Lockdown and Stay Secure

We are all going through unprecedented times with most of us working from home. The uncertainty surrounding our health and work prompts us to think of doing things differently to what we have been for a significant duration.

I know you are overwhelmed with a morass of information in the present times with the COVID 19, however we wish to provide you with the following services that remain available and relevant whilst you are in self-isolation.

Estate Planning:

I can take instructions via a video call, email or a telephone call and assist you in preparing:

1) your Will;

2) an Enduring Power of Attorney (EPA) that appoints an attorney to take care of your financial matters in the event that you are unable to deal with them due to health conditions;

3) an Enduring Power of Guardianship (EPG) that appoints a guardian to take care of your medical requirements and lifestyle decisions in the event that you are unable to deal with them due to health conditions; and

4) an advance health directive (AHD) that enables you to make decisions now about the treatment you would want - or not want.

I encourage you to click on the links below to get more information on how these documents remain relevant in the present times:

1) https://www.publicadvocate.wa.gov.au/E/enduring_power_of_attorney.aspx

2) https://www.publicadvocate.wa.gov.au/E/enduring_power_of_guardianship.aspx

3) https://www.publicadvocate.wa.gov.au/A/advance_health_directives.aspx?uid=6428-3216-6581-9305

Contractual Liabilities

The uncertainty surrounding our work may leave some people with financial difficulties leaving them with thoughts on what happens to our liabilities. Some questions that people would commonly have relate to payment of mortgage monies, home rent, electricity charges, water charges, telephone and internet charges, council rates and charges.

Any liability that we regularly incur like mortgage monies, home rent, electricity charges etc. are contractual liabilities and pandemics do not relieve you from these ongoing liabilities.

Debt collection procedures

Businesses will need to reconsider their current debt recovery procedures as the following laws have temporarily changed:

1. Statutory Demands – the time for payment under statutory demands has been extended from 21 days to 6 months with an increase in the threshold owed before issuing the demand (from $2,000 to $20,000).

2. Bankruptcy notices – the time for compliance with a bankruptcy notice has been extended from 21 days to 6 months for a creditor to initiate bankruptcy proceedings with an increase in the threshold owed (from $5,000 to $20,000).

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf

Businesses must expect delays in payments from its debtors and must consider the following issues when negotiating payment terms with your debtors:

1. Get a written loan agreement with the debtor.

2. Take a security for the debt owed in the written loan agreement and register your interest with the relevant government agency to get the benefit of being one of the preferential creditors.

3. Despite delay, specify the dates for payment of debt. This is because, an agreement such as “I will pay you when I get paid” is vague, ambiguous and unenforceable.

I welcome you to contact me if you need any assistance in understanding your contractual entitlements liabilities, and assisting you in any taking any measures, on your behalf.

STAY HEALTHY AND STAY SAFE

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.

Archana Luktuke3 April 2020

Mr and Mrs Joe Bloggs contacted me to seek legal advice on a proposed commercial lease provided by the real estate agent for their upcoming coffee shop in suburban Perth.

Mr and Mrs Bloggs were being rushed into signing the proposed lease, which they were not comfortable with. They started by explaining how their friend, who runs a hair dressing salon, was provided with extensive written information and a proposed lease to review before executing it. This was in stark contrast to a small seven-page template that they received by way of a proposed lease from their letting agency. I explained to Mr and Mrs Bloggs that their friend and they are subject to separate leasing legislation, however their due diligence before signing the proposed lease will assist them in the long run. In Western Australia, leases for commercial premises can be categorised as retail leases and commercial leases. It is important to note that all commercial leases in Western Australia are not governed by the same legislation.

A summary of the safeguards that a potential lessee of a commercial lease must consider is discussed below.

Retail Leases

Retail leases are governed by Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the “Retail Shops Act”) and are limited to premises:

(a) with a lettable area of 1,000 m2 or less;

(b) used for carrying on a business and that are in a retail shopping centre (a group of premises, 5 or more) or otherwise; and

As at 1 January 2013, 'specified businesses' are limited to:

(a) dry cleaning;

(b) hairdressing;

(d) shoe repair (which includes key cutting and engraving); and

(e) sale or rental of videos tapes, DVDs, electronic games and other similar amusements.

Any landlord, whose commercial premises is governed by the Retail Shops Act, is bound by significant number of obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease. In comparison landlords, whose premises is governed by the Transfer of Land Act 1893 (WA) and the Property Law Act 1969 (WA), are not bound by any specific obligations as to the information he/she needs to disclose to a potential lessee prior to executing the lease.

The Retail Shops Act did not apply to Mr and Mrs Bloggs proposed lease. Therefore, began Mr and Mrs Bloggs’ due diligence journey before executing their commercial lease.

Commercial Leases

The real estate agent provided Mr and Mrs Bloggs with two documents – the Commercial Lease with Annexures and General Terms and Conditions of the Lease. Mr and Mrs Bloggs were seeking advice as to whether both these documents captured the terms and conditions of the agreement between the landlord and them.

Typically, most real estate agents would fill in the details in a Commercial Lease template published by Real Estate Institute of Western Australia (REIWA) and provide it along with the General Terms and Conditions of Lease, also published by REIWA, to any potential lessee.

The General Terms and Conditions of Lease document sets out the obligations and liabilities of the landlord and the potential lessee, however any potential lessee must review whether the following key details have been included in Commercial Lease document provided to him/her:

(a) whether the potential lessee and the landlord have been accurately identified (is the potential lessee and/or the landlord an individual or a company);

(b) whether any guarantors have been included in the lease;

(d) whether any other items (such as equipment) owned by the landlord are being included with the lease;

(e) the term of the lease;

(f) whether the potential lessee has an option or multiple options to renew the lease;

(g) the amount of rent and the frequency of payment of rent;

(h) the mechanism and frequency of rent review;

(i) what are the types of outgoings that the potential lessee is to pay and an estimated amount per month;

(j) whether a security deposit or bank guarantee will be held and for what amount;

(k) permitted use of the premises;

(l) whether the landlord has obtained approvals for the intended use and signage from the local council and the strata management (if applicable);

(m) whether the potential lessee has been provided with copies of approvals for intended use;

(n) insurance requirements to be complied with by the potential lessee; and

(o) how the agreement can be terminated and what is the notice period.

Mr and Mrs Bloggs proposed lease document had the following inadequacies:

(a) incorrect details of the proposed lessee – Mrs Bloggs was named as a lessee in place of the potential lessee company;

(b) the landlord had not obtained any approvals from the local council and the strata management for the intended use and signage although the terms stated otherwise;

If Mr and Mrs Bloggs would have signed up a lease with the inadequacies mentioned above, they would have put themselves in a financial predicament as the incorrect person would have been bound to comply with terms of the lease without any approvals to run the business at the premises and with no estimate of the costs towards outgoings.

Takeaway Message

Caveat emptor – buyers (in this case potential lessees) beware:

The clear message for any individual or entity considering a commercial (non-retail) lease is to undertake adequate due diligence and seek independent legal advice before executing any commercial (non-retail) lease.

Please note that any information included in this article is general information only and does not constitute legal advice. Please contact us to discuss your particular circumstances.