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You can’t get away with everything – Unenforceable Employment Contract Provisions

smsl-admin78
28 Feb 2017
Uncategorized
Comments: 4342

Like many legal agreements, employment contracts may be drafted in a way that is “unbalanced”, to favour one party. Generally speaking, the employer being in a position of power is able to dictate the terms of the agreement between the parties.

However, it is not commonly known that some employment contract provisions are either difficult to enforce or completely unenforceable. This article provides some examples of potentially unenforceable employment contract provisions and explains what you can do to protect your business interests.

  1. Restraint of Trade Clauses

Employers will commonly have circumstances where a past employee has confidential information regarding their business, is employed by a competing business or creates their own competing business. In these circumstances an employer may seek to rely on a restraint of trade clause (i.e. a clause which prevents an employee from working for or conducting a competing business within a specified location for a particular period of time).

Confidential information such as client lists and industry specific know-how can be very important information for a business to protect from spreading to rival businesses.

What may be unknown to many employers is that restraint of trade clauses are, generally speaking, unenforceable, unless they are in the reasonable interests of the parties and the public generally.

Whilst restrictions may be placed on employees who have confidential information and/or direct contact with customers, a restriction on the employee’s ability to work for a different business or to prevent competition from a competing business will not be enforceable.

Tips moving forward:

  • Do not assume that a restraint of trade clause can be relied upon unless you have received professional advice prior to the employer/employee relationship being created;
  • Ensure a “cascade” clause is inserted in the restraint of trade clause with reasonable restraint periods and distances to give your business a better chance of relying on the restraint clause;
  • A restraint of trade clause is, generally speaking, more likely to be enforceable depending on circumstances such as:
    1. Whether the employer has a legitimate interest to protect;
    2. The area and time for the restraint;
    3. The effect the employee leaving has on the employer’s business; and
    4. The nature of the employee’s role means that they hold particular information or influence.
  • Even where a restraint of trade clause is enforceable it can be costly to enforce;
  • Include confidentiality clauses in your employment contract which survive termination of the agreement so that there are alternative avenues for protection of confidential information than a restraint of trade clause.

 

  1. Employee to Reimburse Employer for Training or Equipment

It can be very frustrating for employers to purchase equipment for an employee or have employees attend expensive training sessions at the employer’s cost, only to move business or create a competing business.

It is increasingly common for employment contracts to provide that an employee is required to reimburse an employer for training or expensive equipment, particularly where the employee discontinues employment within a certain time after completing the training or receiving the equipment.

However, section 326(1) of the Fair Work Act 2009 (Cth) essentially provides that a term requiring an employee to make a payment to the employer or another person must be “reasonable” in the circumstances to be valid.

Although employers may see reimbursement for such expenses as “reasonable”; the law has historically favoured employees in this regard.

A reimbursement for equipment or training is more likely to be considered “reasonable” where:

  • The employee benefits wholly or substantially from the equipment or training, compared to the employer;
  • The reimbursement amount is reasonable;
  • The value of the benefit of the equipment/training to the employee is high; and
  • The ability of the employee to decide whether they receive the equipment or training.

In addition, according to section 324 of the Fair Work Act the employer is required to meet further requirements when deducting an amount from monies payable to an employee as opposed to an arrangement where the employee must pay money to the employer.

An example of a permitted deduction would be a salary sacrifice arrangement (provided that other legal requirements are adhered to), whereby the employee forgoes a portion of their pay to receive a particular benefit.

Specifically, the Employer is only able to make a deduction from monies payable to an employee if one of the following applies:

  • The deduction is authorised in writing by the employee and is principally for the employee’s benefit; or
  • The deduction is authorised by the employee in accordance with an enterprise agreement; or
  • The deduction is authorised by or under a modern award or an Fair Work Commission order; or
  • The deduction is authorised by or under a law or an order of a court.

Furthermore, where the deduction is authorised by an employee in writing, the authorisation must specify the amount of the deduction and may be withdrawn or varied in writing by the employee at any time.

Tips moving forward:

  • Ensure that you check any Modern Award, EBA etc. for provisions regarding who is responsible for the payment of training and equipment;
  • Don’t assume that you are entitled to be reimbursed under an employment contract for training and/or equipment if your employee leaves your business;
  • If you have specific equipment or training for which you wish to make an employee responsible, ensure you seek professional advice, preferably prior to executing any employment contract;
  • Ensure that the deduction is permitted under the Fair Work Act;
  • If a deduction is permitted under the Fair Work Act, ensure that the formal processes are followed, such as specifying the amount of the deduction in writing if the employee is authorising the deduction.

