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Commercial Leasing Tips for Landlords – Repairs, Maintenance and Make Good Provisions

If you own commercial premises that you rent out, a carefully drafted lease agreement is essential. Commercial lease agreements are usually prepared by the landlord (or their legal representative). This is an opportunity to ensure the lease is structured to protect your investment while maintaining a balance of rights between each party and meeting any legislative requirements.

This article outlines some key considerations for landlords to help provide clarity and manage risk when leasing commercial property. It discusses responsibilities for repairs and maintenance and make good provisions; areas that can lead to costly disputes if terms are not clear and comprehensive. The information is general only and we strongly recommend seeking legal advice from an experienced professional when entering a commercial leasing transaction.

General Terms and Conditions

Common provisions found in commercial leases include:

  • a description of the premises and its permitted use
  • identification and rights of use for common areas
  • rent, rent increases and how increases are calculated
  • required security deposit/guarantee
  • term of the lease, options to renew, and how options must be exercised
  • responsibility for outgoings
  • repairs, maintenance and make good provisions
  • allocation of risk – limitation of liability and indemnification clauses
  • insurance requirements
  • the circumstances under which the lease may be terminated (for example, breaches, non-payment of rent, insolvency, etc.).

This list is in no way exhaustive and there are numerous other provisions to include depending on the property and the individual leasing transaction.

When negotiating a lease agreement, consider:

  • Plain language and definitions – use plain language wherever possible and include a list of definitions to help clarify key terms.
  • Proactive communication – communicating openly to address any concerns promptly can help clarify action to be taken and prevent issues from escalating.
  • Condition report – a thorough inspection (with photographs) should be conducted and signed off by both parties at the beginning of the lease to document the condition of the premises and establish a clear record. Further inspections can be carried out during the lease to identify any issues.
  • Contingencies – the lease should provide for a range of unforeseen events, for example, damage or destruction of the premises.
  • Compliance with legislation – for premises defined as ‘retail’, landlords will need to consider their obligations under relevant retail leasing legislation which regulates retail shop leases and requires landlords to follow specific disclosure requirements.

Repairs & Maintenance

Responsibility for repairs and maintenance can lead to a range of issues. The commercial lease agreement will be the primary source for managing such matters so these provisions should be comprehensive and clear.

Repairs may be general or structural and the lease agreement should distinguish between each.

In most commercial leases the tenant is responsible for general repairs to and maintenance of the premises beyond ‘fair wear and tear’. For example, walls, floors, fixtures, doors, windows, and inclusions should be repaired and maintained by the tenant during the lease term.

A ‘repair’ is generally defined as an act necessary to fix something that has been damaged, whether accidentally or from continued use. If a tenant or their staff or customers damage part of the premises, the tenant is responsible for the repairs needed to reinstate them.

‘Maintenance’ generally means taking some action to delay wear and tear or the deterioration or breakage of an item, such as cleaning and servicing plant and equipment or properly disposing of waste and garbage.

‘Fair wear and tear’ refers to the reasonable deterioration of property or elements of a property that can be expected over time, for example, worn carpets and faded paint or wallpaper. It does not include damage caused by negligence or the failure of a tenant to properly maintain something.

Including definitions in the lease agreement on what constitutes ‘fair wear and tear’, ‘structural repairs’, and ‘general repairs’, etc. can help minimise disputes. Determining responsibility for repairs and maintenance to plant and equipment such as air-conditioning and cool rooms can be problematic so these matters should also be addressed.

Typically, the landlord is responsible for repairing and maintaining major structural aspects of the building. This may include repairs to the building support system and foundations, flooring and ceiling structures, column support, roof, and elements that can pose a safety risk. Expenditure of a capital nature is also typically the landlord’s responsibility.

Make Good Provisions

Subject to the lease provisions, tenants may have made improvements to the property such as fitting out premises at the beginning of the lease term to suit the tenant’s business operations.

When a lease ends, make good provisions require a tenant to return the premises to the same state as the commencement of the lease, usually excluding fair wear and tear.

Make good provisions should be clear and easy for the tenant to understand, specifying what must be removed (i.e. the tenant’s personal property, fixtures, fittings and items that were not part of the premises before the lease commenced) and what work, if any, must be carried out (i.e. repainting, recarpeting).

As noted, condition reports are important for establishing a baseline for make good provisions.

Some tenants may be reluctant to restore premises to their original condition, particularly if they have gone to considerable expense in making alterations. Generally, landlords can enforce these rights provided they are included in the lease agreement. In some cases, however, it may be beneficial to both parties for certain fixtures to remain and the make good provisions can provide options for this scenario.

Conclusion

A well-drafted commercial lease is critical for setting the foundation of a good business relationship between a landlord and tenant. Each party’s rights and responsibilities must be clearly outlined to minimise potential disputes with watertight provisions included concerning responsibilities for repairs and maintenance and make good arrangements.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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What to Expect at Your First Meeting with a Family Lawyer

Facing a family law issue can be an incredibly stressful and emotional time. Whether you are contemplating divorce, negotiating parenting arrangements, or trying to divide property, seeking legal advice is important to ensure you understand your position. Your first meeting with a family lawyer is a significant step towards understanding your rights and options. It’s a chance to gather information, ask questions, and build a relationship with the professional who will guide you through this challenging process.

