Property

Family provision orders

Under the Succession Act 2006 (NSW), eligible persons may apply to the Supreme Court of New South Wales for a family provision order in relation to the estate or notional* estate of a deceased person to provide “for their maintenance, education or advancement in life”.

The first hurdle to overcome is being an “eligible person” and the second is whether the provision (if any) made for the applicant in the deceased’s Will** is adequate, and if not, what “family provision order” could be made to make it adequate. Unfortunately, this process is not as simple as we have explained it.

Limitation period

Claims for provision must be made within 12 months of the date of death of the deceased person (although in limited circumstanced, this time limit can be extended).

Process

After proceedings are commenced and the parties have put on the majority of their evidence, applications for family provision orders are generally referred to either a Court annexed mediation or to private mediation but if no agreement can be reached, the matter will be set down for hearing.

Eligibility

Those who are “eligible” to make a claim for a family provision order out of a deceased person’s estate include:

  • a spouse of the deceased at the time of the deceased’s death;
  • a former spouse of the deceased;
  • a person in a de facto relationship with the deceased at the time of death
  • children (including adopted children) of the deceased;
  • someone with whom the deceased was in a close personal relationship*** with at the time of their death;
  • those who have, at any time, been wholly or partly dependent upon the deceased and who either:
    • are a grandchild of the deceased; or
    • were, at any time, member of a household of which the deceased a member.

How do you know if you are to receive an inheritance?

Click here to read about how to get a copy of a deceased person’s will.

Adequacy

The Court won’t simply rewrite a deceased person’s Will based on claims of justice or unfairness such as unequally dividing an estate between siblings. The Court has a wide discretion in determining these matters and the nature of any order for provision that may be made.

The Court first considers if the gift (if any) was adequate and if not, what provision may be adequate.

The Court exercises is discretion to make an order and if so, on what terms, after considering the following factors:

  1. any family or other relationship between the applicant and the deceased, including the nature and duration of the relationship,
  2. the nature and extent of any obligations or responsibilities owed by the deceased to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased’s estate,
  3. the nature and extent of the deceased’s estate (including any property that is, or could be, designated as notional estate* of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,
  4. the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person’s estate (that is the competing needs/claims of others),
  5. if the applicant is cohabiting with another person–the financial circumstances of the other person,
  6. any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased’s estate that is in existence when the application is being considered or that may reasonably be anticipated,
  7. the age of the applicant when the application is being considered,
  8. any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased or the deceased’s family, whether made before or after the deceased’s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant,
  9. any provision made for the applicant by the deceased, either during the deceased’s life or made from the deceased’s estate,
  10. any evidence of the testamentary intentions of the deceased, including evidence of statements made by the deceased,
  11. whether the applicant was being maintained, either wholly or partly, by the deceased before the deceased’s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased did so,
  12. whether any other person is liable to support the applicant,
  13. the character and conduct of the applicant before and after the date of the deceased’s death,
  14. the conduct of any other person before and after the date of the deceased’s death,
  15. any relevant Aboriginal or Torres Strait Islander customary law,
  16. any other matter the Court considers relevant, including matters in existence at the time of the deceased’s death or at the time the application is being considered.

*Where assets that were previously assets of the deceased prior to death (such as assets gifted or transferred by the deceased to another person or entity prior to death to attempt to avoid an application for an order for provision, superannuation, property owned as joint tenants between the deceased and another person), be considered as an asset of the estate for the purposes of an application for a family provision order.

**Note that even in intestacy (where there is no Will), an application can be made for a family provision order.

*** A “close personal relationship” is a relationship other than a marriage or a de facto relationship between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care but not for reward or on behalf of another person or organization.

FURTHER INFORMATION

For further information in relation to Wills, Probate, Intestacy, Estate Planning or even International Wills, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is a lien?

A lien is the right of a person or business to hold or retain possession of an item as security for performance of an obligation owed by another, such as the payment of monies owed.

Liens only apply to physically transferable items of personal property and effectively act as an informal or unregistered form of security for payment.

Liens only arise if the item was given to the lien holder with the express or implied authority of the owner (such as the owner or driver of a vehicle) and generally won’t arise over stolen property.

A lien does not arise simply by simply performing work.  There must be a basis for a lien to arise such as a contractual right, a piece of legislation or operation of the law.

There are 4 types of liens, each of which we discuss briefly below:

  1. statutory;
  2. contractual;
  3. common law (or possessory); and
  4. equitable.