 

  1. Conclusion:

It can be costly to assume that all employment contract provisions can be relied upon and enforced.

We recommend that you contact us for advice regarding drafting and implementing employment contracts to give you the best chance of enforcing your contractual rights.

Register that Trademark

smsl-admin78
13 Feb 2017
Uncategorized
Comments: 3788

Fred Coben is the owner of a very successful coffee shop business. Back in 1995 he came up with the idea of setting up a coffee shop called “Cobean Coffee Shop” in Morningside in Brisbane. The name was obviously a play on his name and he felt that it was different enough from other businesses that sold coffee to be unique. Fred developed his business into a thriving business and had started other businesses in locations all around the local area, West End, Caboolture, Burpengary, Redland Bay, Loganholme etc. Fred was in Phase 7 – Expansion/Franchising and Licensing Phase of the Business Legal Lifecycle.

Cobean Coffee Shop had become a local institution wherever it was located. Fred was constantly amazed at how his coffee shop was doing so well when other local businesses failed all around him. People enjoyed the brand of his coffee and the way that he brought a personal touch back to the dry coffee shop scene. Customers would often comment that when they were in other parts of the city they would seek out Cobean Coffee Shops because they knew what they were getting, a great personal experience with a great cup of coffee.

Often Fred would be approached by other people that would want to take on his model and for 20 years Fred did not want to lose control of his business.

In 2016 Fred decided that he wanted to develop an exit strategy for his business, he had developed the business into a thriving profit making machine but he wanted to do something else. Fred was 50 years old and knew that he could not continue to operate these businesses for the rest of his life. He decided that he would set up a franchise model for his stores with a view to taking on other franchisees and then to sell the franchise business to a larger coffee chain or investor.

When Fred approached his lawyer the lawyer went through his plans and advised Fred of what he needed to do. Fred found out that he had a number of things to do before he could franchise his business:

  1. Firstly he needed to put together a product to sell, what was the product? well the product was the manual on how the business was operated so that the people buying the franchise could operate it the way he wanted it operated;
  2. Secondly he needed to approach a marketing company that could market his franchise to prospective franchisees and speak to the people that had previously approached him about becoming franchises;
  3. Thirdly he needed to work out how he was going to train the franchisees and their staff to make sure that they had all of the requirements that he wanted to protect his brand; and
  4. Finally he needed to protect his intellectual property including the name and brand of the business as this was part of the package that was very attractive to buyers.

Critical to Fred’s plans was to establish a trademark for the well known name of the business. He had not done it before as whilst he was making great money from the business he did not want to go to the expense of trademarking his business name and skipped Phase 5 of the Business Legal Lifecycle, Protecting Intellectual Property.

The lawyer did a quick google search of the business name “Cobean Coffee Shop” and was surprised to discover a number of other businesses in the Brisbane named “Cobean Coffee Emporium” and other ones in Sydney and Melbourne named “Cobean Coffee”. Whilst their logos were different it was clear to Fred that his name was not as unique as he thought. The solicitor then undertook a search of the trademark register for the word “Cobean” to Fred’s surprise the words “Cobean Coffee” had been trademarked by a large coffee conglomerate business in Sydney and they were the ones operating the business in Sydney and Melbourne, and had been operating since 1997.

Fred was devastated, the brand that he thought was his, the brand that he thought was unique and special was not and that many of the people that were coming to his store were actually mistaking the business as being related to the coffee shops in Sydney and Melbourne.

What this meant for Fred was that before he could start selling his franchise business he had to spend time and money rebranding all of his stores, social media and advertising. This expense was well over $100,000.00 all of which could have been saved if he had spent a few thousands of dollars early on to make sure that his trademark was unique and he was protected through registration.

This story, unfortunately is not all too uncommon in businesses around Australia. Often when people start a business they do not have the money or knowledge to protect their intellectual property. In developing the Business Legal Lifecycle we realised that this was one of the main impediments for business owners in taking this step. Under the Business Legal Lifecycle, registering a trademark falls into Phase 5 – Protecting Intellectual Property. This is done for the deliberate reason that often whist it is not feasible for a business owner in Phase 1 – Conception, or Phase 2 – Startup for a business owner to register a trademark for their business by the time they get to Phase 5, after having gone through Phase 3 – Initial Clients and Phase 4 Bringing on Employees, there is something to protect in registering the trademark. Spending the money at this point in time to register their business’s trademark is when we have seen successful businesses thrive and really build their business.

