to the terms of the documents which do not correspond with the Letter of Offer,  the RLA  or your understanding of how you will occupy the premises; and  
   4. advise you on the tasks you (as the incoming tenant) may need to undertake before you can take possession of the premises, which may include:
      1. obtaining the landlord’s approval to any proposed fitout;
      2. the provision of a cash security deposit or obtaining a bank guarantee (and complying with the requirements for bank guarantees under the terms of the Lease); and
      3. obtaining public liability insurance coverage which complies with the insurance requirements of the Lease (which will usually include noting the landlord’s interest as an insured party on the insurance policy);
   5. assist with the timely execution and return of the Lease documents to the landlord’s agent; and
   6. seek from the landlord the return of the fully executed Lease documents and, where relevant, the consent of any mortgagee on title to the grant of the Lease by the landlord.
   
   
   
   
3. I have entered into a Lease and have taken possession of the premises.  Is there anything more I should do concerning the Lease?
   
   
   Yes, at a minimum you should:
1. ensure you and your employees comply with the various obligations applying to the tenant under the Lease document;
2. ensure that you and your employees comply with the tenant’s obligations under any building rules which might apply (where the premises are located within a larger building: for example, a shopping centre);
3. diarise the last day you can exercise any option to renew the lease for a further term (noting that if you exercise the option after that last date, the landlord might not be obliged to extend or renew the Lease);

If you would like assistance with your retail leasing, please contact Andrew Bini, Senior Commercial Lawyer at Nevett Ford Melbourne.

 

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PPSR - Audit and amend your apparent credit risk profile

The Personal Properties Securities Register (PPSR) established under the Personal Properties Securities Act 2009 (Cth) (PPSA) records security interests held by creditors over certain personal property of debtors.

A consequence of registration of security interests over the assets of a debtor, is that registration may also provide an indication of the apparent credit risk of the debtor to the world at large. For example, numerous PPSR registrations over a company is likely to indicate that the company may be indebted to numerous creditors. This may have an impact on that company’s ability to raise necessary finance.

However, not all registrations of security interests on the PPSR may be current or legitimate.  It’s common with some debtors that their PPSR registration profiles may contain registrations which no longer apply, or worse, were improperly recorded on the PPSR.

We have been advising clients that if they wish to improve their apparent credit risk profile on the PPSR, they should seek to have the non-current and improperly registered security interests removed from the PPSR.

The PPSA sets out a process for dealing with those registrations, which involves:

• written demands by the debtor to the secured parties to remove or amend the registrations on the basis that the registrations no longer (or never did) secure any obligation from the debtor to the secured parties, including the payment of monies owed (e.g. in circumstances where the debtor has paid the creditor/secured party all amounts owed); and
• if the secured parties do not remove or amend the registrations within 5 business days of service of those written demands, the debtor may apply to the Registrar under PPSA and seek assistance to have the registrations amended or removed.

If you would like assistance with the removal or amendment of registered security interests on the PPSR, please contact Andrew Bini.

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Crowd-sourced equity funding arrives in Australia

 

In March 2017, the Corporations Amendments (Crowd-sourced Funding) Bill 2016 passed the Senate with the resulting Act to take effect in late September this year. 

Without a doubt, this is a significant piece of legislation as it will provide certain Australian corporations with an avenue to raise equity finance outside the current onerous and expensive regime.  The previous legislation, Chapter 6 D of the Corporation Act 2001 (Cth), was clearly designed for more substantial capital raising activities by larger well-resourced listed public companies. 

The Bill should assist smaller companies and start-up ventures (which usually have small asset bases and speculate futures which are unattractive to traditional debt financiers) to raise equity finance.

Perhaps one of the better descriptions of the operation of Bill is on the Australian Parliament website which states:

“Crowd-sourced equity funding (CSF) is a relatively new concept and is enabled by the rise of internet technologies. As the name suggest, it allows businesses to obtain capital from a large number investors (that is, a crowd) through an online platform, where each investor typically contributes a small amount of money in return for an equity stake in the business.