The Importance of the First Meeting

Your initial consultation with a family lawyer is more than just a formality. It’s an opportunity for you to:

  • Gain clarity: Family law in Australia is complex. A lawyer can explain the relevant legal principles and procedures, and how they apply to your specific situation.
  • Explore your options: Your lawyer will help you understand the different pathways available to resolve your family law matter, whether through negotiation, mediation, or court proceedings, if necessary.
  • Assess compatibility: Your first meeting is an opportunity to assess whether you feel comfortable with your lawyer and confident in their ability to represent you. You will need someone you can trust and communicate openly with throughout the process.

Questions to Ask a Family Lawyer

Preparing a list of questions before your first meeting helps you to determine whether you and your lawyer are the right fit, and how you can expect your matter to be conducted. Don’t hesitate to ask questions specific to your circumstances. The more information you have, the better equipped you will be to make informed decisions. Key questions to consider include:

  • What is your experience in family law? Look for a lawyer with expertise in the area specific to your needs (e.g., children’s matters, property settlements, high net worth assets/complex business interests).
  • How do you typically approach cases like mine? This gives insight into the lawyer’s strategy and whether it aligns with your desired outcome. How your family law matter is managed can impact future relationships with your children and ex-partner. Many family lawyers will foster alternative dispute resolution processes to minimise the added emotional and financial stress that litigious court cases can bring. Depending on your circumstances, negotiation and mediation can be vital in helping preserve relationships and minimise costs.
  • What are the likely costs involved? It is important to understand the law firm’s fee structure, billing methods, and potential disbursements, including when payment of fees is expected. You may need to pay some money up-front and/or you may be able to negotiate a payment plan or pay at the end of your matter.
  • What are the possible outcomes of my case? While no lawyer can guarantee a specific result, they may be able to provide a realistic assessment based on their experience and your circumstances.
  • How will you communicate with me throughout the process? Establish clear expectations for communication and updates.
  • What is the estimated timeframe for resolving my case? While timelines can vary, getting an estimated range helps you prepare.

What to Bring to the First Meeting

To make the most of your first meeting, it is helpful to bring relevant documents such as:

  • Marriage certificate (if applicable)
  • Prenuptial or cohabitation agreements (if any)
  • Details of your assets and liabilities (bank statements, property valuations, superannuation statements, mortgage and loan repayments, etc.)
  • Details of your income and expenses (payslips, tax returns, insurances, utilities, rates, etc.)
  • Any relevant correspondence or court documents (if proceedings have already commenced or if there are other relevant court proceedings, past or present)
  • A timeline of events (this can be particularly helpful in parenting disputes)

Having this information available enables your lawyer to gain a comprehensive understanding of your situation and provide more tailored advice.

Understanding the Lawyer’s Fees and Costs

Protracted family law matters can be expensive. It is essential to have a clear understanding of the lawyer’s fees and how they are structured.

  • Hourly rates: Most family lawyers charge an hourly rate. This rate can vary depending on the lawyer’s experience and the complexity of your case.
  • Fixed fees: Some lawyers may offer fixed fees for specific services, such as drafting a parenting plan, preparing an application for consent orders, or representing you at a mediation.
  • Disbursements: These are out-of-pocket expenses incurred by the lawyer on your behalf, such as court filing fees, expert witness fees, and process server costs.

Don’t be afraid to discuss fees openly with your lawyer. Ask for a written cost agreement outlining the billing arrangements and providing an estimate of the total costs involved.

Next Steps After the First Meeting

After the initial consultation, you will likely have a clearer picture of your legal situation and the options available. Here are some potential next steps:

  • Gather further information: Additional documents or information may be requested so your lawyer can provide more specific advice.
  • Negotiate with the other party: Your lawyer may initiate negotiations with your ex-partner or their legal representative to try and reach an amicable agreement.
  • Attend mediation: If negotiations are unsuccessful, attending mediation with a qualified family dispute resolution practitioner may be recommended.
  • Commence court proceedings: If all other avenues have been exhausted, your lawyer may advise you to commence court proceedings.

Moving Forward

Getting help from a family lawyer is an important step in navigating the legal process of separation and divorce. Your first meeting is a chance to assess whether you and your lawyer are the right fit and to gain insight into what to expect and how your matter will proceed. Your lawyer is there to guide you through the process and advocate for your best interests, so it is important to maintain open communication and keep them informed of any developments in your situation. Seeking legal advice early is crucial for protecting your rights and achieving the best possible outcome for you and your family.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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An Executor’s Guide: What to Do When a Loved One Dies

Being an executor is a big responsibility, especially while dealing with the loss of a loved one. An executor is the person named in a Will to manage a deceased person’s estate (property, finances, etc.) and carry out their final wishes. The role entails important legal and administrative tasks, which can be even more challenging when you’re grieving.

Below is an overview of an executor’s role in dealing with a deceased estate. The information is general only and does not constitute legal advice. If you’ve been appointed an executor or can’t find a family member’s Will after their passing, an estate lawyer can provide the advice and guidance you need.