Also this does not just apply to businesses as large as Fred’s, even if Fred had one coffee shop, if the larger business had found out that he was using their name then Fred would have forced him to stop, even though he was trading first as they had a registered trademark.

If you would like to know more about Protecting Intellectual Property or the Business Legal Lifecycle in general please contact our office on 07 3667 8966 or email us at info@smslaw.com.au.

Simplifying the Trademark Process

smsl-admin78
11 Feb 2017
Uncategorized
Comments: 4391

There is great news for businesses looking at registering their trademarks in Australia. In October 2016 IP Australia the government agency that looks after registration of trademarks announced that they were changing the process of registering a trademark to make it a more simple process.

The process of registering a trademark is generally as follows:

  1. An application is made to IP Australia, where fees are paid,
  2. Then it will go through an examination phase where an examiner at IP Australia will give preliminary approval or otherwise to a trademark;
  3. The is trademark is advertised in the Journal to ensure that no third party says that it should own the trademark; and
  4. Once that period is passed the owner is then given the option to pay for registration of the trademark with that registration lasting for 10 years.

Under the changes when you apply for a trademark you will now automatically pay one fee that will include the registration fee. The actual cost is only an increase of $200 per trademark (as at the time of applying for the trademark making it $330.00 per class that you want to register your trademark in) which is less than the fees that were in place previously for application and then registration (which were approximately $200.00 for the application and $300.00 for the registration).

It is important to note that the fees for ongoing registration have also increased by $100.00 per class.

All of this means that it is now cheaper to register a trademark but keeping it for a long time may result in larger costs over the lifetime of your trademark. It will also eliminate the process whereby business owners would go through the process and then decide not to register the trademark, ensuring that IP Australia are compensated for their work up front.

Many business owners believe that they can register their trademark themselves. However the process is more complicated then you think and making sure that it is done correctly is now more vital than ever, as if you incorrectly register your trademark and have to reapply you will lose a lot more money.

At Streten Masons we have expensive experience in assisting businesses to protect their trademark through registration in Australia and in other countries. If you would like to know more about how we can help you please contact our team on 07 3667 8966 or info@smslaw.com.au.

Protecting your intellectual property

smsl-admin78
10 Feb 2017
Uncategorized
Comments: 3255

Do you want to lose your intellectual property should something happen to your business? Usually your intellectual property, such as, the name of your business, how you do things in your business, any patents or other intangible items of value will be lost if you lose your business. This can be a disaster for your business and all of your years of hard work could be obliterated in a heart beat.

However there are steps that you can take to protect your intellectual property. There is no point in waiting until something happens to your business that forces your hand, these steps need to be taken early on in your business. Whilst many would assume that Protecting your Intellectual Property should be in Phase 2 – Startup of the Business Legal Lifecycle what we have found is that often business owners do not want to spend the money that needs to be spent until they have a viable business.

What we are talking about here is having a separate entity own your intellectual property, your business name, trademark and the other intangibles that make your business what it is. Every business no matter what field you trade under has its own intellectual property, it is unique to that business as every person, every entrepreneur and every business owner is different. Protecting what you have built is one of the key parts of Phase 5 of the Business Legal Lifecycle.

When you undertake this step at this Phase there may be some small tax consequences however what we have found is that unless you have a large business from the start (which is the exception rather than the rule) then you do not need to undertake this step until this Phase of the Business Legal Lifecycle.

At Streten Masons we have expensive experience in assisting businesses to protect their intellectual property through a variety of different mechanisms. If you would like to know more about how we can help you please contact our team on 07 3667 8966 or info@smslaw.com.au.

Play fair this November – The rules are changing

smsl-admin78
07 Nov 2016
Uncategorized
Comments: 2675

 

The government has introduced legislation that will affect you as a small business from 12 November 2016.

The changes relate to what is considered unfair terms in standard form contracts entered into on or after the commencement date of 12 November 2016.

What is a small business?

Small business is defined for the purposes of this legislation to be a business that employs less than 20 people (including casual employees).

