THE FIVE THINGS YOU CAN DO TO ASSIST IN A SMOOTH TRANSACTION WHEN BUYING A PROPERTY

Looking to buy? It doesn’t matter if it’s your first home, an investment or if you have done it a dozen times, it’s a big deal.

Here are the top five things you can do to ensure your purchase runs as smoothly as possible:

1. Forward us a copy of the Contract before you sign:

It is extremely important that you know your rights under the Contract and the critical dates and conditions contained in it. We normally suggest inserting building and pest, finance and due diligence conditions into your Contract so you will have time to research the property to be completely satisfied with your purchase and make an informed decision as to whether to proceed or not. The usual timeframe you have to satisfy these conditions is 7–14 days.

2. Talk to your bank or mortgage broker

Ideally, you should talk to your bank or mortgage broker before you start looking for a property. This will give you an idea of your borrowing capacity and purchase price range. Once you sign the Contract, get a copy to your bank or broker immediately so they can start the unconditional approval process. This usually involves the bank doing a valuation of the property and you meeting and satisfying other loan conditions. As mentioned earlier, most Contracts have “subject to finance” conditions which will give you 7-14 days to obtain unconditional approval.

3. Book your building and pest inspection

Book your building and pest inspection as soon as possible. You need to know exactly what you are buying and identify if there are any issues with the property you are purchasing.

Is there a pool on the property? If so, ask your agent if a Pool Safety Certificate has issued for the property. If one hasn’t issued the onus may be on you under the Contract to obtain a Pool Safety Certificate.

If your Contract is subject to Due Diligence, we will suggest researching the Council records and obtaining information of current building approvals.

If any issues are identified relating to any of the above, please speak with us as soon as possible. There are a number of options available to you if you are not satisfied with your enquires.

4. Remember, “Time is of the Essence”:

Keep in mind with all Queensland Contracts, time is of the essence. This means the time limits and deadlines specified in a contract must be met in order for the Contract to stay afoot. If you are unable to meet a deadline, and an agreement for an extension of time is not made, the Contract could be terminated. A good conveyancer can be relied upon to keep you informed of those critical time limits and deadlines.

5. Keep in touch!

We are only a phone call and always here to help. It is extremely important to us that your purchase runs smoothly and we have you settling on time and moving into your new home. We will make sure you are kept informed as your matter progresses. We will also liaise on your behalf to ensure other interested parties, such as agents, brokers and banks, are also kept in the loop.

Buying a property is an exciting time, but things can go wrong. When they do, you will want to be assured that you have the legal skillset of an experienced team to act in your best interest. At Rouse Lawyers, our conveyancing department is backed by senior property lawyers who will down tools and work with our conveyancing team to ensure your problem is solved quickly.

Need expert advice about selling property? Speak to the Property team at Rouse Lawyers. Contact us today!

The Five Things You Can do to Assist in a Smooth Transaction When Buying a Property

Looking to buy? It doesn’t matter if it’s your first home, an investment or if you have done it a dozen times, it’s a big deal.

Here are the top five things you can do to ensure your purchase runs as smoothly as possible:

1. Forward us a copy of the Contract before you sign:

It is extremely important that you know your rights under the Contract and the critical dates and conditions contained in it. We normally suggest inserting building and pest, finance and due diligence conditions into your Contract so you will have time to research the property to be completely satisfied with your purchase and make an informed decision as to whether to proceed or not. The usual timeframe you have to satisfy these conditions is 7–14 days.

2. Talk to your bank or mortgage broker

Ideally, you should talk to your bank or mortgage broker before you start looking for a property. This will give you an idea of your borrowing capacity and purchase price range. Once you sign the Contract, get a copy to your bank or broker immediately so they can start the unconditional approval process. This usually involves the bank doing a valuation of the property and you meeting and satisfying other loan conditions. As mentioned earlier, most Contracts have “subject to finance” conditions which will give you 7-14 days to obtain unconditional approval.

3. Book your building and pest inspection

Book your building and pest inspection as soon as possible. You need to know exactly what you are buying and identify if there are any issues with the property you are purchasing.