In all but the latter of the categories, maintaining actual possession of the property in question is crucial as the rights afforded to the lien holder are only applicable while the lien holder is in possession of such property.

Statutory liens

Statutory liens arise through the operation of specific pieces of legislation such as those in Part 5 of the Sale of Goods Act 1923 (NSW), the Storer’s Liens Act 1935 (NSW) etc.

The relevant Acts describe the terms of the liens created by those statutes.

Contractual liens

If the terms of agreement, terms and conditions of trade or similar document that governs the rights and obligations of the parties to a contract provide for a lien, then such a lien is a ‘contractual lien’.

The operation of the lien is the same however – there must be money or some obligation owed and an item of the other party held pending payment or performance of that obligation.

Common law liens

At common law, liens can either be ‘particular’ or ‘general’ (also known as ‘specific’) and arise by implication of law.

A ‘specific lien’ secures obligations that are incurred in respect of the particular goods that are held.  A common example of a specific lien is the ‘mechanic’s lien’ – the right to hold your car until you have paid for the work performed or a repairer’s lien for payment in respect of improvement work done on a chattel.

A ‘general lien’ however is more favourable, although far less common and more difficult to establish. A general lien allows a person to retain possession of any goods held (but not sell or otherwise deal with that property) until all sums payable by the owner of the goods are satisfied, not just the amount payable in respect of work performed on the specific goods held hostage.

General liens must be established by strict proof of custom or usage such as a ‘solicitors’ lien’ or an ‘accountant’s lien’ which allows a solicitor or accountant to assert a lien over and thus retain a client’s documents (or the fruits of a court action) until payment of all debts owed by the client. It is effectively an implied term of the relevant contract.

Equitable liens

Equitable liens are created on a case by case basis by the law of equity as determined by the Courts. Judges may declare such liens so as to uphold or preserve fairness or justice to a situation having regard to the parties’ dealings and conduct.

An example is where a party spends money improving the item for another where there was either express or implied agreement that the performing party should have an interest in the enhanced property. The party who performed the work and is owed the debt may then acquire an equitable interest in the property proportionate to the value of the enhancement.

Unlike the other types of liens, ‘equitable liens’ do not require actual possession of the article in question. Such liens can be voided by the express or implied agreement of the parties.

Consideration often needs to be given to the value of the lien compared to the substantial time and monetary cost of seeking judicial intervention.

How does a lien end?

Any right to assert a lien (other than an equitable lien) expires upon performance of the outstanding obligation (such as payment) or upon release if the item over which the lien is maintained as without possession, there is no lien.

How does the PPSA affect a lien?

Statutory liens and common law liens can be exempted from the operation of the Personal Properties Securities Act 2009 (Cth) (PPSA).

In some circumstanced, the party asserting the lien can have priority over any security interests registered on the Personal Property Securities Register (PPSR) held by other creditors of owner of the item if:

  • the materials/services were provided in the ordinary course of business by the person asserting the lien;
  • no other Act prevents the lien from having priority; and
  • the holder of the lien did not have knowledge of any security agreement under the PPSR relating to those goods (that prohibited the creation of the lien).

Security interests registered on the PPSR under the PPSA will usually defeat any contractual lien.

FURTHER INFORMATION

For more information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au to discuss your needs.

This information is general only and is not a substitute for proper legal advice.

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Uncollected goods: is possession 9/10 of the law?

If you are a business that cleans or repairs items that are never collected by a customer or if you are a lessor of a commercial property* and a tenant leaves items behind, you may wonder what your rights and obligations are in relation to those uncollected goods.

Is possession 9/10 of the law? Well, sort of. Often it can depend on the terms of trade agreed between the business and the customer (for example a retention of title clause, a lien** or other similar provisions), but assuming it hasn’t been agreed or if there are agreed terms but there is no unpaid account, what is the position?

If there is no contract to govern what happens then the Uncollected Goods Act 1995 (NSW) will likely apply. That Act allows the business holding the goods (bailee) to sell them if they are uncollected by the owner of the goods (bailor) or if the bailee can’t contact the bailor.