Step 1: The First Few Days

Your immediate priority is to handle the practical matters of the death.

  • Obtain the Death Certificate: You will need to obtain the Death Certificate from the registry of Births, Deaths and Marriages in the relevant state/territory (or from the informant – the person who advises the authority of the death).
  • Locate the Will: You will need to locate the deceased person’s original Will, which will provide instructions and guide your actions as executor. It will name you as the executor and detail how the estate should be distributed.
  • Arrange the funeral: Some Wills contain specific instructions for funeral arrangements. If so, you are responsible for carrying them out. It is also common for the deceased’s family members to be involved in the funeral arrangements. Funeral costs are typically paid from the estate.
  • Secure the assets: As executor, you will need to protect the assets of the estate. This could mean securing the deceased’s home, ensuring valuables are safe, and making sure any vehicles or other assets are insured.
  • Notify key people: The beneficiaries named in the Will, as well as family members and any close business associates, should be notified of the death.

Step 2: The Formal Administration Process

The formal administration of the estate typically begins sometime after the funeral and initial shock passes.

  • Gather information about assets and liabilities: You need to get a clear picture of the deceased’s financial situation at the time of their death. This involves identifying all assets (e.g., bank accounts, shares, property, superannuation) and liabilities (e.g., credit card debt, loans, mortgages).
  • Apply for a Grant of Probate: A Grant of Probate is a legal document issued by the Supreme Court. It confirms the Will is valid and officially authorises you to act as the executor. Generally, a Grant of Probate is needed to deal with significant assets like real estate or substantial bank accounts.

Applying for probate involves filing the original Will, a death certificate, and a statement detailing the estate’s assets and liabilities. Specific forms and procedures apply in different jurisdictions across Australia, and it’s important to get this right to avoid delays. An estate lawyer can advise if probate is required and prepare the application for filing with the court.

  • Advertise for creditors: It may be required or recommended to place a public notice in a local newspaper and the Government Gazette to allow creditors to claim against the estate. This important step can help protect you from personal liability should an unknown debt surface after you have distributed the estate. A lawyer can assist with this.

Step 3: Paying Debts and Distributing the Estate

With the Grant of Probate in hand, you have the legal authority to manage the estate.

  • Pay all debts: Before you can distribute any assets to the beneficiaries, you must pay all the estate’s legitimate debts. This includes funeral expenses, outstanding taxes, and any other liabilities. Be careful here – if you distribute the estate before all debts are paid, you could be personally liable for any remaining amounts.
  • Attend to tax matters: You may need to lodge a final tax return for the deceased and a tax return for the estate itself if it earned income during the administration period. It is wise to obtain a tax clearance from the Australian Taxation Office (ATO) before making a final distribution.
  • Transfer assets: Once all debts and taxes are paid, you can begin the process of transferring assets to the beneficiaries as per the Will. This might involve transferring property titles with the relevant state/territory titling authority, dealing with banks, or selling assets and distributing the proceeds.
  • Keep a record of everything: As an executor, you must keep clear and accurate financial records. This includes every transaction, from funeral costs to the final distribution of assets. Beneficiaries are entitled to an account of how the estate was administered.

Timeframes and Professional Advice

The administration of a deceased estate can take considerable time. A straightforward estate might take 6-12 months, but if there are disputes, complex assets, or challenges to the Will, the process can take longer.

The role of an executor is a position of great responsibility. You are legally and financially accountable for your actions. While it is possible to handle the process yourself, seeking professional advice is often the best way to ensure you fulfil your duties correctly, protect yourself from personal liability, and avoid potential disputes. A lawyer can guide you through the complexities of probate and estate administration, providing invaluable support during a difficult time.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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Beyond the Basic Will: When You Need a More Complex Estate Plan

A Will is one of the most important documents you will ever sign. For many Australians, a simple Will, leaving everything outright to a spouse or dividing it equally among the children does the job adequately. It provides clarity and avoids the uncertainty of dying intestate (without a Will).

However, life is rarely simple. As your family structure, assets, and circumstances become more complex, your basic Will may no longer be sufficient. Relying on a standard document in these situations can create legal and financial challenges down the track, especially for your family.

This article outlines some common scenarios where you might consider looking beyond a basic Will to a more detailed, robust estate plan. The information is general only and does not constitute legal advice. For guidance specific to your personal circumstances, please consult a qualified legal professional.

What a Basic Will Usually Covers (and What It Doesn’t)

A standard or basic Will generally covers:

  • Executors: Naming the person or people responsible for administering your estate and carrying out your wishes.
  • Guardians: Naming who will care for any minor children.
  • Beneficiaries: Stating who receives your assets.

While this may be sufficient for many Australians, a basic Will can sometimes create problems. Complex family structures and evolving financial and other circumstances can mean that a one‑size‑fits‑all approach may not fully support your intentions or protect your beneficiaries.

A Will that does not address potential complications can lead to family disputes, delays in estate administration, and unintended asset distributions.

Key Situations Where a Simple Will May Not Be Enough

1. You Have a Blended Family

Blended families, where one or both partners have children from a previous relationship, can significantly complicate estate planning.