Is there a pool on the property? If so, ask your agent if a Pool Safety Certificate has issued for the property. If one hasn’t issued the onus may be on you under the Contract to obtain a Pool Safety Certificate.

If your Contract is subject to Due Diligence, we will suggest researching the Council records and obtaining information of current building approvals.

If any issues are identified relating to any of the above, please speak with us as soon as possible. There are a number of options available to you if you are not satisfied with your enquires.

4. Remember, “Time is of the Essence”:

Keep in mind with all Queensland Contracts, time is of the essence. This means the time limits and deadlines specified in a contract must be met in order for the Contract to stay afoot. If you are unable to meet a deadline, and an agreement for an extension of time is not made, the Contract could be terminated. A good conveyancer can be relied upon to keep you informed of those critical time limits and deadlines.

5. Keep in touch!

We are only a phone call and always here to help. It is extremely important to us that your purchase runs smoothly and we have you settling on time and moving into your new home. We will make sure you are kept informed as your matter progresses. We will also liaise on your behalf to ensure other interested parties, such as agents, brokers and banks, are also kept in the loop.

Buying a property is an exciting time, but things can go wrong. When they do, you will want to be assured that you have the legal skillset of an experienced team to act in your best interest. At Rouse Lawyers, our conveyancing department is backed by senior property lawyers who will down tools and work with our conveyancing team to ensure your problem is solved quickly.

Need expert advice about selling property? Speak to the Property team at Rouse Lawyers. Contact us today!

How to handle renewals with a difficult franchisee

This Article was previously published on the Inside Franchise Business website.

How to handle renewals with a difficult franchisee

Entering a Franchise Agreement (Agreement) with a franchisee is a commitment for the term of the franchise. Dealing with a difficult franchisee can be problematic when locked into a contract and trying to maintain a business relationship. Whether it’s a clash of personalities or contrasting business values, a franchise relationship can easily become strained.

A “difficult” franchisee can range from someone who frequently questions your business motives, to someone who pushes every boundary under the Agreement. They may or may not be a well performing franchisee.

Many Agreements grant the franchisee an option to renew the Agreement for a further term. Renewal is not an automatic right. The franchisee will only be entitled to exercise the option if certain criteria under the Agreement are satisfied within a certain time. Every Agreement is different. Some common criteria include there being no un-remedied breach, substantial compliance with the Agreement throughout the term, executing the franchisor’s then-current Franchise Agreement, paying a renewal fee and refurbishing or upgrading the premises/equipment/vehicle to the franchisor’s then-current standards.

Timeframes are important. The franchisee must generally exercise the option within a certain time before the end of the Agreement. The Franchising Code of Conduct (Code) also requires franchisors to tell the franchisee whether you intend to renew the Agreement at least 6 months before it expires.

If a franchisee is entitled to an option, has satisfied all the criteria set out in the Agreement and validly exercises the option, you must honour the option. It is not sufficient to simply decide you no longer wish to continue with the franchise.

Franchisee breach is the most common reason for not renewing a franchisee. It would generally need to be breach of a major obligation to justify grounds for non-renewal. This would be determined on a case-by-case basis with reference to the terms of the specific Agreement. It may not be enough for the franchisor to simply believe that the franchisee is in breach. The formal procedure under the Code may need to be followed by telling the franchisee about the breach and providing a reasonable time for it to be remedied to constitute a valid breach. If the breach is remedied, you may need to honour the renewal.

If you wish to rely on past breaches, then the Agreement must state that substantial compliance is a condition of renewal (rather than simply stating that the franchisee is not in breach of the Agreement at the time of the renewal). You must always act reasonably. You would be in a stronger position if the formal notice procedure under the Code is followed each time the franchisee is in breach. In other words, there should be a written record of non-compliance clearly communicated to the franchisee.

The Code requires both franchisees and franchisors to act in good faith in dealings with each other. If you did not have a valid legal basis or reasonable and justifiable grounds for not renewing a franchisee, the franchisee may argue the good faith obligation has been breached. However, the obligation to act in good faith does not prevent a party from acting in their legitimate commercial interests.