At its most basic level, CSF allows people to invest in unlisted shares issued by businesses.

CSF has gained attention because access to finance is considered a major impediment to improved productivity and innovation, particularly for smaller and/or newer businesses that are not able to access the more traditional sources of financing. CSF can notionally help to alleviate some of these constraints by introducing an additional source of finance for these firms. However, the current regulatory framework imposes burdens and costs that are considered significant impediments to more widespread utilisation of CSF in Australia. 

The proposed changes in this Bill are intended to alleviate these constraints. In its broadest form, the Bill will allow small companies, which would otherwise find it difficult to raise money through traditional sources of finance, to raise money from the general public through an online platform. The proposed changes are also intended to improve investment opportunities for retail investors. However, since small businesses and start-ups also pose a greater relative risk for such retail investors, the proposed amendments also aim to provide protection to these investors by imposing caps on the investments in any single offer and by imposing information and gatekeeping requirements on licensed CSF intermediaries.” 

Clearly, the new fundraising changes focus on raising money from the public in an online regime through licensed CSF intermediaries.

Amongst other changes to the Corporations Act, the Bill introduces a new Part 6D.3A of the Corporations Act, titled “Crowd- sourced funding”.

In a nutshell, amongst other things, new part 6D.3A:

• defines the types of companies that may make offers (“eligible CSF companies), which are unlisted Australian registered public companies limited by shares which do not have a substantial purpose of investing in securities or interests in other entities and which meet an assets and turnover test (must be less than $25 million in both cases);
• sets an issuer cap of $5 million which an eligible CSF company may raise in a 12 month period;
• establishes the requirements of CSF offer documents including the mandatory use of CSF intermediaries and “offer platform” on which CSF offer documents are to be published;
• defines when offers are open and closed and the period during which offers may be open;
• sets out numerous obligations on the gatekeepers- i.e. the CSF intermediaries and how they operate their platforms and deal with application monies amongst other things;
• defines when CSF offer documents are defective and the consequences of defective documents and the liability of directors and other parties;
• describes when a retail investor applicant may withdraw their application (by providing a 48 hour cooling off period);
• provides a cap on investment by retail investors ($10,000);
• prohibits a company or a CSF intermediary financially assisting retail investors in acquiring securities
• provides restrictions on advertising CSF offers; and 
• provides that certain companies may be eligible for exemption from certain governance requirements in the Corporations Act.

Given that the majority of companies in Australia are proprietary limited companies, which by definition in the Corporations Act are not public companies, the Bill will not afford proprietary limited companies the ability to participate in the crowd-source funding regime.

 

However, the Federal Government has indicated an intention to introduce further legislation to enable proprietary limited companies to access the crowd-sourced funding regime in the near future.

If you would like further information on crowd-sourced equity funding including the conversion of your existing company into an entity which would qualify as an eligible CSF company, please contact Andrew Bini Senior Commercial Lawyer at Nevett Ford http://nfmelbournelawyers.com.au/index.php

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ASIC warns about scam emails

On 17 January 2017, ASIC issued a Media Release warning its customers to be vigilant of a scam involving emails to customers purporting to be issued by ASIC.

The media release reports that ASIC “is aware of some customers having received emails containing attachments or links to the fake invoices.  Fake emails may look different to ASIC emails and generally instruct the recipient to click a link to make a payment or download an invoice”.

The media release suggests the scammers are using viruses, spyware or malware programs to access or steal personal information of ASIC customers.

Corporate entities and those within those companies who have company secretarial responsibility should be vigilant about responding to emails purporting to be issued by ASIC.  If there is any doubt about the authenticity of an email purporting to come from ASIC the recipient is urged to notify ASIC.  

The Media Release also suggests suspected scam emails be notified to the ACCC via Scamwatch “Report a scam” page.