The new legislation will apply if any one of the parties to the contract is a small business and:

  • The contract is for the supply of goods or services or the sale or grant of an interest in land; and
  • The upfront price payable under the contract is no more than $300,000.00 or $1 million if the contract is for more than 12 months.

Standard form contracts

The new rules will apply to a standard form contract entered into or renewed on or after 12 November 2016 and not for existing contracts.  A standard form contract is one that has been prepared by one party to the contract, normally with little or no opportunity for the buyer to negotiate the terms.

 

What contracts and terms that are not effected?

  • Contracts entered into before 12 November 2016 (unless renewed on or after this date)
  • Certain insurance contracts
  • Terms that define the subject matter of the contract, the upfront price payable and that are required or expressly permitted by a law (eg under the franchising code)

Examples of contracts which may be affected include:

  • Franchise agreements;
  • Manufacturing and distribution agreements;
  • Business terms and conditions;
  • Licence agreements;
  • Service agreements; and
  • Leases

What may be considered unfair?

The following terms may be considered unfair:

  • Where one party (but not another) can avoid or limit their obligations under the contract;
  • A term that enables one party (but not another) to terminate the contract;
  • Terms that penalise one party (but not another) for breaching or terminating the contract;
  • The contract can be varied by one party (but not another).

If a term is found to be unfair what happens?

The unfair term is void however the contract may continue to bind the parties provided the contract can operate clearly without the void term.

What can I do now?

It is not too late to review your contracts and think about the clauses that may be considered unfair.  Amendments can be made now for any future contracts you may enter into.  The number of employees for either your own business or business you are interacting with must now be front of mind to determine whether the party is a small business.

Now is the time to review your current contracts to ensure that any future agreements do not contain unfair terms.  If you are unsure if a term is unfair or if you have any other questions about your contract or another party’s contract that you about to enter into please contact Streten Masons Lawyers on (07) 3667 8966

Balcony struck down by High Court

smsl-admin78
14 Oct 2016
Building and Construction law, Litigation
Comments: 364
apartment, Balcony, body, construction, corporate, dispute, finance, litigation, loss, profit

Balcony struck down by High Court

A dispute over a 5 square metre balcony is probably the most expensive balcony feud ever in Australia. The High Court recently ruled in a dispute between the owner of a property and the body corporate itself.  The owner of the property wanted approval from the body corporate to allow the owner to build an additional balcony between his two existing  balconies in a Noosa Heads complex. This change would have effectively granted the property owner additional property, albeit common air space, for the property.

The rules and the body corporate legislation require that any change to a property that takes away body corporate property requires unanimous consent of all of the members of the body corporate before it can happen. In 2012 the body corporate members unanimously agreed to deny the balcony upgrade, sparking the property owner to try and overturned that decision through the courts. balcony The property owner went through the appeals process before ending up in the High Court.

In the High Court, the property owner argued that it was unreasonable of the body corporate to not allow the extension of the balcony. However, the High Court ruled that it was not unreasonable that the motion to deny the balcony upgrade was unreasonable.

The fight, which reportedly cost the parties somewhere in the order of $500,000.00, now means that body corporates will know that such changes can be blocked and gives certainty to the way that the courts in Queensland will interrupt these disputes. It is also a good lesson for people considering entering litigation; now the property owner has been left to foot a hefty legal bill all over his attempt to create a bigger boundary on his property.

At Streten Masons Lawyers we can assist your clients in all types of legal disputes – particularly body corporate disputes. Heading into expensive litigation processes can be incredibly costly for your business so getting advice is the best thing to do. Contact one of our lawyers today on (07) 3667 8966 or info@smslaw.com.au to find out how we can assist your clients.

References:
http://www.afr.com/real-estate/residential/martin-albrechts-balcony-plan-struck-down-by-high-court-20161012-gs0ce7

 

Do I Need Workplace Policies and Procedures?

smsl-admin78
13 Oct 2016
Commercial Law, Corporate law
Comments: 228
Business, commercial, corporate, dispute, guide, law, legal, legislation, policies, procedures, workplace

Do I Need Workplace Policies and Procedures?

The checklist to start and run a successful business can sometimes be intimidating. Sorting your priorities to get the business running can be tedious when you’re eager to start. Similarly, finding time to improve your business can burdensome when you’re up and running.

However, it is crucial that if your business has staff that you obtain and implement Workplace Policies and Procedures documents to save your business time and money.

Although there are almost innumerable reasons why your business should have workplace policies and procedures, some of the most important and practical reasons from a legal perspective are as follows.