You must also be mindful to treat franchisees equally. The same criteria for considering a renewal should be applied to all franchisees within your system. It would not be reasonable to renew one franchisee whilst rejecting another in the same circumstances.

It will often be a condition of renewal that the franchisee signs the franchisor’s then-current-form Franchise Agreement which may be on different terms to the existing Agreement. It could be unconscionable for you to present an Agreement with onerously higher payment obligations or vastly different terms to discourage the franchisee from proceeding with the renewal. However, courts have held that franchisors can change payment structures and other obligations on a renewal if such changes are reasonable and in response to the current commercial market.

If you don’t have clear grounds to reject the renewal but hold justifiable concerns, then it may be reasonable to impose certain conditions on the renewal. For example, the franchisee undergoing further training or formulating and committing to a business plan. The renewal could be seen as an opportunity to work with your franchisee to resolve issues and improve performance.

Disputes can be costly for both parties if the franchisee challenged your decision to not renew. The ACCC can also impose penalties for breaching the Code.

Note that in certain situations the restraint of trade provisions under the Agreement may not be enforceable if you did not renew. This may apply if the Agreement was entered after 1 January 2015, the franchisee was willing to extend the Agreement, was not in breach, claimed compensation for goodwill of the business, and you failed to pay genuine compensation for goodwill.

The best advice for handling a renewal with a difficult franchisee is to maintain composure, act in a professionally commercial manner and keep communication open. Whilst this is easier said than done, it is essential to remember that a franchise is a business relationship for the financial benefit of both parties. Sometimes the relationship may be beyond repair, but the commercial goal should always be remembered. Having a well-drafted Franchise Agreement from the outset will also improve your bargaining power should issues ever arise.

Need advice about your Franchise Agreement?  Talk to the Franchising team at Rouse Lawyers. Contact us today!

6 steps to set up a franchised business

This Article was previously published on the Inside Franchise Business website.

There are six simple steps to follow if you’re planning to buy a franchise:

Step 1 – Research

There are many franchise systems to choose from.  A franchise is a long-term commitment. Ensure you do thorough research and due diligence before you decide on a system. Get as much information and as many figures as you can. You don’t need a business degree to run a franchise, but it is recommended that you do some online courses to understand the basics of business management.

Step 2 – Structure

Getting your business structure correct from the beginning is essential. Find a commercial lawyer and an experienced accountant. They will assess your situation and advise on the best entity structure to use to operate your business. Your accountant will carefully examine the figures you’ve been given by the franchisor.

There are many different types and combinations of structures:

1. Sole Trader
2. Partnership
3. Company
4. Trust (discretionary, unit or hybrid)

The best structure for you will depend on who will be actively involved in the business and how you wish to protect your personal assets. Each structure has its own taxation consequences. What is right for one person is not necessarily right for another. Don’t assume that because a family member had a company that you need one too.

If you choose a trust and a company, your advisors will register your company and set up your trust. If you have business partners then having a partnership, shareholders or other governance agreement is good practice to outline the relationship of the stakeholders involved, including (without limitation) what happens if you wish to buy out a partner or sell your share or interest in the future.

Step 3 – Finance

Unless you have sufficient assets to fund your new venture, you will need to apply for finance. This will take several weeks. Be prepared for your financier to ask for a personal guarantee. This means that if your entity can’t meet a loan repayment, then the financier can have recourse against your personal assets.

Step 4 – ABN

Your accountant will need to apply for an ABN for your entity and register it for GST.

Step 5 – Read everything

Carefully read all the documents given by the franchisor. Make a list of questions to discuss with your lawyer and accountant. They may seem silly to you, but these questions are often a prompt for your advisor. Don’t assume your advisors understand the ins and outs of the franchise model – explain it to them.

Make sure the franchise documents cover everything you are expecting. A ‘gentleman’s agreement’ may sound good at the time, but trying to enforce this in the future can be problematic.

Step 6 – Don’t rush

Double check with your advisors before you sign anything. Make sure you’re comfortable with your enquiries and the franchise documents before you proceed. Buying a business is a huge commitment. Make sure you can see yourself in the business each day and that you’ll be happy doing that.

 If you need assistance setting up your Franchise, Talk to the Franchising team at Rouse Lawyers. Contact us today!

