Solari & Stock Newsletter – March 2016

Changes at Solari & Stock

As always we like to keep you all informed of the changes that are being made at our office which are of significance in relation to our dealings with our clients and referrers.

In late 2015 the Directors of our firm, Michael Solari and Riccarda Stock made a decision in relation to the future strategic direction of the firm. That decision involved the changing of our staffing levels with a view to streamlining the operations of the business and for the business to focus on its prime areas of business namely:

• Commercial Law.
• Family Law.
• Commercial Litigation.
• Commercial and Industrial Leasing for landlords and tenants.
• Commercial and Residential Conveyancing and other Property Law.
• Wills, Powers of Attorney, Enduring Guardianships (Estate Planning) and Deceased Estates.

Our highly skilled professional team comprises:

Family Law

Riccarda Stock – Accredited Specialist Family Law.

Shelby Timmins – Accredited Specialist Family Law.

Fiona Gill.

Commercial, Property and Deceased Estates

Michael Solari.

Alysson Morgan Greig.

Vicki De Bonis,

and our experienced support team, look forward to continuing to provide high quality and efficient services in relation to the abovementioned areas of law.

Unfortunately, there have been some suggestions in some parts of the marketplace that we are not doing some of the work referred to above and the Directors of the firm wish to reiterate to all persons with whom we have dealings that the firm will be continuing to do work in relation to the abovementioned areas of law.

If we are approached to undertake work in areas that we do not practice in, we have a range of experienced and competent legal firms to whom we are able to refer persons to for those specific areas of law, to ensure that our clients achieve the best legal representation in any matters, even those in which we do not practice.

Violence and Family Law

Domestic and family violence is a topic that is increasingly in the spotlight in Australia, particularly with the recent strong media focus. In the 2014/2015 year there was 435 reported domestic violence incidents in the Sutherland Shire alone. However, it is estimated that less then half of domestic violence victims actually report the assault to police.

Due to the nature of family law, it is not surprising that domestic and family violence is prevalent in the Family Court system. It is estimated that approximately 41% of the matters filed in the Family Courts feature family violence.

The Family Law Act 1975 considers family violence in matters before the Court. Section 60CC(2) clearly sets out the primary considerations of the Court when determining what is in the best interests of the child, being:

(a) the benefit to the child of having a meaningful relationship with both of the child’s parents; and

(b) the need to protect the child from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence.

The legislation explicitly states that the Court is to give a greater weight to protecting the child from harm, than any other factor.

There are multiple avenues available in matters where family violence is involved to try and protect victims, as well as ensure that appropriate action is taken in regards to alleged perpetrators and the relationship they retain with their children.

The unfortunate issue currently faced by the Courts, and as eloquently highlighted by Chief Justice Bryant of the Family Court of Australia, is that restricted funding to various services and support groups, extensive delays in the Court system and limited resources available to parties of family law matters, leaves the Australian family law system in the position of trying to resolve complex family matters with limited resources and time.

It is widely established that the most effective way to resolve the issue of domestic and family violence on a long term basis, is through education and the provision of adequate support and resources. In September 2015 the Australian Government announced a $100 million package of measures to provide a safety net for women and children at high risk of experiencing violence. The focus of this package is to provide improved frontline support and services, leverage innovative technologies to keep women safe, and provide education resources to help change community attitudes to violence and abuse.

In the interim, while the Family Courts are facing limited resources and time, there is a strong focus on ensuring that best practice principles are implemented in the Family Courts to protect families, and particularly children, from the effects of family violence. The Family Violence Best Practice Principles released by the Family Courts in December 2015 assist the Courts, practitioners, service providers and litigants in cases where family violence is an issue. These principles provide guidance at every stage of the family court process to ensure that family violence is appropriately identified, reported and considered.

As practitioners our role is to ensure that our client is confident enough to advise us when family violence is an issue, to follow the best practice procedures ensuring the Courts are aware of family violence issues and ensure that our client is in the best possible position to seek appropriate reports and Orders, both interim and final, for their matter.

Our committed and specialist Family Law team at Solari & Stock have a wealth of experience in dealing with the complexities and sensitivities of Family Law, including family violence issues.

The Effect of Personal Guarantees following an Assignment of Leasehold or transfer of freehold

Commercial leases are often entered into for substantial terms and contain various options to renew or otherwise extend the initial lease period. As such it is not uncommon that during the term of a lease, one of the parties to the lease, being the tenant or the landlord, may wish to assign or transfer their rights and obligations to another entity for the balance of the lease term.

Landlords often require personal guarantees be provided to secure the obligations of a tenant under a lease. The impact of an assignment of a lease or transfer of the ownership of the property on the obligations of a guarantor are often not effectively considered at the time a lease is drafted. It is however an important consideration for landlords who may wish to enforce personal guarantees which have been provided in respect of a lease which may have been assigned or transferred.

During the term of a lease, the lease may be assigned or transferred by either:

the assignment of the lease from the current tenant to another tenant, for example on the sale of the business which is conducted from the premises; or

the transfer of the property from the initial landlord to a new owner.

Each of the above scenarios has different considerations for landlords who want to ensure that personal guarantee provisions remain effective following the assignment or transfer.