How the goods may be disposed of, and what notice needs to be given, depends on their type and value.  For example, if the goods are worth:

  • less than $100, the business owner needs to give the customer 28 days verbal or written notice of an intention to dispose of the goods. If the customer doesn’t respond or collect the goods in that time, the business owner can dispose of them they see fit;
  • more than $100 but less than $500, the business owner needs to give the customer and each other person that claims an interest in the goods 3 months written notice of an intention to dispose of them. If the customer doesn’t respond or collect them within 3 months, the business owner can dispose of them by private sale for ‘fair value’ or public auction;
  • more than $500 but less than $5,000 the business owner needs to give the customer and each other person that claims an interest in the goods 6 months written notice of an intention to dispose of the goods. If the customer doesn’t respond or collect them in the 6 month period, the business owner can dispose of them by public auction provided that the business owner publishes a copy of the notice in a daily newspaper circulating generally throughout NSW at least 28 days before the 6 months notice is to end;
  • more than $5,000, the business owner needs a Court order to dispose of the goods; and
  • Perishable goods are dealt with differently any only require a ‘reasonable’ amount of notice, the length of which depends on the nature and condition of the goods.

What should the notice state?

Broadly speaking, a notice regarding uncollected goods must include:

  • the business name;
  • a description of the goods;
  • an address where the goods can be collected;
  • a statement of any relevant charges (eg freight and storage costs) and if the business is planning to take money out of the sale to cover those charges;
  • a statement that on or after a specified date, the goods will be sold or kept unless they are first collected and the relevant charges are paid.

No profit

When the goods are sold, the bailee can only recover the cost of the original service being provided if unpaid, the costs of the sale and any maintenance, insurance and storage costs. The bailee is not allowed to make a profit on the sale of the uncollected goods.

Any surplus if the bailor can’t be found or won’t take it, must be paid, as unclaimed money, to Revenue NSW. What a pain!

* There is specific legislation relating to the disposal of goods held by a pawnbroker (Pawnbrokers and Second-Hand Dealers Act 1996 (NSW), Part 4, s.30), goods left by a tenant (Residential Tenancies Act 2010 (NSW), Part 6 Division 2) or resident of a retirement village (Retirement Villages Act 1999 (NSW), Part 9, Division 7). Some assets can require additional steps to dispose of such as motor vehicles (for example the Commissioner of Police has issued a certificate stating that the vehicle is not recorded as stolen) and may require a Personal Property Securities Register Search.

** A lien is a common law right to retain possession of an item until an account is paid (such as a mechanics lien to keep a car until the repair bill is paid for), but it can be confirmed in an agreement.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to uncollected goods, your rights or obligations under a contract or arrangement or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Coronavirus: Remote witnessing of legal documents

On 22 April 2020, the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW) came into effect.

The effect of the Regulation is that the signing of legal documents in New South Wales such as Wills, Powers of Attorney, Deeds, Agreements, Appointments of Enduring Guardians, Affidavits and Statutory Declarations can be witnessed by audio visual link, rather than having to be physically present, as is normally the case – that is the law (during the COVID-19 pandemic) now allows the remote witnessing of legal documents.

Some documents have other additional requirements, like Wills which require 2 witnesses, not just one, as is provided for in s.6(1)(c) of the Succession Act 2006 (NSW).

Audio visual link includes Zoom, WhatsApp, Skype, HouseParty, FaceTime and the like.

The witness must sign the document either:

  1. by signing a counterpart of the document as soon as practicable after witnessing the signing of the document; or
  2. if the signatory scans and sends a copy of the signed document electronically, the witness may countersign the document as soon as practicable after witnessing the signing of the document.

The witness must endorse the document, or the copy of the document, with a statement that specifies the method used to witness the signing and that the document was witnessed in accordance with the Electronic Transactions Regulation 2017.

All copies of the document should be stored together so they can be read as the one document.

The Regulations do not change what documents may or may not be executed electronically in NSW – only how documents may be witnessed and attested.  The Regulations also do not affect the laws or requirements of any other jurisdiction, including the Commonwealth (such as company execution of documents under the Corporations Act 2001 (Cth).

Under the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW), the Regulation were to operate for a maximum period of 6 months from 22 April 2020 however, on 18 September 2020, the Stronger Communities Legislation Amendment (COVID-19) Regulation 2020 came into effect such that, among other things, the operation of the electronic witnessing regulations was extended to 31 December 2021.

Similar regulations are in place in the other States and Territories, such as Queensland’s Justice Legislation (COVID-19 Emergency Response – Wills and Enduring Documents) Regulation 2020 (Qld).

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus, if you had previously held off arranging documents such as for your estate planning due to not wanting to attend our office physically due to social distancing concerns or if you need to discuss how to best to arrange signing of documents under the Regulation, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice.

Please contact McKillop Legal to discuss your legal concerns or objectives.

