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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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AIRBNB – LEASE OR LICENCE?

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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Property Law – Retail Leases Act Changes

Parties to retail leases need to be aware of amendments to the Retail Leases Act 1994 (NSW) (“RLA”) that have come into effect on 1 July 2017.

Some of the key changes to leasing of retail premises and their effects are identified below:
  • New Lessor Disclosure Requirements– Requires full disclosure in the lessor’s disclosure statement of any obligation of the lessee to contribute to the lessor’s outgoings and prevents recovery from outgoings that are not disclosed. This means a lessee will not be liable to pay any amount in respect of any outgoings unless the liability to pay the amount was disclosed in the disclosure statement for the lease.
  • Turnover Rent – Lessees may find shelter from turnover rent clauses in leases by utilising online transaction which now excludes online sales revenue, except where the goods are delivered from or at the premises (or the Centre) or where the transaction takes place while the customer is at the premises.

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Property Law – CBD Changes

Property Law – Background

The Commercial Building Disclosure (CBD) Program is a regulatory program that requires the mandatory disclosure of a building’s energy efficiency information to the market when commercial office space above a certain size is offered for sale or lease.

The CBD Program is an initiative of the Council of Australian Governments (COAG). It was established by the Building Energy Efficiency Disclosure Act 2010 and is managed by the Australian Government Department of the Environment and Energy.

Changes Made

In essence:

  • from 1 July 2017 the mandatory disclosure threshold on commercial office space will decrease from 2000 square metres to 1000 square metres
  • this means owners and landlords of smaller commercial office buildings may need to disclose the building’s energy efficiency when they sell or lease their property after this date

Tips

Our Matthews Folbigg Property Law team recommends building owners/landlords, tenants who sub-lease and real estate agents:

  • review these property law changes
  • seek the assistance of a property lawyer to understand the impacts of these property law changes

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Property Law tested by Developer

Jobema Developments Pty Limited is the first developer to test the new property law introduced by the Conveyancing Amendment (Sunset Clauses) Act 2015, which requires vendors to either obtain the consent of purchasers before they can rescind an off-the-plan contract in reliance on a sunset clause in the contract, or to obtain the permission of the Supreme Court to do so.

Facts:

In this case, Jobema, the defendant, purchased a development site from Xycom, who had exchanged a number of off-the-plan contracts with a sunset date for the registration of the strata plan of 31 December 2015. As part of the purchase, Jobema would assume Xycom’s obligations under the exchanged off-the-plan contracts, one of which was with Mr Wu.

Xycom had carried out minimal work on the project before it had been sold. While Jobema commenced work immediately, the project was not completed by the sunset date. As required by the new legislation, notice of the proposed rescission was served on Mr Wu and the notice cited several reasons for the delay and the proposed rescission. Mr Wu did not consent to the rescission and Jobema subsequently applied for leave in the Supreme Court under the Conveyancing Act.
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Property Law changes to Off-the-Plan Contract

As of 2 November 2015, property law in New South Wales has changed in relation to off-the-plan contracts, giving purchasers increased protection which make it harder for developers to enact sunset clauses to cancel contracts. This applies to all contracts for sale, even those already entered into.

A sunset clause is traditionally included in an off-the-plan contract in order to allow a buyer or developer to rescind if completion has been delayed. However, some developers have been using abusing these clauses, intentionally delaying a project in order to cancel existing contracts and then resell to new buyers at a higher price to reflect the current market.

With the Conveyancing Amendment (Sunset Clauses) Act 2015 introducing s66ZL into the Conveyancing Act, developers must now provide purchasers with written notice of their intention to rescind no later than 28 days before the sunset date and specify why they are proposing to rescind the contract and the reason for the delay in creating the subject lot.
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New South Wales moving towards a paperless conveyancing future

The introduction of Version 2 of the Conveyancing Rules means that any discharge of mortgage signed on or after 1 March 2017 must be lodged by the discharging mortgagee or its representative, except where the discharge is to be lodged with any other dealing affecting the same folio(s) of the Register (e.g. a transfer of land and/or a mortgage).

Providing a stand-alone discharge to the registered proprietor to lodge at the Land and Property Information shall no longer be allowed

In addition to the above, if the mortgagee is an ADI (authorised deposit-taking institution under the Banking Act 1959 [Cth]):

  • A mortgage or discharge of mortgage to which the National Credit Code applies, signed on or after 1 March 2017 must be lodged electronically, except where lodged with any other dealing affecting the same folio(s) of the Register.
  • If an incoming mortgagee in a refinance transaction is also an ADI, any combination of mortgage and discharges of mortgage signed on or after 1 August 2017 must be lodged electronically, except where they are to be lodged with any other dealing affecting the same folio(s) of the Register

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Norwest Legal Office

The Hills area of Sydney is rapidly growing and recognizing this growth, Matthews Folbigg Lawyers has opened a legal office in the heart of Norwest to service the needs of private clients in this flourishing community. Located at 12/4a Meridian Place BELLA VISTA, private clients requiring assistance with matters relating to Personal Injury, Family law, Wills & Estate Planning and Property are now able to meet with a lawyer at Norwest simply by phoning for an appointment (9635 7966) and requesting to meet a lawyer at the Norwest office.

Matthews Folbigg is one of the largest law firms outside of the Sydney CBD and has specialist lawyers in Compensation Law, Family Law, Wills and Estate Planning and Property, available at Norwest by appointment. The personal injury lawyers at Matthews Folbigg have a reputation for maximising compensation claims and helping everyday people win and with over 50 years experience in compensation law, our lawyers can guide you through the actions you need to take on a NO WIN NO FEE BASIS.
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