  1. Health and Safety Matters:

Perhaps the most common reason for employers implementing workplace policies and procedures is to ensure that they provide a safe workplace as required by workplace health and safety legislation.

It can be difficult for businesses, particularly growing businesses, to manage health and safety risks for their employees. Providing and implementing specific policies and procedures which requires and empowers employees to self-identify hazards is both critical and necessary.

When an incident occurs in the workplace it can be very difficult for an employer to distance themselves from that occurrence; therefore prevention is the key.

  1. Protect against unfair dismissal claims:

Business owners seldom have time to keep up to date with and deeply understand complex industrial relations laws to ensure they are not exposed to unfair dismissal claims.

An employment law Solicitor can assist you to obtain clear expectation guidelines and processes/procedures which provide a clear framework group-meetingfor your business to implement, making the process much simpler.

Sometimes employers implement these procedures after an unfair dismissal claim is made and by then it has already cost them thousands.

Ideally, if the expectation guidelines, processes and procedures are followed correctly, your business can reduce exposure to liability for unfair dismissal claims.

Protect against other employment claims:

There are an almost infinite number of matters that your business can be held liable for; this includes both claims by an employee and/or third party because in relation to the actions of an employee in the course of their employment.

You can reduce your exposure by having specific policies and procedures, including grievance procedures in relation to:

  1. sexual harassment;
  2. workplace bullying;
  3. discrimination; and
  4. racial, religious or other vilification.

Make your business more efficient:

You might be surprised how much more can be achieved when employees have additional certainty regarding their roles and do not need to interrupt management for advice.

In addition, bringing on new employees will be made easier and you are more likely to retain valuable knowledge when an employee leaves because it has been documented in the procedures.

Spending money in the short term can save your business money in the long run by investing in workplace policies and procedures; plus it will add to the value of your business once you decide to sell.

We recommend that you call us at (07) 3667 8966 or email info@smslaw.com.au for advice regarding drafting and implementing policies and procedures for your business.

 

Why Businesses Fail in Their First Year

smsl-admin78
10 Oct 2016
Business, Commercial Law
Comments: 149
book, Business, conception, Employees, expansion, fail, franchising, guide, intellectual, leasing, legal, lifecycle, property, startup

Why Businesses Fail in Their First Year

 

“I could sell that.”

 

It is the thought that has passed through the mind of every entrepreneur that has seen a need for a product or service. Unfortunately, history is full of failed concepts that were built on hot air and good intentions. Canine sunglasses? Smell-o-Vision? Google Glass? Every year, upwards of 200,000 new businesses are registered in Australia with approximately 1% of those still trading after 12 months.

Out of those who continue to trade, 40%+ suffered from poor strategic management, 40% struggled with cash flow, and 30%+ suffered trading losses throughout the financial year. The risk of failure is all too apparent, but with every new business – such as Uber or AirBnB – the goal of starting a successful business is achievable.

The defining factor in the success of any new business is one thing: information. Despite Australia’s over-supply of willing entrepreneurs, there is a substantial deficit in professional knowledge of starting or running a business. If knowledge equals power, then the most powerful investment for any up-and-coming entrepreneur is quality information. Taking, for example, the model used by Jeremy Streten in “The Business Legal Lifecycle”.

If knowledge equals power, then the most powerful investment for any up-and-coming entrepreneur is quality information. Taking, for example, the model used by Jeremy Streten in “The Business Legal Lifecycle” where the start, growth, and end of a business is mapped out over 13 phases:

  1. Conception;
  2. Start-up;shutterstock_289209530
  3. Initial Clients;
  4. Bringing on Employees;
  5. Protecting IP;
  6. Maximising the Business/ Bringing in Investors;
  7. Expansion/ Franchising/ Licensing or Buying an Existing Business;
  8. Estate Planning;
  9. Investing in Property;
  10. Litigation and Dispute Resolution;
  11. Sale of Part or Whole of the Business or Listing on a Stock Exchange;
  12. Retirement; and
  13. Insolvency/ Winding-Up

It is no secret that the vast majority of new businesses fail within the first year of trading. To best understand that “how” and “why” failure is so prevalent, it is best to track the beginning of a new business and the risks that are associated with starting out. The first four phases of the BLL map the early development of a new business.