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Coronavirus: Commercial Tenancies Code

Further to our COVID-19 blogs on the Federal Government led arrangements on employee standdownsnegotiating changes to commercial leases and the JobKeeper subsidy, the National Cabinet on 07 April 2020 agreed on a mandatory Commercial Tenancy Code previously foreshadowed as part of the “hibernation” strategy for Australia’s economy.

“preserve the lease, to preserve the relationship, keeps the tenant in their property and keeps the tenant on the lease, which is also good the the landlord… which underpins the value of those assets

The Code applies to tenancies where either the Lessee/Tenant or the Lessor/Landlord is eligible for the JobKeeper program.

The Code is based on a set of leasing principals intended as the Prime Minister says to operate such that it “preserves the lease, preserves the relationship, keeps the tenant in their property and keeps the tenant on the lease, which is also good the the landlord… that underpins the value of those assets“.

The overarching obligations are for landlords and tenants to work together in an honest, open and transparent manner and to negotiate in good faith on a lease by lease basis so as to mitigate the impact of the Coronavirus on the lease arrangements.

The Leasing Principles themselves include:

  • Landlords must not terminate the lease due to non-payment of rent during the pandemic period*
  • Landlords must not draw on a Tenant’s security (bank guarantee, personal guarantee or cash bond etc) during the pandemic period
  • Tenants must honour the Lease
  • Landlords must reduce rent proportionate to the trading reduction in the Tenant’s business over the course of the pandemic period through a combination of:
    • waivers of rent (accounting for at least 50% of the rental reduction); and
    • deferrals of rent (spread over the remaining time on a Lease and for no less than 24 months)
  • No interest, fees or charged are to be imposed  on the rent waived or deferred
  • Rent increases (other than Retail Leases based on turnover) are frozen during the pandemic period
  • Any statutory or insurance charges passed on to the tenant are to reduced in the appropriate proportion
  • Tenants should have an opportunity to extend the Lease period  of the rent waiver/deferment period
  • A binding mediation process will regulate these co-operative arrangements.

*The pandemic period is from 03 April 2020 and for the period during which the for the period during which the Commonwealth Government’s JobKeeper program remains operational.

To view the Prime Minster’s statement following the National Cabinet meeting here.

The States and Territories will legislate these arrangements as soon as is possible.

Banks are urged to support landlords in a similar manner.

Residential tenancies remain a State and Territory issue, not being determined by the National Cabinet. To register your business’s interest in the JobKeeper system, visit the Australian Taxation Office’s dedicated page.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss how to best deal with commercial tenancy issues, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice.

Please contact McKillop Legal to discuss your legal concerns or objectives.

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Coronavirus – Negotiating changes to commercial leases

Any businesses that are experiencing a downturn as a result of the current economic crisis that has come as a result of the Coronavirus pandemic will know that one of the largest expenses, apart from that of staff, is its leasing of premises. We have another article on options for employers including standing down its workforce.

The Government has introduced a range of measures to assist businesses and employees with the ongoing payment of wages with the JobKeeper program and the National Cabinet has agreed to implement a moratorium on the eviction of commercial and residential tenants for 6 months. This will be implemented by the States and Territories.

The Government has suggested that commercial leasing arrangements are a matter that ought to be discussed and agreed between lessors and lessees as it is a very complicated area of law that affects businesses from sole traders to multinational corporations. There are many advantages of having these discussions, rather than seeking to strictly enforce the terms of the previously agreed leases, including:

  • The lessor can retain the lessee in the premises – this will be important for them after the pandemic ends
  • The lessee will need to continue trading from the premises – either during the pandemic and/or after the restrictions on movement are relaxed.
  • The lessor may have mortgage repayment obligations to its bank and will need some level of cashflow to assist it to do this

Any  discussions between lessors and lessees should, in the first instance, be informal and without prejudice to the written lease obligations.

There is a moratorium on evictions, but there’s not a moratorium on the requirement to pay rents. Landlords/Lessors and tenants/lessees not significantly affected by COVID-19 are expected to honour their lease and rental agreements.

Every business and each premises is different so there is no ‘one size fits all’ answer but points for negotiation could include:

  • changing the amount of rent to be paid for a period (say a reduction in rent of 25% for 6 months)
  • a rent free period or a reduced rent period (for example 3 months of no rent payable)
  • a delay in payment of the rent (same rent is payable but the obligation to pay is deferred to a later time).
  • extension of the term of the lease to accommodate any rental concessions

Any agreement that may be reached should be documented in writing and signed, and it may be that the lease if registered will also need to have any changed also registered on title.