  • The risk: Leaving everything to your current spouse in the hope they will later “do the right thing” by your children provides no legal protection. Your partner can legally change their own Will after your death and exclude your children entirely.
  • The solution: A lawyer can integrate strategies such as:
  • Life interests: Allowing your partner to live in your home or access estate income for life, with assets later passing to your children.
  • Testamentary trusts: Providing longer-term control, asset protection, and flexibility in distributing inheritances, especially in blended families.

These structures help balance fairness between a surviving partner and children from previous relationships.

2. You Want to Protect Assets from Creditors or Divorce

If you leave assets outright to a beneficiary, the assets become that person’s property. This means their inheritance can be exposed if they face bankruptcy or family law proceedings.

  • The risk: If your child receives a lump sum inheritance and then faces bankruptcy or a divorce settlement, that money may be included in the assets available to be split with creditors or a former partner.
  • The solution: A testamentary trust can hold assets on behalf of the beneficiary, helping to protect them from financial risks due to bankruptcy or relationship breakdowns.

3. Your Beneficiaries Have Special Needs or Lack Financial Maturity

An outright gift is not always in the best interests of the recipient.

  • Risks for minors or young adults: A large inheritance can be quickly depleted without experience or guidance.
  • Risks for beneficiaries with disabilities: Direct inheritance may affect their eligibility for government benefits.
  • The solution: Your Will can include a trust to manage funds over time or establish a Special Disability Trust to support a person with a severe disability.

4. You Own a Business or Have Complex Investments

If your assets include a business, partnership interest, or complex investment structure, a basic Will may not provide sufficient direction.

  • The risk: Without a clear succession plan, transferring the ownership or control of a business interest can cause delays, financial loss, or tax issues.
  • The solution: Your estate plan should be complemented with a separate business succession plan (potentially incorporating a buy/sell agreement) prepared by your lawyer and accountant. This ensures the smooth ownership transition and protects the business’s value.

The Power of the Testamentary Trust

A testamentary trust is created under your Will and takes effect only after your death. The trust, rather than the individual beneficiary, holds the assets. This structure can offer several benefits:

  • Asset protection: Trusts can help shield inheritances from financial claims, bankruptcy, and relationship breakdowns.
  • Tax flexibility: Trusts can allow income to be distributed among beneficiaries in a tax-effective way – these matters should be discussed with your accountant.
  • Control: Trusts enable you to appoint a trustee to manage funds responsibly and in accordance with your wishes.

Key Takeaways

Drafting a Will is a vital step in protecting your family and assets. However, for many people, a basic Will is just the beginning.

You may need a more detailed estate plan if:

  • You have children from a previous relationship.
  • You have minor or vulnerable beneficiaries.
  • You are concerned about your beneficiaries’ financial exposure due to divorce or debt.
  • You own a business or hold complex investments.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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The Relevance of a De Facto Relationship in Australia

Australian society has long recognised the existence of non-traditional domestic partnerships. This has been reflected across various laws, with de facto relationships holding significant weight from a legal perspective. This can be a confusing area, especially when it comes to understanding what a de facto relationship actually is and why it matters from a legal stance.

So, why is this important, and what does it mean for you?

This article breaks down what constitutes a de facto relationship in Australia, how the law determines if one exists, and why this status is so relevant, particularly in areas like family law and financial matters. The information is general only and is not intended to be legal advice. If you need guidance, we recommend consulting an experienced lawyer.

What is a De Facto Relationship?

The Latin term “de facto” simply means “in fact” or “in reality”. In a legal sense, it means a couple is living together on a genuine domestic basis, even though they aren’t married.

The definition of a de facto relationship is found in section 4AA of the Family Law Act 1975 (Cth). The Act is a federal law, and its principles are applied across Australia, although some states have their own specific laws that also deal with de facto relationships, particularly in areas outside of family law.

According to the Family Law Act, a person is in a de facto relationship with another person if:

  • They are not legally married to each other.
  • They are not related by family.
  • They live together on a genuine domestic basis.

The third point is the one that often requires the most thought, and the law looks beyond simply sharing a house. To determine if a genuine domestic basis exists, a court will consider various factors. No single factor is more important than another, and a court will look at all of them to get a complete picture of the relationship.

These factors include:

  • The duration of the relationship: How long have you been together? Generally, a de facto relationship needs to have lasted for at least two years. However, this is not a strict rule, and there are exceptions.
  • The nature and extent of your common residence: Do you live together? Do you have shared responsibilities for the home?
  • Whether a sexual relationship exists: This is one of the factors, but it is not a defining one. A couple can be in a de facto relationship even if they no longer have a sexual relationship.
  • The degree of financial dependence or interdependence, and any arrangements for financial support: Do you share bank accounts, split bills?
  • The ownership, use, and acquisition of property: Do you own assets together, like a car or a house?
  • The degree of mutual commitment to a shared life: Do you consider yourselves a couple and present as such to the world?
  • Whether the relationship is registered under a prescribed law of a state or territory: In some states, you can register a relationship, which provides formal legal recognition.
  • The care and support of children: Do you have children together, or do you care for each other’s children?
  • The reputation and public aspects of the relationship: Do friends, family, and the community see you as a couple?

