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Do I Need Workplace Policies and Procedures?

13 Oct 2016
Commercial Law, Corporate law
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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

10 Oct 2016
Business, Commercial Law
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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

10 Oct 2016
Building and Construction law
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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?

19 Sep 2016
Corporate law, Uncategorized
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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.

3 Things to Consider Before Enforcing a Debt

22 Aug 2016
Debt recovery
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3 Things to Consider Before Enforcing a Debt

 

It is an unavoidable reality in doing business that from time to time you will encounter customers or clients who either can’t, or won’t, pay outstanding debts. The question is then whether these debts can be enforced, and if so, whether it is cost effective and practical to do so.

There are many factors that come into play when deciding what, if any, steps to take in enforcing a debt. Some key things to consider are often the need to protect your brand, desire to continue trading with the debtor, and the cost of steps to force the debtor to pay.

Ultimately the decision on whether or not to pursue a client for an outstanding amount comes down to a commercial decision by the business owner. However, from a cost-effectiveness point of view, and as a matter of practicality, we have provided essential factors to bear in mind when deciding on whether or not to use the courts to pursue the debtor for payment.

When?

The first question you need to ask yourself is how old is the debt, or when was the debt owed? The answer to this can determine whether or not the debt is recoverable.

Depending on the circumstances it is not unheard of for businesses, or liquidators, to try and recover debts that have been owing for a number of years. While the rules vary, and it is important to consider the particular circumstances surrounding the debt, an action to recover a debt owing under a contract must be brought within 6 years of when the cause of action arose.

As a general rule, the cause of action will have arisen when the debtor is in default of their obligation to pay. For example, where an invoice required payment within 7 days of the date of that invoice, the cause of action will arise on the 8th day after then invoice is issued if there is no payment.

Where?

Any assessment of the cost-effectiveness and practicality of recovering a debt requires consideration of where the debtor is located.Lawyer

Many contracts will contain jurisdiction clauses allowing the creditor to commence proceedings in a specified jurisdiction. For example, a Queensland business may require that a customer agree that any dispute is to be heard in the Brisbane Courts.

However, as discussed in some of our previous articles, commencing court actions and ultimately getting a judgment is often only the start, with subsequent enforcement action required. Where the debtor’s assets are located in another state (or even another country), enforcement against those assets will require that the judgment be registered in that jurisdiction. This will generally incur further costs.

What?

When deciding whether or not to enforce a debt, knowing about the financial circumstances of the customer is essential.

Any question as to the cost-effectiveness of recovering a debt requires a consideration of whether the debtor has the ability to pay the debt, whether the creditor has any information regarding assets owned by the business, or even whether the debtor’s business continues to trade at the time of enforcement.

Where the creditor lacks information regarding the debtor it is often necessary to commence what are called examination proceedings. These are proceedings, once you have obtained judgement, requiring the debtor to provide information regarding their ability to pay.

Commonly, the debtor (or a company officer) fails to respond and this can ultimately result in a warrant for their arrest. If, or when, they are apprehended they may reveal that there are no assets against which the judgment can be enforced.

Alternatively, the creditor may be aware of where the debtor is carrying out business and whether there are particular assets that may be seized. In this case, recovering the debt may be as simple as obtaining a warrant to seize and sell those assets, with the proceeds of the sale going towards repaying the debt as well as any costs incurred in pursuing the debt.

How We Can Help

If you require advice regarding prospects or options for commencing proceedings, or if proceedings have been commenced against you and you need advice on you options to defend those proceedings Streten Masons Lawyers can provide advice on all stages of the court process. Contact us at info@smslaw.com.au or call on 07 5428 1111 to talk about how we can help your business through the process.

Choosing the Right Business Structure

05 Aug 2016
Commercial Law, Corporate law
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Choosing the Right Business Structure

When entering into the commercial world it can often be difficult to decide how and where to begin.  Choosing the appropriate business structure is one of the most important steps before even considering arranging for finance, finding a premises, or contracting with suppliers and clients. Throughout this article we detail the different type of structures available, each structure’s advantage, risk and liability and how to create each structure (including their costs).

Step 1 – Know the difference

There are essentially three main types of structure that you can adopt when beginning your business:

  1. a Sole Trader/ Business,
  2. a Company, or
  3. a Partnership.