MAIN RESIDENCES IN ESTATE PLANNING – CAUTION REQUIRED

The use of testamentary trusts in estate planning (particularly for clients with a reasonable level of income producing investments) is relatively standard practice. It is not uncommon in preparing the Will to pass all of the assets of the testator into one or more testamentary trusts.

The tax advantages of testamentary trusts are obvious – distributions to minors are not restricted to a $416 limit as applies to discretionary trusts, as well as the income splitting advantages of discretionary testamentary trusts. Of greater importance are the asset protection advantages that a properly designed testamentary trust can provide.

What is often ignored, however, is the special position of main residences under the tax legislation. A complete exemption from any capital gains subject to a number of conditions – the key condition is the disposing owner is an individual that has used the property as their main residence.

CGT on deceased estates

Example Bruce and Fleur purchased their home in 1992 for a cost of $170,000. The property is held as tenants in common. Throughout the period of ownership they have used it exclusively as their main residence. It now has a value of $1,020,000, and after reduction by costs associated with sale, a capital gain of $800,000 is expected. They are now 73 years of age and executed their Will which passes their interest in the home, together with other income producing assets, into a Testamentary Trust initially controlled by the survivor. Shortly afterwards, Bruce passes away.

The general rule is that post-CGT assets (assets acquired on or after 20 September 1985) passing into a deceased estate are deemed to have been acquired at the cost base of the testator. The Main Residence Exemption is extended if the property is sold within two years of death.

But what of the situation where the property passes to a testamentary trust? A trustee is generally not eligible for the Main Residence Exemption.

Special Cost Base Rules

Division 128 alters the standard cost base rules above in nominated circumstances.

One special cost base rule applies where the property was the main residence of the deceased immediately before they died and was not then being used to produce assessable income. In that instance, instead of adopting the deceased cost base, the cost base is equal to its market value. On the other hand, the dwelling were used to produce assessable income at the date of death (for example, by the rental of a room) the cost base would be $85,000 (½ of $170,000), which could give rise to a capital gain of $315,000 if sold immediately after death. A death tax?

Exemption for deceased estates

The rules in respect of the Main Residence Exemption provide a full exemption for post-CGT dwellings if it was a deceased’s main residence just before death and not being used to produce assessable income at that time (use prior to death is not taken into account). It applies to pre-CGT dwellings irrespective of use prior to death.

The full exemption is available where the dwelling is sold within two years of death, or the dwelling is used throughout the period after death by the deceased’s spouse, a person with a right of occupation under the Will, or the beneficiary to whom the dwelling passes under the Will.

Importantly, the exemption not only applies to an individual but also to the trustee of a deceased estate. Although it might be considered that the term “trustee of a deceased estate” is limited to the legal personal representative, the ATO accepts that the trustee of a testamentary trust satisfies that description (ATO ID 2006/34) which is consistent with its long-standing practice in PSLA 2003/12 to treat the trustee of a testamentary trust in the same way as a legal personal representative for CGT.

A key planning point is if the dwelling is being used as the Main residence of a person other than the spouse, a right of occupation must be provided by the Will.

Failing the conditions: if the property is not sold within two years and not used as a main residence by the people described above, a partial exemption is available. But in that instance any period when the dwelling was not the deceased’s main residence is taken into account to reduce the exemption.

Replacement Residences

In the event that the property were sold and a replacement residence acquired, the above exemption would not apply to the replacement residence.

On the other hand, if the original dwelling had passed to an individual who sold it and acquired a replacement residence, the replacement residence would be eligible.

A less-known provision, (Section 118-210) extends the Main Residence Exemption to the trustee of a deceased estate that acquires a dwelling for occupation by an individual. With appropriate drafting of the Will and putting in place appropriate processes to demonstrate the dwelling is acquired for occupation by an individual, this provision extends the Main Residence Exemption to a replacement residence.

As outlined above, the ATO accepts that the trustee of a testamentary trust is a trustee of a deceased estate to qualify for this exemption.