The law looks at the combination of these factors to decide whether a de facto relationship exists.

Why a De Facto Relationship is Relevant in Australia

The legal recognition of de facto relationships is a big deal because it grants de facto couples many of the same rights and responsibilities as married couples. This is most obvious in two key areas: family law and financial matters.

Family Law

For many years, couples who were not married had limited legal recourse if their relationship ended. That changed with reforms to the Family Law Act that came into effect in 2009. These changes gave de facto couples the right to ask a court to make orders about property settlement and spousal maintenance after a relationship breakdown, just like a married couple.

The principles for dividing assets in a de facto relationship are largely the same as for a married couple. A court will consider:

  • The assets and debts of the relationship.
  • The financial contributions each person made, such as income, savings, and assets brought into the relationship.
  • The non-financial contributions. These can include caring for children, looking after the home, or supporting the other person’s career.
  • The future needs of each person, such as their age, health, income, and who has care of the children.
  • The effect of any family violence to which one party of the relationship has subjected or exposed the other, on the ability of a party to make financial and non-financial contributions; and the economic effect of family violence on a party’s current and future circumstances.

This legal recognition means that if you are in a de facto relationship and it ends, you are protected by the same legal framework as a married couple when it comes to property division.

Financial Matters

Beyond family law, being in a de facto relationship can impact a range of other financial and legal areas:

  • Superannuation: Many superannuation funds recognise de facto partners as beneficiaries for death benefits.
  • Wills and inheritance: In some cases, a de facto partner can make a claim on a deceased partner’s estate, even if they were not included in the will. The law in each state and territory varies on this point.
  • Social security and government benefits: Your de facto status can affect your eligibility for benefits from Centrelink, as they assess your combined income and assets.

Key Takeaways

The concept of a de facto relationship acknowledges that many people choose not to marry but still want the same legal protections and recognition as married couples.

If you are in a relationship that you think might be a de facto relationship, it is important to understand your rights and obligations, especially if you are considering buying property together or if the relationship ends. The law’s purpose is to ensure that both partners are treated fairly and that any children of the relationship are properly cared for.

The detailed and comprehensive definition of de facto in the Family Law Act ensures that the unique circumstances of each couple are taken into account, providing a flexible framework for addressing a wide range of situations.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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Due Diligence when Buying an Existing Business

If you are thinking about a new venture, expanding an existing business or entering a new market, one option you might consider is to buy an established business. There are advantages and disadvantages when buying an existing business compared with starting your own. Considering the pros and cons of each, and carrying out any due diligence beforehand to assess the value, risks, and potential of a target business will help you make an informed decision. An experienced lawyer can help you navigate the legal complexities.

Advantages and Disadvantages

Buying an established small business offers several advantages. First and foremost, you will usually inherit an existing customer base, which can provide immediate cash flow and revenue. This can save you the time and effort required to build a customer base from scratch. Additionally, an established business often has existing relationships with suppliers, distributors, and other stakeholders, providing you with a head start in identifying key resources and entering the market. Brand recognition and goodwill associated with an existing business can also help you establish credibility in the industry.

On the other hand, starting your own business allows for greater control and customisation. You can shape the business according to your vision and preferences without inheriting any existing issues or limitations. Starting from scratch also enables you to choose the location, design the infrastructure, and hire the team that aligns with your strategic objectives. However, building a new business requires substantial time and resources, and success is not guaranteed in the early stages.

Due Diligence when Buying a Small Business

For an existing business, due diligence typically refers to the comprehensive investigation and analysis of the target business to assess its value, risks, and potential for growth. It encompasses investigating the financial, legal, operational, and human resources of the proposed business.

Financial and Legal Due Diligence

Financial due diligence involves scrutinising the proposed business’s financial statements, tax records, cash flow, and debt obligations. This helps you evaluate the accuracy and reliability of the financial information provided by the seller, assess the business’s profitability and financial health, and identify any potential financial risks or liabilities.

Legal due diligence focuses on examining the legal documents, contracts, licences, permits, and regulatory compliance. It ensures that the business has clear title to its assets, that there are no legal disputes or pending litigation that may affect its operations, and that it complies with applicable laws and regulations.

Taking over existing agreements forms another aspect of the due diligence process. You will need to review contracts with customers, suppliers, landlords, and other key stakeholders to assess their terms, obligations, and potential risks or liabilities. This ensures that you are fully aware of the existing contractual relationships and can effectively manage them after the acquisition.

A lawyer can assist with various legal aspects of due diligence, for example, assessing the business’s intellectual property rights, reviewing contract terms and conditions, and investigating obligations under existing agreements that will be assigned to the new owner. Accountants can help with financial due diligence by analysing and assessing the accuracy of financial information and identifying potential financial risks or liabilities.

Operational Due Diligence

Operational due diligence involves assessing the business’s operational processes, systems, and infrastructure. You may need to evaluate its supply chain, production capabilities, technology, and any intellectual property rights. This helps you understand the efficiency and effectiveness of operations and identify any operational risks or inefficiencies.