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Renewing Victorian Retail Leases

Where a tenant has an option for a further term granted to it under the terms of a lease (or a subsequent deed varying the lease), in the majority of cases for standard commercial (non-retail) leases it is the tenant that takes the first step in exercising the option.  

For the exercise of the option to be valid, the option must be exercised within the option exercise period defined in the lease.  If the tenant exercises its option outside the option exercise period, the landlord is generally not obliged under the terms of most leases to renew the lease for the further term, and the lease will terminate at the end of the current term.

However, for leases of “retail premises” governed by the Retail Leases Act 2003 (VIC) (Act), the landlord is required to act first.

As mentioned in our earlier blog on 13 October 2016, Section 28 of the Act 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 (Last Date for Exercising the Option).  That notice (Notice) is to be given at least 6 months and no more than 12 months before the Last Date for Exercising the Option. 


• However, the landlord is not required to provide the Notice if the tenant exercises or purports to exercise the option before receiving the landlord’s Notice;


• 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 for the Exercising Option is extended to a date which is 6 months after the date landlord provides the Notice to the tenant (Extended Last Date);


• If the Extended Last Date occurs after the expiry date of the current term set out in the lease, the lease continues until the Extended Last Date; 


• If the tenant exercises the option prior to the Extended Last Date, the new lease commences at the expiry date of the old lease, rather than the total term of the lease being extended.

Consequently, an unplanned extension of the option exercise period may occur where a landlord fails to provide, or is late in providing, the Notice to the tenant.

For tenants, however, it would be prudent to formally exercise their option for a further term within the option exercise period, rather than wait for the landlord to serve the Notice.  Section 28 does not prevent tenants from the exercising their options prior to receiving the Notice.

In circumstances where:

1. a retail leasing tenant has failed to exercise its option for a further term within the option exercise period recorded in the lease; and


2. the landlord has indicated that it is not willing to accept the tenant’s exercise of its option outside that option exercise period, and has required the tenant to vacate the premises at the end of the current term.

Section 28 may provide a solution (by extending the Last Date for Exercising the Option) if the landlord has not served the Notice on the tenant.

If you require assistance regarding exercising an option under a retail premises lease in Victoria, please contact Andrew Bini, Senior Commercial Lawyer, Nevett Ford Melbourne. 

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Retail Leasing

Landlords should avoid delays in providing executed Lease document to tenants

Section 22 of the Retail Leases Act 2003 (Vic) (RLA) provides:

1. Within 28 days (or such other period as is agreed in writing between the landlord and the tenant) after being given a copy of the retail premises lease signed by the tenant, the landlord must give the tenant a copy (which may be a photocopy) of the lease signed by the landlord and the tenant.


2. If the landlord fails to provide the executed lease to the tenant within that period, the tenant may give the landlord a written notice of termination of the lease at any time within 28 days after:


1. the tenant is given a copy of the lease signed by the landlord and the tenant; or


2. entering into the lease, 

whichever happens last.

1. If the tenant gives the landlord a notice of termination in accordance with the above, the lease terminates 14 days after the notice is given.

Accordingly, Section 22 requires a landlord to give to the tenant a copy of the lease document signed by both the landlord and the tenant within 28 days of receiving a copy of the lease document signed by the tenant.

A failure by a landlord to provide the fully executed lease document to the tenant within that 28 day period, places the tenant in a position where the tenant obtains a window of opportunity to terminate the lease.

In an effort to avoid the situation where the tenant is empowered to terminate the lease under Section 22, we suggest that if, prior to the execution of the lease documents, a landlord anticipates a delay in returning the fully executed lease document to the tenant, then the landlord should ensure the lease contains a provision which allows the landlord to return the executed lease document to the tenant outside of the 28 day period. This is allowable because Section 22 clearly states “within 28 days, or such other period as is agreed in writing between the landlord and the tenant”.

If you require assistance with retail leasing please contract Andrew Bini. 

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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.

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