When using the Sole Trade structure, all that is required is the registration of an Australian Business Number (ABN) and registration for GST.  Under this structure, a person conducts their business alone, and typically only engages in small- to medium-sized ventures. A Sole Trader scenario does not create a separate legal entity, rather the business enters into a contract with another party in a personal capacity.Business Structure

The Company structure creates a separate legal entity through the registration of an Australian Company Number (ACN) with the Australian Securities and Investments Commission (ASIC). Directors and shareholders are nominated within the company’s structure.  There are multiple types of companies that can be created, including companies limited by shares, limited by guarantee, or unlimited companies. The most common type, however, is the standard proprietary limited company where the shareholder’s liability is limited to the amount left unpaid on their respective shareholding. This structure can be utilised for any type of venture.

Finally, the Partnership structure consists of the combining of resources and expertise between persons through mutual agreement to carry on a business in common with a view of profit. Each partner is then essentially an agent for the remaining partners. This structure does not in itself create a separate legal entity; each partner is required to have an ABN for taxation purposes.

Step 2 – Know the advantages, risks and liability of your structure

Each structure has various advantages and risks associated with them.

The Sole Trader structure is relatively simple, given that one person is in control of all finances and decisions. The initial start-up costs are relatively low; all income is paid to the business owner; there are less statutory frameworks and rules that require compliance; and in certain circumstances, losses of the business can be offset against the profits of the business. These are also easy to dissolve should the business owner wish to cease trading.

The business owner in a sole trader structure is, however, personally liable for all claims and debts related to the business. It is typical for all funds raised for the business in the operation to be provided through personal loans. It is also potentially more difficult to raise funds for the business, given that the only guarantee which can be given extends to the assets held personally by the business owner.

The Company structure is more complex and heavily regulated by legislation. This structure has higher initial start-up costs, as a company constitution is required in addition to registration. While legislation provides for specific rules to fill the gaps in a company constitution, it is prudent to ensure that the constitution is drafted to suit the specific company. A standard constitution can be obtained, or the appropriate version can be created by a lawyer.

Directors typically make all decisions for the company unless the company’s constitution requires particular decisions to be voted upon by its shareholders in a general meeting.  The company then enters into all contractual arrangements as a separate entity rather than as an individual.

The profits made by the company are also distributed to its shareholders depending on the class of shares they hold. In a typical company, the directors are the only shareholders and therefore obtain the profits. This can be altered if the company constitution provides otherwise. Further, the shareholder’s liability at any point is limited; should the company become financially unstable, an individual shareholder cannot not liable for the complete debt, only for the amount left owing on their shares.

A company can also issue shares to raise further capital to progress the company, and generally pays a lower rate of tax.

Losses are borne solely by the company, as legal arrangements are entered in to in the company name. This will apply unless personal guarantees have been given by directors indemnifying a third party for money owed, or there has been foul play (such as allowing the company to trade insolvent) by a director.

There are, however, more stringent obligations imposed on a Company than any other structure. Company documents must be compliant with the relevant legislation, and detailed records must be kept. Further, the company is obligated to specific disclosure and mandatory reporting obligations throughout its life.

The company’s director or directors are also obligated to act in a particular manner, given that they owe a fiduciary relationship to the company as a whole. They must ensure that they act in the best interest of the company, that they act in good faith, and that they do not misuse information or take advantage. Breaching these obligations can result in a breach of civil penalty provisions which can lead to heavy fines or imprisonment.

The Partnership structure is generally a more complex business structure, as a partnership agreement is typically a detailed document that needs to outline each partner’s rights and obligations within the partnership.  Each partner is also required to register for an ABN and GST while the partnership itself must obtain its own Tax File Number. The costs of these are relatively minimal.

This structure is also governed by statutory framework, however the requirements are not as strict as a company regarding reporting and disclosure obligations.

A Partnership arrangement works best when established persons combine their resources for a mutual purpose, and limit their liability and authority through strict agreement.  Failing to do so results in each partner being jointly and severally liable for the actions of the other partner, whether they are aware of them or not. Each partner is also given the right to participate in the management of the partnership unless otherwise agreed, or an incorporated limited partnership is formed.