Phase 1: Conception

Conception is often seen as the most exciting phase starting a business; it is characterised by enthusiasm and good intentions. Every entrepreneur begins their journey seeking to satisfy a need in the market, and this journey begins by identifying the need and supplying for that need. The trap that many entrepreneurs fall into is believing that a good idea is enough and that the business will take care of itself. The early days will be spend answering questions such as:

  • What is the need in the market?
  • Is my idea a one-off, or can it be developed?
  • Who are my clients going to be?
  • How am I to fund this venture?

Focussing too heavily on one idea, or over-simplifying the vacancy in the market can prove to be fatal for any new business. An under-prepared initial concept is often no more than a waste of time and resources for a new entrepreneur. It is worth the time and effort to properly develop the original idea, and if necessary, seek out professional advice.

Phase 2: Start-Up

Once an idea is properly conceived, the start-up of the business may begin. If Conception is the most exciting phase, then Start-Up will be the most nerve-wracking. This phase includes setting up a business entity, entering a commercial lease arrangement and even taking out a loan to jump start cash-flow. The average person does not know which is the best business model is for them, so this is the phase where it pays to get some advice. Choosing a business model will need answers to questions such as:

  • What is the entrepreneur’s personal situation?
  • What are the assets involved, and how can they be protected?
  • How much time and effort is going to be expended?
  • What are the short-term and long-term goals for this idea?

The business models that are available include sole trading, setting up a trust, registering a company, or entering a partnership arrangement. Choosing the wrong business model will likely result in poor cash-flow, inability to access the target market, and inevitable trading losses.

Phase 3: Initial Clients

The third phase is where the idea starts to take shape – finding, and catering to, clients. Much like stalking prize game on the African savannah, an entrepreneur must get to know every aspect of their target audience. A new business owner must begin to cater for an “ideal client” – who is this ideal client? Where do they live? What are their interests? What is their socio-economic status? How will they be exposed to the product and/or service?

Once this ideal client has been determined, the task of selling the initial idea becomes easier. A successful entrepreneur will develop a method of attracting the attention of the ideal client, and will have systems in place to ensure a seamless transaction. Failing to identify an ideal client is a common mistake which often leads to generic and unremarkable sales techniques. Many early-career entrepreneurs struggle with the technical side of selling the initial idea, such as formulating a client agreement form or setting up debt recovery processes; it is essential that these practices are developed before the business can grow.

Phase 4: Bringing on Employees

The fourth phase indicates that the business is well and truly growing in size and capacity. This phase can be the most rewarding if the business owners hire the right candidates – but, hiring the wrong candidates can be a massive expenditure for the business in time and money. There is a wealth of anecdotal evidence that shows business owners making mistakes involving the legal obligations on taking on staff, or hiring the wrong candidates, or simply not having enough work for new staff. It is this stage that seeking professional advice becomes essential, whether it be a lawyer, a business consultant, or a third party recruiter.

Before seeking further advice, every business owner will be to be able to answer the following questions:

  • Do I want employees or contractors?
  • Do I have a contract drafted?
  • Am I aware of my legal obligations to them, and their legal obligations to me?
  • How much work do I have to share around?

Running a business is, and will always be a significant risk. It is with in the early development of a business (i.e. within the first four phases), that the majority of fatal mistakes are made. We see that the most common reasons for a new businesses to fail their first year are:

  1. Rushing the concept. Sometimes a bad idea is just a bad idea – there is no way to rescue a business that is built on an under-developed concept.
  2. Choosing the wrong business model. The type and structure of the business will have important consequences for out come of the business.
  3. Target marketing. Without having a defined sales strategy, a new business is lost in the wilderness, surrounded by competition.
  4. Staffing choices. Good staff are valuable; bad staff is not. A business owner needs to know the difference.

Our staff are experienced and well-versed in all the pitfalls or decisions that a new entrepreneur may be faced with. If you have any questions, do not hesitate to contact us at (07) 3667 8966, or at info@smslaw.com.au.

Into the Deep End

smsl-admin78
10 Oct 2016
Building and Construction law
Comments: 1203
deep, end, guide, help, investment, laws, leasing, legal, legislations, pools. building, profit, property, shared

Into the Deep End

Why You Need to Know the Difference between Shared & Non Shared Pools

Do you own a pool? Are you thinking of buying somewhere with a pool? You’re probably aware that there are heaps of pool safety laws under the Building Act 1975 (QLD) that apply to pool owners, but did you know that different regulations can apply for Shared Pools and Non-Shared Pools?

