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Email Negotiations Creating a Binding Agreement to Lease

September 28th, 2016

Agreements to lease are frequently used in commercial leasing to bind parties to obligations for a future lease.  In the recent case of Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21 (“Vantage v Priolo”) the parties engaged in preliminary negotiations and were found to have reached an immediately binding agreement to lease through email correspondence.

Agreements to Lease

Agreements to lease are used to outline the obligations of parties in a future lease prior to the final lease being executed or prepared.  An agreement to lease must contain the essential elements of contract (offer, acceptance, consideration and intention) as well as outline the essential terms of an agreement to be binding.

Generally agreements to lease must be in writing and signed by the parties.  However, this recent case did not consider this a requirement for a binding agreement to have been reached.

The Facts

Vantage (the tenant) and Priolo (the landlord) had begun negotiations for a new lease.  Vantage was the present tenant and had leased the premises for six years.

Following email negotiations a revised proposal was sent to Vantage requesting that they confirm the terms were acceptable to them.  Vantage returned correspondence accepting the terms of the proposal and requested that draft documents be prepared.

Vantage delayed the return of the draft lease and after some time raised issue with some of the terms of the lease, particularly the make good obligations.  The parties continued to negotiate this point but never reached agreement.

Vantage later gave notice to Priolo purporting to terminate the current lease on the basis that they had been holding over the lease and no final agreement had been reached.  Priolo disputed this notice, asserting that a binding agreement to lease had been formed.

Decision

The question before the court was whether the parties had intended to create a binding contract based on the revised proposal terms that would later be substituted by formal documents.

The court held that an immediately binding agreement to lease had been reached on the basis that the parties had intended to be bound because:

  1. Vantage had occupied the premises for a long time and was familiar with the suitability of the premises;
  2. the parties were familiar with each other as reliable and trustworthy;
  3. Vantage was not seeking another premises at any point in negotiations;
  4. the proposal was accepted, contained all essential terms and no new more onerous terms; and
  5. the new lease was for the same duration as the prior lease.

Even though negotiations remained ongoing, no agreement to the disputed terms was reached and no formal documentation was entered into, the court found that a binding agreement had been made.

This decision highlights the importance of making your intentions apparent at the outset and throughout negotiations of any agreement.  It also highlights the importance of having formal documentation drawn by legal representatives, when you do wish to be bound by an agreement, to ensure that your interests are protected and that you are not bound to terms you do not necessarily agree with.

For more information about this issue and all leasing enquiries, please contact our office on 07 4036 9700.

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Brangelina no more

September 23rd, 2016

The internet has almost broken again this week with the news breaking that on 19 September 2016 Angelina Jolie filed for divorce from Brad Pitt.

The couple have been together for 12 years, they married in 2014 and have six children together.

Jolie has hired infamous Hollywood divorce lawyer Laura Wasser, who also represented Johnny Depp in his recent divorce from Amber Heard.  Wasser also acted for Jolie in her divorce from Billy Bob Thornton in 2003.

In the filed divorce papers, Jolie cites irreconcilable differences as the reason for the breakdown of their marriage.

In the United States, each state deals with family law separately and has different laws that apply, Jolie has filed in the state of California.

However, in Australia, family law is dealt with in a federal jurisdiction, with the same legislation applying across the whole of Australia.

As with all other relationship breakdowns, Jolie and Pitt must now attend to separating their finances and putting into place parenting arrangements for their six children.

Brangelina have made millions between them since the start of their relationship, but the biggest battle could end up being over their children.

Reports are now surfacing that Pitt has anger management and substance abuse issues which are affecting him and his care of the children.

When considering parenting arrangements the court will always look at what is in the best interests of the children.  This includes maintaining a meaningful relationship with both parents and protecting the children from harm.

Parents are encouraged to make arrangements that meet the needs of the children.  The court will make decisions based on the unique circumstances of each child and family.

If you would like to discuss your separation please contact our family law team.

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Queensland Introduces New Smoke Alarm Laws

September 20th, 2016

Many will remember the 2011 house fire at Slacks Creek in Logan, which claimed the lives of 11 people.

As a result of the house fire, a coronial inquest was held between 14 and 25 August 2014, in which the circumstances surrounding the house fire were investigated.

As a result of the coronial inquest, the Queensland Government recently passed the Fire and Emergency Services (Domestic Smoke Alarms) Amendment Act 2016 (“the Act”)The Act, which will commence operation on 1 January 2017, will make a number of important changes to Queensland’s smoke alarm regulations.