It is important to note that although a partnership does revolve around a partnership agreement (somewhat similar to a company’s constitution), it is not in itself a separate legal entity because each partner is an authorised agent for the other.

litigationProfits from the partnership are distributed in accordance with the partnership agreement, regardless of the contribution of funds made by each partner. This is the same situation for losses incurred by the partnership. Liability for loss or any claim that may be relative is shared equally between partners, although losses can be offset against a partner’s alternative income in certain circumstances.

When a person wishes to leave a partnership arrangement, they must do so by agreement between the partners or in accordance with the mechanisms of the partnership agreement. This is the same situation should a partner wish to join.

The partners are obligated to act in a particular manner, given that they owe a fiduciary relationship to each of the other partners. They must ensure that they act in the best interest of the partnership; act in good faith; and do not misuse information, take advantage, compete, or gain a benefit from the partnership agreement outside the other partners.

Capital for the partnership is more difficult to raise as the partnership cannot offer shares to shareholders in return for funds. Instead, each partner would need to contribute funds from their own personal borrowing facility which incurs personal liability.

Step 3 –Create the structure

In order to create each type of structure, there are different processes that must be followed, and various costs incurred.

When creating a Sole Trader structure, all that is essentially required is the registration of an ABN and registration of GST.  At present, there is no fee for this application.

Creating a Company structure is more in-depth.  The type of company must firstly be selected (typically a proprietary limited company). The directors and initial shareholders must then provide their written consent; the constitution must be drafted (or alternatively replaceable rules can be adopted); and the lodgement and registration fees must be paid to ASIC. The current applicable fee is $457.00 for a standard company.

If your company wishes to have a more tailored company constitution, it is recommended that a solicitor create a document that suits your needs.

When creating a Partnership structure the only real requirements are the registration of a Tax File Number and ABN for each partner in addition to a partnership agreement. However, a prudent person would draft a complete partnership agreement in order to ensure that all obligations and rights of each partner are dealt with appropriately.

It’s important to make sure your business has been legally setup for a successful journey. If you require any additional information please contact us at info@smslaw.com.au or call us at (07) 3667 8966 so that we can assist your matter. For more information about how your business can benefit from The Business Legal Lifecycle ©, contact Jeremy at Jeremy@smslaw.com.a

 

Building up to Bankruptcy

26 Jul 2016
Building and Construction law, Litigation
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Building up to Bankruptcy

How Insolvency Could Stop Your Construction Firm

 

If you are a licensed builder in a company that is winding up due to bankruptcy, there are a number consequences set out by the Queensland Building Services Authority (QBSA) which you should be aware of.

When a company can no longer satisfy its debt obligations and must be declared bankrupt, it is insolvent. An insolvent company may go through a winding up period, that is, the orderly wrapping up of affairs and closing down of a business, also known as an event.

When an ‘event’ occurs in a company where you hold the role of director, secretary, or influential person, you may be deemed an “excluded person” pursuant to section 56AC of the Queensland Building Services Authority Act 1991 (Act).

What are the consequences of this occurring?shutterstock_374312011

When one event occurs, you will become an “excluded person” for a period of five years unless you can make appropriate submissions to the QBSA to have you deemed to be a “permitted individual”. This application must be made to the QBSA within 28 days after you receive notice from the QBSA that they intend to deem you an excluded individual.

Where a second or subsequent event occurs you will receive a second or subsequent notice from the QBSA, who has the power to deem you an excluded individual for life. When an individual is excluded for life, this means they can never be a licensee, director, or secretary of a licensee company. Again, the individual only have 28 days to apply to the QBSA to be categorised as a permitted individual.

What should I do first?

Where you receive such an exclusion notice you should immediately contact your professional advisors so that steps can be taken to determine whether you should make an application. Your advisor will properly prepare the application on your behalf; there are a variety of factors which must be considered to comply with the requirements of the legislation and give you the best chance of succeeding in your application.

The QBSA has considered my application and it has been refused, what do I do next?

Where the QBSA decides that it will not categorise a person as a permitted individual, you are at liberty to apply for a review of that decision through the Queensland Civil and Administrative Tribunal (QCAT).

The QCAT member will then conduct a new review of the matter to decide if the QBSA decision should have been to categorise the person as a permitted individual. These are important and complicated applications and once again you should instruct competent lawyers to act on your behalf in the application.

Where can I find help?