Pass to Spouse

Some may be dubious about the ATO continuing to stand by its long-standing practice and for greater certainty the best option is simply to pass the interest in the residence to the survivor. What must not be overlooked is that such a gift would then be subject to any claims that might be made against the surviving spouse (loss of asset protection benefits). Additional processes must be implemented in that case to preserve the asset protection benefits of a suitably drafted testamentary trust.

Key Message

When implementing estate planning the Main residence of the deceased’s should receive special attention to enable access to the Main Residence Exemption on a subsequent sale during the lifetime of the survivor, and the asset protection benefits of a properly designed testamentary trust.

In particular, drafting a suitable form of right of occupation within the terms of the Will is recommended.

If passing the residence to a spouse, additional processes are required.

NOTE: This article is for general information only and should not be relied upon without first seeking advice from one of our specialist solicitors.

If it’s too good to be true… it could cost you.

Image via today.com

Consumer Affairs Victoria v Gibson

The Federal Court has handed down its decision on penalties against Belle Gibson.

Ms Gibson rose to fame (and infamy) surrounding promotions of her book and mobile app titled The Whole Pantry, wherein she claimed to have beaten cancer through diet and alternative therapies after rejecting conventional cancer treatment.

The App and Book, published in August 2013 and November 2014 respectively, netted Gibson and her related company estimated sales of over $1 million, along with breakfast TV slots, current affairs coverage, magazine articles, social media stardom and charity fundraisers.

However, the claims turned out to be too good to be true.

After cracks began to appear in Gibson’s cancer story, and allegations surfaced that little, if anything, from the charity promotions, had actually been donated, Consumer Affairs Victoria (CAV) commenced proceedings against Ms Gibson and her company for misleading and deceptive conduct.

In March 2017, Gibson and her related company (now in liquidation) were found to have engaged in misleading and deceptive conduct in breach the Australian Consumer Law and its counterpart Victorian legislation.

It was held that Gibson and her company had made false or misleading representations in relation to claims about Gibson having cancer and the treatments she underwent, along with multiple false or misleading representations that certain sales proceeds would be donated to various charities.

The Court found that, despite the company operating the social media accounts and holding the book publishing contracts with Penguin, Ms Gibson was also liable as the ‘controlling mind’ behind the operation.

In the follow-up judgment, Mortimer J ordered Gibson to pay penalties totalling $410,000 associated with the Australian Consumer Law breaches for false charitable donation claims, plus CAV’s legal costs.

The Court declined to make an adverse publicity order (requiring publication of a corrective notice). However, in a stinging endnote to the judgement, the Court observed that CAV could have sought additional non-monetary orders, including community service orders:

[115] The Court could have been asked to direct Ms Gibson, for example, to perform a service at one or more of the charitable organisations to which she had promised she and her company would give money. The Court could have been asked to direct her to perform a service at one or more institutions caring for people who really do have cancer … And, in a case such as this, it is more likely to have brought home to Ms Gibson the impact of her conduct, and its offensiveness to members of the Australian community who really are struggling with cancer and its effects, whether on themselves, their families or their friends. Most Australians are, in one way or another, touched by cancer as a terrible illness.

Ms Gibson did not appear at the trial hearings, and it remains to be seen whether the penalties imposed by the Court will be paid. Penguin Australia earlier agreed to donate $30,000 to Victoria Consumer Law Fund for its role in publishing the book.

Takeaways

• False, or misleading and deceptive claims in breach of the law can result in substantial penalties.
• The Court is not limited to financial penalties, and has a range of other measures it can impose, such as adverse publication orders, and community service orders.
• Company directors can be personally liable for misleading and deceptive conduct where it is shown that they are the “controlling mind” behind the conduct.

Links

Consumer Affairs Victoria press release
https://www.consumer.vic.gov.au/latest-news/annabelle-gibson-and-inkerman-road-nominees-pty-ltd-court-action

Director of Consumer Affairs Victoria v Gibson [2017] FCA 240 (Liability Judgment)
http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2017/240.html

Director of Consumer Affairs Victoria v Gibson (No 3) [2017] FCA 1148 (Penalties Judgment)
http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA//2017/1148.html

If you have concern’s over your Intellectual Property call  Rouse Lawyers today to discuss how we can assist you.