1. Assignment of the lease

Where a lease is assigned between tenants, the guarantor will usually be discharged as the assignment constitutes a material variation of the principal contract, being the lease, and the variation is not for the benefit of the guarantor. There is some argument that where a guarantee contemplates that an assignment may take place, the guarantor will not be absolutely discharged in the event of an assignment as the guarantee provides for the variation and contemplates that the guarantor’s liability will continue notwithstanding the assignment of the lease. However even in this case the guarantor will not be responsible for the debts of the new tenant unless they are specifically brought within the ambit of the guarantee.

It is therefore important that assignments of leases are documented by way of a deed of assignment. All parties to the assignment should be party to such a deed, including any new or continuing guarantors. The deed should specifically include an acknowledgement by any continuing guarantors that they continue to be bound by the terms of the guarantee despite the assignment of the lease to a new tenant. Similarly any such deed should set out the guarantee provisions under which any new guarantor is to be bound.

2. Transfer of the property

Generally there is no impact on the enforceability of the guarantee where the landlord transfers the property. Such a transfer would not prejudice the guarantor as it is immaterial from the guarantor’s point of view to who the guarantor owes the obligation. It is possible however that if the lease prohibits a landlord from transferring the property and the tenant and the landlord subsequently agree, without agreement from the guarantor, to amend the terms of the lease to allow the transfer, the guarantor may be discharged on the basis that there has been a material variation to the terms of the lease. Similarly where a lease contains specific obligations on the landlord to notify the guarantor of any transfer of the property and these requirements are not adhered to, the guarantee may not be effective following the transfer. Where there is any doubt as to whether a guarantee will be preserved on the transfer of the property, all parties including the current landlord, the incoming landlord, the tenant and the guarantors should enter into a deed whereby the tenant and the guarantors acknowledge their continuing obligations under the lease.

Therefore when drafting guarantees to secure the obligations of the tenant it is important to ensure that relevant clauses:

expressly preserve the liability of the guarantor where the lease is transferred or assigned;

confirm that the debts and liabilities of any assignee of the tenant are included within the definition of secured monies and secured obligations; and

does not contain a provision which creates an obligation to notify the guarantor of any assignment of the leasehold or freehold.

Where there is any doubt or uncertainty as to whether a guarantee will be preserved on the assignment of lease or transfer of the property, all parties to the lease and any incoming parties should enter into a deed whereby the continuing parties, including guarantors, acknowledge their continuing obligations under the lease. Most of the problems identified in this article can be avoided or mitigated by careful drafting of guarantee clauses within leases. At Solari and Stock our Commercial Property team is able to assist with the drafting of such clauses.

Option Agreements for the Sale of Property from a Vendor’s Perspective

With the gazettal of the new LEP for the Sutherland Shire Council, there are numerous developers making offers to enter into options to purchase properties for the purpose of redevelopment. It is therefore timely to look at the issues that should be addressed in acting for a vendor of either commercial or residential property when entering into an option.

Some basic considerations which need to be taken into account include:

1. What is the option fee? Is it to form part of the purchase price?;

2. Is there any proposal that there could be an extension of the initial option period? If so, in what circumstances and under what conditions? Should any fee be paid for such an extension? Normally extension fees do not form part of the purchase price;

3. What is the purchase price and how is it to be calculated? Often the purchase price is a fixed agreed price. Sometimes however, the price is calculated depending on the final terms of the development consent obtained that is, there may be some increase in the purchase price if certain conditions are met;

4. A provision should be included in the option deed that if the option is not exercised, the vendor obtains the benefit of any applications made, consents obtained and any reports undertaken, by the developer;

5. Is the option a call option (that is where it is entirely in the hands of the purchaser as to whether it proceeds or not) or is it a put and call option (which means that if the purchaser does not exercise its option, the vendor can force the purchaser to complete the purchase and buy the property)?;

6. How is the purchaser identified? Often an option will provide that it can be exercised by the purchaser or a nominee of the purchaser. If the vendor only wishes to deal with the person who originally approached them, the vendor should require a provision be inserted into the option deed that confirms that the option cannot be assigned to a third party;

7. If the purchaser is a corporation, should personal guarantees be obtained from the directors?;

8. Is GST payable in relation to the option fee and/or the contract?;

9. Is the purchaser going to be required to pay or contribute anything towards the outgoings (Council rates, water rates, land tax etc) during the option period?;

10. If the developer wants to exercise a right of access during the option period, what limitations and conditions are to be imposed?;

11. If a development consent is being sought by the purchaser, should the vendor be entitled to review it to ensure that it complies with what was initially represented to the vendor y. Should the vendor require periodic progress reports from the purchaser?;

12. Whether a caveat should be allowed to be lodged by the purchaser to protect their position? If so, should the vendor be appointed as the purchaser’s attorney enabling them to remove the caveat if the option is not exercised?;

13. If any preliminary works such as site clearing are to be undertaken during the option term, what conditions are to be imposed? For example is notice required before works are undertaken, what conditions are to be imposed, what obligations to reinstate the land are to be imposed if the option is not exercised, what insurances will be required etc?;

14. If the vendor wants to remove any items from the property, this should be provided for in the option or the contract for sale.

At Solari & Stock we are involved in numerous option arrangements both on behalf of vendors and purchasers, and our Commercial and Property team is able to assist vendors or purchasers in relation to such transactions.