At Streten Masons Lawyers we can help if you are currently owed money by a person who you fear may become a bankrupt.  We can also assist if you are owed money by a debtor and want to initiate bankruptcy proceeds against them. Contact Jeremy at Jeremy@smslaw.com.au or call on 07 5428 1111 to talk about how we can help your business.

By Jeremy Streten

 

Pools and Penalties

20 Jul 2016
Building and Construction law, Commercial Law, Leasing, Property Investment, Property Law
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Pools and Penalties

The changes in 2016

The Queensland Government introduced a number of Pool Safety requirements in 2010. While it was commonly known within the Real Estate Industry that the ‘grace period’ for the provisions introduced expired in late 2015, the practical implications for Sellers who have not complied with these requirements is less clear.

Under the Act a grace period of 5 years was given for pool owners to comply with the requirements; this expired on 30 November 2015.Swimming_Pool_PNG_Clipart-949

As it stands, pool owners who do not have a compliant pools face up to 165 Penalty Units, which currently equates to $20,113.50. There are also additional penalties which may apply which relate to a failure to register a pool with the QBCC and complaints. This applies whether the owner is listing the property for sale or not and as such poses significant financial risks for pool owners.

Notwithstanding the above changes, the most recent twelfth edition of the REIQ Contract for House and Residential Land (Contract) was published in July 2016 and unfortunately has not been amended to specifically take into account the legislative changes.

Under Clause 4.2 of the Contract where no pool safety certificate has been issued the contract becomes conditional upon the Seller obtaining the Pool Safety Certificate and gives the Buyer the opportunity to terminate the contract if this is not provided.

It is likely that this right is going to be increasingly utilised as, despite the warning currently noted on the Contract,Buyers no longer have the benefit of the 90 day post-settlement grace period in which to obtain a Pool Safety Certificate.

While it would be of great use if the next edition of the REIQ Standard contract addresses these issues more clearly, our recommendation is that each property owner with a pool obtain the necessary compliance certificates prior to entering into a contract for sale.

For more information on pool safety regulations, or any other matters concerning property, contact us at info@smslaw.com.au or call 07 3667 8966. We’d be happy to help with your inquiry.

Top 7 Considerations for Buying Property off The Plan

12 Jul 2016
Building and Construction law
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Top 7 Considerations for Buying Property off The Plan

What does off the plan mean?

When a new property is being built, whether it is units or new houses, often a developer will seek to sell properties prior to completion. Essentially you are entering into a contract before:

  • Construction of the building is complete; or
  • The registered title to the lot has not been created.

Developers sell properties off the plan for a number of causes but the two main reasons are:

  • To show their bank or financier that they have the requisite buyers of the completed properties to give comfort to the bank or financier that the end development will be sold; or
  • To give the developer the confidence to know that buyers will purchase the end products.

Often entire developments are sold off before they are completed.

However given the many variations and the uncertainties of the construction process, laws in Queensland obligate the developer to provide detailed disclosure as to what they are building and providing to the buyer. This also protects buyers who may not be aware of the different variables to ensure that the most important factors are disclosed.

What to look out for?

As with the purchase of any property where you buy a property off the plan you need to have a clear understanding of what you are buying. The contract will set out the terms of what you are buying and there are a number of factors to look at including:

1. The Plans

Whether you are buying a block of land, a unit within a small or a unit within a large complex it is very important that you know exactly what you are purchasing. The contract must attach plans which set out what is being constructed so that you can get an understanding. These plans are allowed to change by no more than 5% from the final constructed building otherwise you may have the option to get out of the purchase. In particular when you are buying a block of land to construct a house on you need to consider if there are any easements or other restrictions on what you can build (including building covenants). Make sure that you check these out in detail and if you are unsure that you ask the developer for more information.

2. The Surrounding Area

We always strongly recommend that you visit the construction site to see the surrounding areas, potential views, local amenities and other facilities. These are important as they will help you understand the location of where you are buying.

3. Approvals of The Plan

Depending on the type of construction and the contract, you may enter into an agreement before all of the required approvals are in place. When we use the term approvals we are talking about the local council and certification approvals that any new construction needs to have in place before it can be occupied. It is important that you consider this because if an approval is not in place then there may be an unreasonable delay to the construction which is outside the developer’s control.