Operational due diligence may also involve an evaluation of the business’s human resources. This might encompass reviewing employment contracts, assessing employee benefits and compensation packages, and understanding any potential labour issues or legal obligations. This helps assess the quality and suitability of the existing workforce and plan for any necessary changes or restructuring. A lawyer can provide guidance on employment matters, ensuring compliance with employment laws, and assist with the transfer of employees or restructuring, if necessary.

Conclusion

Regardless of whether you choose to buy an established business or start your own, due diligence is a crucial step in the process. Obtaining competent legal and financial advice can help entrepreneurs minimise risk and enable them to make informed decisions about their proposed venture.

This is general information only and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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Penalty Clauses in Contracts – Are They Enforceable?

A penalty clause is a term in a contract that imposes a penalty on a party that breaches a contractual obligation. It is important to know that penalty clauses are generally unenforceable under Australian law. However, it can sometimes be difficult to distinguish penalty clauses from other similar clauses that are enforceable.

What is a Penalty Clause?

A contract term that states that one party has to pay an amount upon a breach of contract may be a penalty clause. Penalty clauses are designed to deter breaches of contract, regardless of the actual harm suffered by the non-breaching party. As such, penalty clauses are unenforceable because they are considered to be a form of punishment that imposes disproportionately high financial penalty on the breaching party. However, there are very similar clauses used in contracts, called “liquidated damages” clauses, which are enforceable.

A liquidated damages clause is an agreement that a party in breach will pay the other party an amount which is a reasonable estimate of what the breach will cost the non-breaching party. For a liquidated damages clause to be enforceable, it must be a “genuine pre-estimate”. This means that the amount cannot be random, even if it is agreed between the parties. There must be a genuine effort applied to calculating how much a certain breach would cost the non-breaching party.

Identifying Penalty Clauses

Unfortunately, it can be quite difficult to distinguish between a penalty clause and a liquidated damages clause. For instance, if a contract imposes a fee for late payment of an invoice, this clause could be an unenforceable penalty clause or, it could also reflect a genuine pre-estimate of damages. It is reasonable for a late fee to be set at the cost incurred to re-issue the invoice, as it is not intended to be a penalty.

Termination fees are another example worth considering. If a termination fee is set at an unreasonably high amount, then it is not a genuine pre-estimate of the non-breaching party’s actual losses resulting from the early termination. In that case it will be considered a penalty clause and will be unenforceable. On the other hand, if the termination fee represents a reasonable estimate of the non-breaching party’s actual losses (such as the costs of finding a replacement for the terminated contract), then it may be enforceable as a valid liquidated damages provision.

To determine whether a particular term is a penalty clause, the court will consider the nature of the breach, the amount of the penalty, and the relationship between the parties. It is important to note that whether a particular contractual provision is a penalty clause or not will depend on the specific circumstances of the case. As such, parties should carefully consider the potential risks and consequences of including such provisions in their contracts.

Considerations when Drafting Contracts

When drafting a contract in Australia, it is important to ensure that the purpose of a clause is not to punish or to deter a breach by imposing an artificially high fee. In addition, consideration should be given to whether it is necessary to impose a fee for a breach, when other alternatives (such as negotiation) might achieve the desired outcome. However, these concerns should not prevent a drafter from including proportionate and necessary liquidated damages clauses in a contract, as these clauses can be vital to protect businesses against genuine losses.

When drafting a liquidated damages clause, it is wise to document the consideration that was given to calculating the amount of damages that would flow from different types of breaches. Including this documentation in the contract (or associated documentation) means that the contracting parties have all had an opportunity to consider whether the amounts imposed would constitute a reasonable pre-estimate. This will make it more likely that the clause will be enforceable.

Conclusion

Penalty clauses are generally unenforceable as they are considered to be a form of penalty on the breaching party rather than a genuine pre-estimate of loss suffered by the non-breaching party. This, however, should not prevent the inclusion of proportionate liquidated damages clauses in contracts. In such cases, it is important that the clause seeking liquidated damages to deter a breach should not impose an artificially high fee or penalty.

The information in this article is general in nature and does not constitute professional advice. If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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Making a Will if capacity is in question

It is well known that a Will is a legal document which sets out how a person wants their assets to be distributed once they die.

If you are over the age of 18 you can make a Will – provided you have capacity. 

In general terms, a person making a Will (a testator) has the necessary capacity if they:

  • know what a Will is;
  • know of the amount and type of property they are disposing of;
  • understand the moral claims to which they should give effect when deciding to whom to leave their property; and
  • are not delusional or suffering from a mental illness at the time they sign their Will.

Who decides on capacity?

It is not the role of a lawyer to be an expert in assessing the capacity of their client.

However, a lawyer can be involved in carrying out a “legal” assessment of the testator’s capacity.

If there is a question about someone’s mental capacity to make a Will, then an opinion, preferably in writing, should be obtained from that person’s treating doctor. The opinion should state that the person has the required testamentary capacity to make a Will.

When should the Will be signed?

It would be ideal if the doctor could be present when the testator signs the Will, and even better if the doctor is one of the two witnesses to the Will. In all likelihood, this will not usually be possible.

