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COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

New Laws

The NSW Government now has the power to set new rules for retail landlords and tenants, the details of which will be known in coming days.

Although the new laws (currently) only relate to retail leases, nevertheless there are substantial challenges for both commercial and retail tenants and landlords to consider as set out below arising from the COVID-19 situation.

What is expected?

For retail tenants and landlords it is expected that the new laws will address such matters as evictions, bank guarantees/bonds, tenant defaults, rent abatements, and mandatory/core trading hours.

Caution must therefore be exercised when purporting to rely upon a lease term as it may be modified or prohibited under the new regime.

What about force majeure and rent abatement clauses?

Contractual force majeure provisions (ie, events beyond the reasonable control of a party) and rent abatement clauses will have important significance and need to be carefully considered in terms of the rights, remedies and obligations they create for both landlords and tenants.
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Obtaining access to a neighbouring property

If there is a close boundary between your property and your neighbour’s property, temporary access to your neighbour’s property may be required if you intend to carry out works to your property, such as renovations.

Obtaining access

If you and you neighbour agree to terms of access, it is beneficial for both parties to enter into a licence agreement to set out the terms of the access including, the length of time and any agreed compensation. However, if initial negotiations between yourself and your neighbour fail, you make need to seek a statutory order to permit access.

Access orders

Access orders are more appropriate if the access sought is temporary. In the event the access required is long term (for example a right of way) an easement may be more suitable. Under the Neighbouring Land Act 2000 (Act), the Local Court can grant an order permitting access for the purposes of carrying out work. Section 12 of the Act outlines the type of work and includes constructions, repairs, maintenance, alteration, renewal or demolitions of buildings.
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Tax Sting – Living/Moving Overseas

If you are living and conducting a business outside of Australia, you may still be liable to pay tax to the Australian Government if you are considered to be a “resident” for tax purposes.

Who is a Resident?

Essentially a “resident of Australia” or “resident” for the purposes of the Income Tax Assessment Act 1936 (1936 Act) is a person whose domicile is in Australia unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia.

What is a Permanent Place of Abode?

In the recent Federal Court of Australia decision of Harding v Commissioner of Taxation the concept of “permanent place of abode” was discussed at length.

The key features of that case were:

  • ✔ the appellant was an Australian citizen who had lived outside of Australia for 17 years of the previous 20 years (specifically in Bahrain to commute to his work in Saudi Arabia)
  • ✔ in the prior court decision, the primary judge:
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Purchasing off-the plan: is it the right way to go?

Purchasing off the plan

An off the plan contract refers to a contract for the sale of a residential lot (the subject lot) that has not been created at the time the contract is entered into. Essentially, a purchaser is buying a house or apartment before construction has finished. New laws set to commence on 1 December 2019 aim to provide stronger protection for purchasers in response to a number of concerns arising from recent off the plan developments. Whilst the process of buying a brand new property (as is the case with off the plan) can be exciting, it is prudent for purchasers to consider a number of matters and obtain legal advice before committing to the contract.

Contract terms and safeguards for purchaser

Firstly, purchasers should mindful that they are purchasing from a developer and that contracts (often lengthy), have been tailored to benefit the developer and protect their interests. For example, the contract may contain a clause permitting the developer to terminate the contract if a certain numbers of sales are reached. The clauses are often complex and lengthy making it harder to identify unfair contract terms.
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Changes to Property Transactions

The Conveyancing (Legislation) Amendment Act 2018 introduces changes that will provide better protection for purchasers buying property off the plan and more flexibility to those using electronic land contracts and deeds.

Off the plan Contracts:
An off the plan contract is used to sell a property such as a strata unit without its own separate title, given the property does not exist at the time contracts are exchanged.

Off the plan contracts can be beneficial to both property developers and purchasers. For property developers, finance is generally dependent on the percentage of lots that have been pre-sold.

For purchasers, these off the plan contracts are a popular way to enter the property market. This is because the construction and settlement periods can take years, providing extra time for buyers to save funds required for settlement.

However, due to the very nature of the transactions, off the plan purchasers are particularly vulnerable to the actions of developers. The new laws aim to address this vulnerability.
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Unjust Put and Call Options – When a developer Comes Knocking

When a developer approaches you to buy your home (and you’re interested), you need to ensure you get as many facts as you can and seek legal advice. Sometimes the developer may not wish to purchase your land straight away, and you may enter into an agreement to sell and purchase land in the future.

A ‘Call option’ is essentially an approved right granted to the buyer by the seller of a property. This right requires the seller to sell the property to this buyer on the agreed terms at a future point in time. For example, you agree to sell you home to the developer in 2 years for a million dollars. A call option is beneficial in that the price agreed upon will not change irrespective of pricing fluctuations in the property market. A ‘put option’ is an approved right granted to the seller by the buyer. This right enables the seller to request the buyer to buy the land at a future point in time.
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Commercial Law – Tips for Small Business

Commercial Law – Some tips for small business owners

Many people operate small businesses and many people are setting them up. From a commercial law perspective here are a few simple but effective tips:

  • It is well known that you should try and separate assets from business risk. That is why many people operate under a company structure. It follows that you should not use the trading company to acquire any assets, that is, other than the business itself. For example, premises should be purchased in another name and, if possible, any valuable assets such as intellectual property or even expensive equipment should be held in another name and licensed to the trading entity.
  • If a husband and wife operate a business under a company structure there is no need for both to be directors (as opposed to shareholders). The role of director carries considerable personal risk and there is no need to expose all the couple’s personal assets to that risk.
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Does an AirBnb arrangement create a lease or licence?

Due to the advent of online letting platforms such as AirBnb, short-term rentals have become increasingly popular. However, these kinds of arrangements present many legal ramifications.  The case of Swan v Uecker [2016] VSC 313 is a recent example of how AirBnb can create confusion about whether such arrangements can be classified as a lease or licence.

The Facts:

A landlord leased a two bedroom apartment to a tenant under a lease. The terms of the Lease permitted subleasing but required the consent of the landlord. . However, without consultation with the landlord, the tenant entered into what they classified as “licences” with Airbnb guests. These “licences” allowed AirBnb guests to stay in the apartment for between three and five days and occupy the entire apartment without the tenant being present. As part of the arrangement, all of the bookings were made online, the guests agreed to leave at the end of their stay and the premises were said to be the tenant’s principal place of residence.
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