4. Construction Timeline

Generally when you inquire with an agent or developer in relation to buying a property off the plan, they will generally give you an idea of when the development is likely to be completed. Pursuant to the law in Queensland each contract must have a sunset date, this is the date by which the construction is completed otherwise either the buyer or the seller can terminate the contract. However before you sign the contract to purchase you should see that the sunset date is not an unreasonably long time (it can be no longer than 5 and a half years).

5. The Property Value

You should always engage the services of a valuer to advise you if the purchase price you are paying for a property is market value.

6. The Deposit

When entering into an off the plan contract in Queensland a developer can take a deposit of up to 20% of the purchase price. This money must be held in a trust account. However you need to consider the actual sum of money and the length of the construction as you will not have access to those funds from when you sign the contract until when the purchase settles (after registration of the separate title with the titles office).

7. The Purchasing Entityshutterstock_376770310

When entering into the contract to purchase the land it is important that you have the correct entity as the buyer of the contract. It is impossible to change it later without the consent of the developer which may or may not be given (sometimes if the value of the property has increased a developer will agree to change the purchasing entity for a higher price). This is an important consideration to take.

These are the most important considerations that you are buying a property off the plan. You should always seek advice on these issues and ensure that you are satisfied with what you are buying. Streten Masons Lawyers always recommends that if you feel something is not right with the contract you immediately consult a professional.

Finance

When buying a property off the plan often a contract will be subject to finance for a period of time after the contract is signed. You should be aware that when you are buying a property off the plan that any financier will make any finance approvals subject to a final valuation. In other words the bank will not guarantee you that they will fund the purchase as they want to ensure that what is being purchased is worth what you are paying for it.

It is uncommon for the finance condition to continue post construction as the developer will not want to take the chance on the banks valuer reducing the value. Therefore if you decide to buy a property off the plan you should satisfied and confident that you will be able to finance the purchase and be aware of the risks that you are taking.

Buying a property off the plan is an exciting venture but as with any investment you need to make sure that you do all of the due diligence correctly. At Streten Masons Lawyers we have extensive experience in reviewing and advising buyers of off the plan properties (as well as acting for developers on the other side) of their rights and obligations. If you would like further assistance please contact Jeremy Streten on 07 3667 8966 or Jeremy@smslaw.com.au.

The Facts behind Debt Collection Processes

12 Jul 2016
Commercial Law, Debt recovery
Comments: 0
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The Facts behind Debt Collection Processes

Any business in the Business Legal Lifecycle will inevitably be faced with the situation where a supplier or contractor to the business is pursuing them for payment of a tax invoice.  The business has either not paid the supplier or contractor for cash flow reasons or for the more common reason – the invoice is disputed.

Having a debt collection process as part of a business is imperative to itssurvival.  Successful businesses also have procedures in place to deal with the situation where they are being pursued by a supplier or contractor.

The key to dealing with the situation is communication and documentation.  If the invoice is disputed the reasons for the dispute must be put in writing to the creditor.  Telephone calls are fine however we recommend that any telephone is followed up with an email confirming the details of the conversation.

We recently spoke to a client regarding a well utilised document in the debt recovery process – a creditor’s statutory demand for payment of a debt (statutory demand).  The client had received a statutory demand from a creditor and had disputed the invoices received. In the past the creditor had contacted them by telephone a few times to discuss the invoices.  Unfortunately due to illness to the business owner and a very busy business the statutory demand was not responded to within the timeframe (strictly 21 days from the date of service).

The effect of not responding within the 21 day time period meant the client was forced into making payment for the invoices as the costs Moneyand lost time to oppose any Court action was prohibitive.  Had the client documented all the details of the dispute with the creditor and had a process to deal with statutory demands the outcome in our experience would have been vastly different.

Communication and responding to invoices where disputed becomes particularly important within the building and construction industry.  The process to deal with payment claims/invoices under the Building and Construction Industry Payments Act is a must for any business in the industry to avoid unfavourable decisions.  The timeframes are strict and cannot be extended.

One of our clients was facing some cash flow issues and had an outstanding debt to a supplier.  Our client had a process in place which included written communication to the creditor.  The creditor appreciated the communication and due to the transparency of our client the creditor agreed to a generous payment schedule.

If you have recently received a statutory demand or you would like to know more about how we can help introduce the process into your business to deal with outstanding debts, contact our office’s dispute resolution expert Craig Mason by email craig@smslaw.com.au or (07) 3667 8966.