Where there is the likelihood of the Will being challenged on the testator’s death on the basis of a lack of capacity, it is important to obtain contemporaneous medical evidence from the testator’s treating doctor or in some cases a geriatrician confirming the testator has capacity. It is prudent for the doctor to conduct a medical examination to determine this and then provide a written report confirming their opinion.

We feel that the testator should on the same day provide instructions to the lawyer and sign the Will.

Having a medical report stating that, in the doctor’s opinion, the testator had capacity and then on the same day the person provided instructions and signed their Will, places the testator in a strong position so far as capacity is concerned.

Could the Will be challenged?

It is important to address the issue of capacity in some circumstances because a Will can be challenged on the grounds that the testator did not have sufficient capacity when signing the Will. This arises most frequently where the testator is ill, for example, in hospital, on medication or elderly and suffering from dementia.

It is difficult to set aside a Will on grounds that the testator lacked testamentary capacity if the Will is prepared by a competent lawyer who took appropriate instructions from the testator and was satisfied that he or she had the requisite testamentary capacity to make a Will.

How your lawyer can help

If you are worried because you know someone who wants to make a Will and may not have capacity or may be in the early stages of dementia, then it is prudent to encourage them to consult a lawyer who is experienced in preparing Wills, and to do this as soon as possible.

It is also prudent to ensure the lawyer is made aware of this potential difficulty because it may be necessary for the testator to first attend their doctor’s surgery for an appointment with the doctor being able to provide a satisfactory written report so it can be taken to the lawyer’s office ahead of the testator’s appointment but on the same day.

It is then a matter for the lawyer to be in a position to actually prepare the Will on the spot for checking and signing. Then the testator will have a Will that is dated the same day as a medical report saying they had capacity to understand the Will they signed.

As you can see there is a degree of planning that is needed, so speak to your lawyer to ensure that all the plans are worked out first.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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What is an ‘Interest’ in Property?

When discussing property law, the concept of an ‘interest’ is significant. An interest in property refers to a legal stake or other right that an individual or entity holds in a particular piece of real estate.

This article explores the definition of property interests, common types, and the profound impact they can have on property owners and prospective buyers. Additionally, we distinguish between legal and equitable interests, shedding light on their distinctive characteristics. The information is general only, and we recommend seeking professional advice relevant to your circumstances.

Definition of an Interest in Property

At its core, an interest in property refers to a legally recognised claim or right associated with a specific piece of real estate. These interests can take various forms, each conferring a set of rights and obligations upon the party holding them. Understanding these nuances is crucial for both property owners and potential purchasers, as they directly influence the utilisation, transfer, and enjoyment of the property.

Common Types of Interests

The most common types of interest in property are freehold, leasehold, easements, covenants, and mortgages.

Freehold Interest

This is the most comprehensive and absolute form of property ownership. A freehold interest grants the holder full ownership rights, allowing them to use, sell, or lease the property without constraints (subject to planning, environmental and other relevant laws). The property can be passed on to heirs, providing perpetual ownership.

Leasehold Interest

In contrast to freehold, a leasehold interest grants the holder the right to use the property for a specified period, in exchange for complying with terms and conditions and payment to the property owner, often through a lease agreement. While those with a leasehold possess certain rights during the lease term, ultimate ownership reverts to the landlord after its expiration.

Easements

Easements confer specific rights to a third party, allowing them access or use of another person’s property or part of it. Common examples include utility easements, granting access for maintenance or installation of utility lines. Easements typically run with the land and can affect the land’s value, use and future development. They should be fully investigated during a property transaction.

Covenants

Property covenants are legally binding restrictions or agreements that dictate how a property may be used. They are often imposed by developers to maintain certain standards within a community and to protect the land’s value.

Mortgages

A mortgage is a financial interest in a property held by a lender until a loan is fully repaid. A mortgage document and/or associated loan agreement will set out the rights of each party to the mortgage. The property serves as collateral for the loan, and failure to repay the loan may result in foreclosure where the property is repossessed and sold to repay the mortgage.

Impact on Property Owners and Prospective Purchasers

Understanding the nature of property interests is paramount for both existing property owners and those contemplating a purchase.

For property owners, recognising existing interests is crucial to avoid disputes and ensure the lawful enjoyment of their property. Leasehold arrangements, easements, or covenants may impact how an owner uses and maintains their property.

Identifying property interests is perhaps more critical for those who are acquiring a property. Before buying a property, it is essential to conduct thorough due diligence to identify existing interests. This involves reviewing title deeds, survey reports, and any pertinent legal documents. Failing to do so may lead to unexpected limitations or disputes after the purchase.

Legal Interests vs. Equitable Interests

A critical distinction in the realm of property interests lies in their classification as either legal or equitable.

Legal interests are formally recognised and enforceable by law. They are typically registered with the relevant government authority, providing a clear and public record of the interest. Examples include freehold ownership and registered mortgages.

Equitable interests, while still legally valid, may not be immediately apparent from public records. These interests arise from agreements, trusts, or other equitable doctrines. An example is a beneficial interest in a property held by someone other than the legal owner.