There may be situations where no negotiated solution will work and parties may need to rely on dispute resolution procedures either now or at the end of the moratorium period, noting that the moratorium does not relieve a lessee from the obligations under the Lease, just that they cannot have the lease terminated during the moratorium period.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss negotiating changes to commercial leases or licensing arrangements, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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COVID-19: McKillop Legal remains open for business

McKillop Legal remains open for business and is fully operational despite the significant and unprecedented challenges facing our families, the Australian economy and our way of life as a result of the Coronavirus/COVID-19 pandemic.

We remain open for business and available to provide advice either by telephone, email or other services (and, if necessary, in person, abiding by the Government’s social distancing guidelines).

Our staff all have the ability to work remotely from home or in other places using our secure technology infrastructure and systems.

If you or your business has any legal issue it requires assistance with, whether relating to your rights or responsibilities relating to business, shutdowns or employment in relation to the pandemic or in relation to other matters, please call or email us and we will be in touch promptly.

Take care.

Can you just put a caveat on someone’s house?

If you are owed a substantial sum of money by someone, whether because you have loaned them funds or if you have a bill that hasn’t been paid, you would generally like to secure those funds. This way, if the borrower or debtor ends up being a bankrupt or insolvent, you may be in a better position as a secured creditor to those that are unsecured and hopefully you can get paid.

So how does security work? Security is effectively giving notice to the world that you have a claim on that person’s estate or assets so that subsequent people or businesses dealing with the same person are aware that you are to be paid in property, ie before them.

Security can be given in several ways, including:

  • handing over physical possession of certain assets;
  • the granting of  a Security Interest over assets registered on the Personal Property Securities Register (or “PPSR”); or
  • perhaps granting a Mortgage over real property owned by the person owing the money.

The registration of securities grants priority in order of registration, so it is important not to delay in registering any securities granted.

Ordinarily, you would have put in place a Loan Agreement or had Terms of Trade in place to govern your business relationship so that you have the express written consent to do such things to secure the debt, but if these documents are not in place before the financial obligation arises, people often take the step of lodging a caveat on title to property owned by the debtor.

A Caveat registered on title to a property has the effect (subject to the specific wording of the caveat of course) of preventing the owner or registered proprietor of that land from dealing with that land without the consent of the person who lodged the Caveat (the “caveator”). Dealings that can be prevented include lodging other Mortgages, lodging Transfers and the like.

Can you just put a caveat on someone’s house? If only things were that simple!

Many people have taken the step of lodging a Caveat on title to a debtor’s property only to have been unsuccessful in protecting their debt. Why? Well, in order to lodge a caveat (or even a Mortgage or PPSR Security Interest for that matter), you need to have the relevant asset “charged” in your favour with payment of the relevant debt. Creating a “charge” over an asset creates an interest in that asset that allows you to lodge a Caveat to notify and protect that interest.

A Caveat is not a document that gives you priority over previously registered interests, but it does give you some control over the asset such that you can prevent refinancing or a sale of an asset unless satisfactory arrangements for you to be paid have been made as part of that process  Properly drafted documents in relation to the lending of funds or business agreements where credit is extended should include things such as Mortgages, General Security Deeds or other things that create an interest in the asset sufficient to lodge a Mortgage, on title (to land), a Security Interest (on the PPSR in relation to assets etc) or at a minimum a Caveat over land.

Without such an interest being created, the caveator runs the risk that the owner can’t sell or refinance and suffers financially, then pursues the caveator for damages flowing from the caveator’s wrongful act, putting the caveator in an even worse position than they were before!

These things should not be done without proper advice, so take the time to review your current situation and documents now before a problem arises and have the documents updated to best protect you or your business.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to debt recovery, loan agreements, estate planning, any business-related matter or if you have a Caveat lodged on your property without your consent, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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Commercial Leases

A commercial lease, simply put is the agreement between the owner of business premises (the lessor) to the tenant that is to occupy those premises (the lessee).

The terms of each commercial lease can and usually do differ depending on the nature of the property, the location and the use to which the premises are to be put. There are however many terms that are common to all leases, even if they may be drafted differently in each lease document.