Photoelectric Alarms

One of these changes is in relation to photoelectric alarms.  Photoelectric alarms, compared with the standard ionisation alarms, are proven to be much faster in detecting smoke.  Any smoke alarm that is replaced after 1 January 2017 must be replaced with a photoelectric alarm.

Requirements Under Australia Standards

The Act will also require compliance with an additional Australian Standard in fire safety.  Pursuant to the additional Australian Standard, residents will be required to ensure:

  1. that smoke alarms are interconnected so that it will not matter which part of the house a fire may start in because once one alarm is triggered, all alarms in the house will be; and
  1. that all bedrooms and hallways are equipped with smoke alarms.

When Do The Changes Come Into Force?

As mentioned above, any smoke alarm that is replaced after 1 January 2017 must be replaced with a photoelectric alarm.

Also as of this date, new or substantially renovated buildings must be fully compliant with the new laws.

From 1 January 2022, all dwellings sold or leased must be compliant with the new laws and, from 1 January 2027, all dwellings state-wide must be compliant.

Conclusion

It is important for residents to be aware of the new laws so they can benefit from the enhanced safety features they provide and to also avoid the penalties associated with non-compliance.

Landlords, vendors and developers will also need to be aware of these changes, as it will be their responsibility to ensure that the dwellings they are leasing, selling or building are compliant.

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The importance of properly drafted special conditions

September 19th, 2016

A recent case before the Supreme Court of Queensland reminds us about the importance of properly drafted special conditions in contracts, particularly those for sale and purchase of land in Queensland.  In International Palace Pty Ltd v Novaheat Pty Ltd [2016] QSC 75 a contract was entered into for the purchase of vacant industrial land.  The contract was a standard form contract for Commercial Land and Buildings.

The contract included a due diligence clause, that was not clearly drafted, stating “This contract is subject to and conditional upon due diligence period to be satisfied on or before 40 days from contract date.”  When the purchaser did not provide notice satisfying, waiving or terminating the contract at the end of the due diligence period the vendor gave notice terminating the contract.

The purchaser disputed the validity of the termination and went on to satisfy the due diligence condition a few days later.  The issue before the Supreme Court was whether the vendor was able to validly terminate the contract under a condition that was solely for the benefit of the purchaser based on the construction of the condition.

Even though the condition was for the sole benefit of the purchaser, by failing to give notice of satisfaction or otherwise of the condition by the due date, the contract was voidable by either party.

This decision highlights the importance of critical dates as well as good drafting.  It may be that if the special condition to the contract was more clearly drafted the parties could have avoided this costly litigation.

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Personal Property Securities Update

September 16th, 2016

Registering your interests – the importance of correct identifiers

The importance of correctly registering a security interest on the Personal Property Securities Register (“the Register”) cannot be overstated.  Whilst the process for registration is very simple and anyone is able to do it, it is very important to know the rules behind using the Register.

This lesson is highlighted in the recent decision of the NSW Supreme Court In the matter of Accolade Wines Australia Limited and other companies [2016] NSWSC 1023 (“Accolade Wines”).  On a review of the company’s Personal Property Securities Registrations, it was discovered that a number of registrations may be invalid due to incorrect recording of the grantor details.

The Personal Property Securities Act (“the Act”) has specific requirements for what identifiers you may use when registering a security on the Register against different entities:

  • for individuals – the date of birth of the person must be provided;
  • for companies – charges must be registered against the ACN; and
  • for other entities (such as partnerships or trusts) – charges must be registered against an ABN, where one exists.

Failing to register with the correct grantor identifier will invalidate a registration.  In Accolade Wines, the company had registered interests against customers’ ABN’s instead of ACN’s as required.  To rectify the error, they created new registrations and sought orders from the court allowing extra time for registration as this error was inadvertent.  The extension orders were allowed on the basis that there was little or no prejudice to creditors or shareholders by allowing the extension of time.

This decision shows us that whilst it is possible to rectify errors in registrations, it will in most instances create risk and involve costly applications to the courts.

Expiration of Transitional Period

Another important reminder is that the transitional period for charges formerly registered with ASIC prior to the Register will expire on 30 January 2017 (five years from the registration commencement date for the Register).