It is crucial to understand the distinction between legal and equitable interests when assessing the true scope of property rights. While legal interests are readily identifiable through official records, equitable interests may require a more in-depth examination of the property’s history and associated agreements. Unfortunately, a buyer may acquire a property without discovering an equitable interest and may then need to go to court to try and protect their right to the property. However, this risk can be mitigated by engaging proper legal support and performing due diligence prior to a property purchase.

Conclusion

The various types of property interests, ranging from freehold ownership to easements and covenants, each carry distinct implications for the use and enjoyment of a property. Recognising the impact of these interests, conducting thorough due diligence, and distinguishing between legal and equitable interests are essential steps in navigating the complexities of property ownership and transactions. Seeking legal advice is often necessary to confirm property interests at each stage of real estate ownership.

If you or someone you know wants more information or needs help or advice, please contact us on (08) 8155 5322 or email [email protected].

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Can I Stop Somebody from Contacting or Seeing my Child?

In the complex landscape of family law, few issues are as emotionally charged as the care of children. It is common for parents to question what they are legally obliged to do and their decision-making rights about their children. For instance, parents often struggle with knowing whether they can stop someone from contacting or seeing their child. Sometimes this is about contact with the other parent, but at other times the contact is with another significant person, such as a grandparent. Unfortunately, in neither case does the law provide clear-cut guidance, although there are principles that can help to determine these issues.

Contact with the Other Parent

In Australia, the law concerning the care of children is generally governed by the Family Law Act 1975 and exercised by the Federal Circuit and Family Court of Australia (or, in Western Australia, the Family Court of Western Australia). Family law prioritises the best interests of the child above all else.

Historically, when the care of a child has become a decision for the Court, it has favoured arrangements that allow for ongoing contact with both parents, even in cases of parental conflict or estrangement. This is not because parents have ‘rights’ regarding their children, but rather because there  was a presumption that both parents had ‘equal shared parental responsibilities’ towards their children. Therefore, if both parents have equal decision-making power about their child, it was presumed by the Court that neither parent should prevent contact between the child and the other parent.

However, this presumption was always rebuttable. There were circumstances in which the Court would limit or restrict contact between a parent and their child to ensure the child’s safety and well-being. These circumstances typically involved abuse, neglect, substance abuse, domestic violence, or other factors that posed a risk to the child’s physical or emotional health. Accordingly, outside of the courtroom parents were empowered to limit or restrict contact with the other parent if it endangered their child’s safety or well-being.

If the other parent believed that this power was being used inappropriately or punitively, they could seek legal intervention to establish contact. In such cases, the Court would carefully consider the evidence presented and make a decision based on the best interests of the child.

More recently, the Court is being guided by legislative changes to acknowledge, from the outset, that a child may not benefit from spending significant time with a parent and the presumption of shared parental responsibility has been removed. The Court will now consider an amended set of factors when making decisions about parental contact.

These factors include what arrangements promote the safety of the child and each person who has care of the child, the views expressed by the child, the developmental, psychological, emotional and cultural needs of the child, and the capacity of each parent to meet those needs. In addition, the Court will consider the benefits to the child of having a relationship with their parents and other people who are significant to them and anything else that is relevant to the particular circumstances of the child.

Despite this changed emphasis and provided the best interests of the child are at the forefront, it is likely to remain uncommon for the Court to order that a child has no contact with one of their parents. There is a significant body of research that shows that in most circumstances it is in the best interests of children to have a relationship with both parents. As such, parents outside the courtroom should consider withholding a child’s contact with the other parent to be a course of last resort and only taken when it is necessary in the interests of the child. Parents should also be mindful that withholding a child from contact with another parent without valid justification can have serious consequences. The Court takes a dim view of parents who engage in ‘parental alienation’, which involves manipulating or coercing a child to reject the other parent.

Other Significant People

Ultimately, the goal of Australian family law is to promote the well-being of children. Within this broader mission, the Court not only considers contact between the child and their parents but also contact with other people who are significant to the child. For instance, if a child has developed a relationship with a grandparent, perhaps through regular visits, it may not be in their interests to have this relationship severed. Again, this is not because of any concept of ‘grandparent’s rights’, which is not a recognised legal principle in Australia. Rather, it is because the Court recognises that when someone is important to a child, it can be harmful for them to lose this person and that this should only happen if it is unavoidable. For instance, if a grandparent is abusive or alienating, then it would be reasonable to prevent them from having contact with the child, even if this goes against the child’s expressed wishes. However, it would not be sufficient for a parent to withhold access to their child simply because they wish to do so, or to punish the grandparent, in circumstances where the child has a positive and longstanding relationship with their grandparent.

Conclusion

At all times a parent must consider the best interests of their child when determining who can and cannot have contact with their child. As long as it is the child’s interests that are being prioritised, the parent may decide to prevent contact. If the other person has the necessary standing, they may challenge this decision before the Court, at which time consideration will be given to what is in the overall best interests of the child. This consideration will include the impact on the child if their parent is forced into contact which is not healthy, such as with a parent with whom they have a negative relationship.

This is general information, and you should obtain professional advice relevant to your circumstances. If you or someone you know wants more information or needs help or advice, please contact us.

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