Sometimes confusion arises as to whether a lease is of commercial premises as opposed to retail premises. Retail leases are covered by the Retail Leases Act and there are many additional obligations on the Lessor in relation to retail premises such as the provision of a Disclosure Statement, minimum lease term etc

Prior to entering into a lease, it is a good idea to obtain a condition report or at least take photos or video to show the condition of the premises as at the commencement date and to show what fixtures and fittings were in place.

Some key considerations in relation to a business or commercial lease include:

  • Development consent for the intended use of the premises
  • Term
  • Options to renew or buy
  • Rent
  • The process for and timing of rent reviews (CPI, market, fixed increase etc)
  • Outgoings
  • Security bonds
  • Director guarantees
  • Costs
  • Insurances
  • Repair and maintenance obligations
  • Lessee’s make good and refurbishment obligations on termination
  • Any pre-lease works/promises made
  • Assignment and sub-letting/licensing

It is not uncommon for the parties to enter into a Heads of Agreement or similar document whereby some or all of the above matters and more are documented briefly, such that the key terms are signed off as agreed, but it is usually important to ensure that this document itself doesn’t create a lease and is in fact subject to the parties negotiating and signing a formal written Commercial Lease.

Leasing can be complicated so it pays to seek the advice of a lawyer before entering into a Commercial Lease, an Agreement for Lease or a Heads of Agreement.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to the leasing or licensing of business premises, commercial law or business related matters, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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The difference between joint tenants and tenants in common

You own property with another person and you are in the process of making a Will.

Of course, you want your interest in the property to go to your intended beneficiaries.

Your solicitor asks you if you own the property as “joint tenants” or as “tenants in common“. You stop and think…

Until now, you had no idea that there was any difference between joint tenants and tenants in common and had probably never considered it.

The concepts are the same for any asset, but are more commonly used in relation to land. So what is the difference?

What is tenants in common?

The simplest way to think about owning real estate (or real property) as tenants in common is that each owner has a legal interest in the land in a defined or specific share or proportion.

For example, the phrase “as tenants in common in equal shares” means that each owner has an equal interest in the land (so in the case of 2 owners, they each hold a 50% interest and in the case of 3 owners, they each hold a 1/3 interest).

Where property is owned as tenants in common but in unequal shares, the proportion of ownership is specifically stated (such as “John Smith as to 1/4 share and Bob Brown as to 3/4 share as tenants in common”).

With tenants in common, each owner (subject of course to any Co-Ownership Agreement or encumbrance such as a Mortgage or Caveat) may freely transfer or dispose of their share of the property, including in their Will when they die.

On their death, their interest in the property will be included in the inventory of property annexed to the grant of Probate or if they don’t have a Will, annexed to the grant of Letters of Administration.

What does joint tenancy mean?

Joint tenants however each own the whole of the relevant asset. The concept is that the co-owners’ ownership of the asset overlaps such that on the death of one joint tenant, the remaining joint tenant/s will continue to hold the whole of the asset. This is known as the “right of survivorship“.

A deceased joint tenant’s interest in the property does not form part of their estate and is not available for distribution to the beneficiaries of that person’s Will. Often this is overlooked by those drafting Wills.

The same principles apply to bank accounts held jointly.

It is for this reason that most married couples (or those in longer term relationships) hold their property or at least their principal place of residence as joint tenants. There are however, sometimes good reasons for holding property differently as part of an overall Estate Plan. Blended families for example often necessitate this right of survivorship not being given effect to so as to more fairly distribute their estate on their death.

Other situations where a joint tenancy may be appropriate for those not in a relationship like marriage is a Lease by parties to a Partnership – the death of one partner would then not necessarily affect the continuation of the Lease.

Severing a joint tenancy

If you hold property as joint tenants with another person it is possible to sever the joint tenancy – which then converts it to a tenancy in common in equal shares.

This can be done unilaterally by lodging the appropriate documentation at NSW Land Registry Services (formerly NSW Land & Property Information and the Land Titles Office) and is often done by lawyers when parties to a marriage or de facto relationship no longer wish for the other party to own the entire property on their death, such as when they separate or get divorced.

Mixed tenancies

It is also possible to have a combination of both a “joint tenancy” and a “tenancy in common“, such as where a property is owned by 2 families. For example,  a husband and wife may own one half of the land but they own it jointly as between them (so that if one passes away, the other continues to own it) and the brother of the husband owns the other half absolutely.

The title to the property would show “John Smith and Mary Smith as joint tenants as to 50% and David Smith as to 50% as tenants in common”.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, changing the tenancy of a property or documenting a co-habitation or property use agreement, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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