Here’s what you should understand before diving into a sale or purchase of properties with pools…

Non-Shared Pools

These are pools that are only be used by the residents of one dwelling, such as a private house pool or a spa on a private balcony. Note: if the pool is associated with a “Class 3 Building” (such as a hotel, motel or backpacker hostel) it will be considered a Shared Pool – even if it’s only accessible to some residents.

When entering into a Contract of Sale, the Seller must either:

  1. provide the purchaser with a pool safety certificate; or
  2. give a Form 36 notice that they do not have a certificate.

If the purchaser doesn’t have a valid pool safety certificate at settlement then they must obtain one within 90 days. Certificates are valid for 2 years for Non-Shared Pools, no matter how many times the property is sold or leased during that period. You don’t need to renew them once they expire, unless you decide to lease or sell the property.

Shared Pools

These are pools that can be used by residents of more than one dwelling, such as hotels, backpacker hostels or body corporate pools.

When entering into a contract of sale, the Seller must either

  1. provide the purchaser with a pool safety certificate; or
  2. give a Form 36 notice that they do not have a certificate.

If the Seller doesn’t provide a certificate then the Form 36 notice must also be given to the Queensland Building and Construction Commission and the body corporate (if there is one) prior to settlement.

The Buyer will have 90 days from settlement to comply with the pool safety standards. Certificates are only valid for 1 year for Shared Poolspool and must be displayed at the pools access point.

Leasing Properties with Pools

When leasing a property with a Non-Shared Pool, the property owner must ensure a valid certificate is in effect before the lease agreement is signed, however the tenant does not need to be provided with a copy.

Property owners who are leasing a property with a shared pool must either ensure that a valid certificate is in effect, or give a Form 36 notice to the tenant, the QBCC and the owner of the pool (i.e. the body corporate) before entering or renewing the lease. If there is a certificate, the tenant must be given a copy as well.

Property Agents

Finally, property agents should note that if you collect commissions in connection with a lease (or other accommodation agreement) for a non-shared pool, and no pool safety certificate has been obtained, you may be liable under the Property Occupations Act 2014.

How We Can Help

If you are buying, selling or leasing a property with a pool, remember that the pool safety requirements may vary depending on whether it is a Shared or Non-Shared Pool.

Contact us by emailing info@smslaw.com.au or phoning (07) 0667 8966 to check your obligations. Want to know more about the current pool penalties in Queensland? We recently wrote a full article on pools and the penalties which you can view here.

Trusts: Why Do We Need One?

smsl-admin78
19 Sep 2016
Corporate law, Uncategorized
Comments: 74
Business, commercial, entity, funds, guide, home, legal, owner, residency, Trusts

Trusts: Why Do We Need One?

One of the biggest mistakes that we see on contracts – whether they bbusiness-fundinge residential land contracts, commercial land contracts or business contracts – is the failure to correctly identify one of the parties to the contract where one is a trust. Often a buyer of a property will say that the entity that is buying the property or business is the “Smith Family Trust”. The issue here is that the Smith Family Trust is not a legal entity.

To be a legal entity the “Smith Family Trust” must have a trustee, therefore the correct entity might be “John Smith as trustee for the Smith Family Trust” or “Smith Pty Ltd a trustee for the Smith Family Trust”. Not putting down the correct entity can make the contract invalid and allow either party to terminate for lack of certainty. This will mean that the agent will not receive their commission!

The reason for this is that a trust without a trustee is not a legal entity; the trust has the benefit of the property whilst the trustee has the legal ownership. One cannot exist without the other and this means that you need to have both in place to properly enter into a contract.

From a practical level we know that it can be difficult for some people to know the trustee off the top of their heads – let’s face it they have a lot on their minds and therefore they may struggle to remember these finer details. Often we have agents express their frustration on this point so here are some tips on how to easily obtain this information:

Firstly if you are preparing a contract where the seller is a trust and does not know the name then from your title search you will have the details that you need: “Smith Pty Ltd as trustee under instrument 705865486” will appear as the registered proprietor on the title search and is a perfectly acceptable way of listing the seller.

Secondly, a quick call by the buyer or the seller to their solicitor or accountant will quickly solve the issue as they should have those details at their figure tips.

Getting the right entity is essential to make sure that a contract is valid and binding and to avoid any transfer duty issues. If you have any questions please contact our office on 07 3667 8966.

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