Section 337 of the Act provides that registrations (with no stated end date) are temporarily unaffected by defects in registration (for example, registrations not citing serial numbers on certain types of collateral or registration against an incorrect grantor identifier).  This was to allow time for defective registrations to be amended to make them compliant with the Act.  Following 30 January 2017, these types of registrations will no longer be protected by this provision as the transitional period will have come to an end.

It is important that if you have not already reviewed transitional charges from previous registers (such as that maintained by ASIC), you should ensure that they are compliant with the Act prior to the end of this transitional period so that your registration does not become invalid.

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Amendments to Retail Shop Leases Act

September 14th, 2016

The Retail Shop Amendment Act 2016 received royal assent in May 2016.  The Queensland Government has now announced that the amendments will come into effect on 25 November 2016.  There are a whole suite of changes to the Retail Shop Leases Act that will affect all Retail Shop leases.

Some of the more notable changes:

  • any retail tenancy over 1,000m² will no longer be considered to be a retail shop and will no longer be covered by the Act;
  • disclosure periods (for example the seven day lessor disclosure notice period) can now be waived;
  • current lessor disclosure statements will need to be provided on the exercise of options;
  • major lessees can now waive the protections regarding rent review provisions (eg. multiple mechanisms for review and ratchet rent provisions);
  • the relocation provisions will now apply to all relocations (not just those where vacant possession is required to facilitate refurbishment, extension or redevelopment of the centre);
  • on assignment, both assignee and guarantors will be released from their obligations if the disclosure requirements are complied with; and
  • refurbishment clauses will be void if they do not detail when and what refurbishment needs to occur.

Keep an eye out for our upcoming business seminar on the amendments and what you need to know, as the changes are sure to affect all landlords and tenants of retail shops in one way or another. For more information about the changes and how they affect you contact our property law department.

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Protecting assets – can you trust in your trust?

September 13th, 2016

A common misconception is that assets held in a trust are protected from family law property settlements.

The reality is that trust assets can be taken into account in property settlements as if they were assets of a party.

Whether trust assets form part of a family law property settlement will depend on the facts and circumstances of each case, including but not limited to:

  • the nature and acquisition of the trust assets;
  • the party or parties who have control of the trust;
  • the relationships of the parties involved in the trust; and
  • the benefits received from the trust.

Our family law team can assist you with clarifying your position regarding your trust and how they relate to your property settlement.

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Changes to Energy Disclosure Laws for Commercial Buildings

September 6th, 2016

In 2010, the Commonwealth Government implemented the Commercial Building Disclosure Program (“Disclosure Program”).  The Disclosure Program mandates the disclosure of energy efficiency for commercial spaces and was introduced to provide incentive for commercial building owners to improve their energy efficiency.

Pursuant to the Disclosure Program, corporate sellers and lessors of certain commercial spaces are required to obtain a Building Energy Efficiency Certificate (“Efficiency Certificate”) before putting the property on the market.  The Efficiency Certificate must be provided to the prospective buyer or lessee at the time of the sale or lease.  To obtain an Efficiency Certificate, the seller or lessor must engage a Commercial Building Disclosure accredited assessor.

Currently, an Efficiency Certificate is required by a seller or lessor when:

  1. the total area for sale or lease is 2,000 square metres or more; and
  2. the total office space in the building comprises at least 75 per cent of the space by net lettable area.

Recently, the Commonwealth Government has announced that the scope of the Disclosure Program will be expanded.

As of 1 July 2017, an Efficiency Certificate will be required if the total area for sale or lease is 1,000 square metres or more, as opposed to the current 2,000 square metres.

As a result of the change, a number of lessors and sellers who were not required to obtain an Efficiency Certificate, will be.  Indeed, the Commonwealth Government, in its media release announcing the change, has estimated that an additional 1,000 commercial buildings will require an Efficiency Certificate a result of the change.

It is particularly important to be aware of the change to the Disclosure Program because failure to comply can result in hefty penalties.  A court may impose penalties of up to $180,000.00 for the first day of non-compliance and up to $18,000.00 for each subsequent day of non-compliance.  Alternatively, the Department of the Environment and Energy may issue an infringement notice of up to $18,000.00 for the first day of non-compliance and up to $1,800.00 for each subsequent day.

Owners of buildings with more than 1,000 square metres of lettable space, and which are predominantly office buildings, will need to prepare for the change by obtaining an Efficiency Certificate before the Disclosure Program changes on 1 July next year.

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