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What is an Agreement to Lease?

When renting business related property it is important for both landlords and tenants to understand the relationship they are entering into and the rights and obligations that they each have, the document that governs this relationship is usually a Commercial Lease.

A Commercial Lease gives the tenant an immediate right to take possession of premises and occupy those premises to the exclusion of all others, including the landlord or owner.

An Agreement to Lease is used prior to a Commercial Lease being signed in circumstances where there are things to be done before the landlord can give the tenant exclusive possession of the premises.

An Agreement to Lease documents each party’s rights and obligations and sets down all of the requirements that have to be satisfied prior to the terms of the actual Lease taking effect.

An Agreement to Lease can be very useful for both landlords and tenants and it is important to understand the relationship being entered into and the rights and obligations of each party.

 

When to use an Agreement to Lease

An Agreement to Lease is often used when:

  • the tenant needs to obtain consent from someone, say for a particular use of the premises
  • the premises are being purpose-built for the tenant; or
  • an existing building is being renovated before the tenant moves in; or
  • the current tenant may be moving out but has not given up possession, often the case in shopping centres.

Completion of the works, fit out, consent or delivery of vacant possession is usually taken into account to set the start date of the Lease.

 

The benefits of an Agreement to Lease

An Agreement to lease creates a binding obligation on both parties to enter into a lease on agreed terms, subject to agreed conditions being completed. This creates more certainty for the parties where money is to be spent before the Lease commences.

If you are a landlord undertaking building and renovation work to rental premises is a significant cost to you in time and resources. It is a period of down-time where no rental monies are received and is best kept to a minimum. You may have to obtain Council approval for building work which takes time and you will have to contract and co-ordinate the many tradespeople to complete the works.

If you are a tenant you will want to make the best possible use of the premises from the first date you pay rent, being able to complete these works before the Lease commences is essential. It is also important that no inconvenience is caused to your customers by building works in your business.

 

Issues commonly covered

Consents

If the premises are not tenanted or the use of the premises is changing you may have to apply to Council or other authority for consent to use the premises for a particular type of business such as a café or a service such as a medical office.

Consent may also be required from a mortgagee of the premises or a licensing authority if the business requires a licence to operate.

Obtaining these consents can take time and can be done under the terms of an Agreement to lease.

 

Fit out works

A Works Schedule is often attached to or is contained in the Agreement to Lease and sets out what works are to be done and who is obligated to do the works – landlord or tenant.

Often plans and specifications are attached to the Agreement and this is useful in the event that the landlord and the tenant have a difference in opinion of what exactly is required.

The tenant is usually responsible for some of the fit out items or the landlord directs the tenant as to how the premises must be fitted out. In a shopping centre for example, the landlord may have design guidelines that the tenant must follow when fitting out the premises. If the tenant has control over the design of the premises then they often have to get permission from the landlord for the works and provide plans and design drawings to the landlord for approval.

If the tenant is doing most of the fit out the landlord will often specify a commencement date for the Lease even though the tenant’s fit out may not be completed. The tenant should be organised as early as possible with design and trades to minimise the period that they are paying rent but may not be open for business.

 

Time frames

The Agreement to lease will usually have a time frame for completion of the conditions as the works or consents will usually have to be completed prior to the Lease commencing.

Delays may occur and it is important that a workable time frame is in place prior to entry into the Agreement to Lease.

The tenant should also ensure that there is a “sunset date” in the Agreement to Lease in case the works being done by the landlord are not completed in time or the required consent has not been given. The tenant may then be able to terminate the Agreement and find alternate premises rather than being delayed further.

 

Other provisions

The Agreement to Lease will usually have a copy of a draft Lease attached to it so that the terms of the Lease are clear to the parties and agreed from the outset.

The terms of the Lease should be reviewed by your lawyer before an Agreement to Lease is signed.

Common provisions in a Lease which may require review include, any options for renewal, the commencement date which may be the “hand over” date, the fit out period if any, the amount of rent payable, rent review dates and method (often the CPI adjustment or a specified percentage), outgoings and promotional costs payable, what use is permitted at the premises, insurance and guarantee requirements, works to be completed by each party and time frames for works completion, de-fit costs or what the tenant must do to “make good” the premises when they vacate. Attachments to the Agreement to Lease may be a “works schedule”, plans and specifications, tenancy listing.

If you or someone you know wants more information or needs help or advice, please contact us on 03 9497 2622 or email amsr@amslaw.com.au.

How effective are your Post Employment Restraints

Much damage can be done to a business where an executive or senior manager resigns taking valuable customer information and confidential information.  Restraint of trade clauses, or post-employment restraints, play a crucial role in protecting the legitimate interests of the employer.

In order to protect business interest’s employment contracts should contain protections which operate after the employment ends.

 

The purpose

Restraints of trade are included in employment contracts to protect an employer’s trade secrets, confidential information, customer connections and staff connections by restricting an employee’s activities after they have left employment.

Restraint of trade clauses will be enforceable to the extent that the restraint is reasonably necessary to protect the legitimate business interests of the employer. Whether a clause is reasonably necessary will depend on the particular clause and the facts of the case.

At common law, post-employment restraints of trade are on the face of it invalid as infringing public policy. A restraint clause in an employment contract will only be enforceable if the restrictions imposed are no more than necessary for the protection of the employer’s legitimate business interests.

Legitimate interests that can be protected include confidential information, customers and staff.  It is typical for a restraint clause to prevent an employee from:

  • Soliciting the employer’s clients;
  • Setting up a competing business with the employer’s business or working in a competitive business; and
  • Poaching employees of the business.

 

Reasonableness

When determining whether restraint clauses are reasonable, Courts will consider the following:

  • The negotiation process, and in particular comments made when negotiating restraint clauses.
  • The bargaining position of the parties.  Was there an imbalance in power between the employer and the employee at the time of agreeing to the restraint?  Whether the employee had the opportunity to obtain legal advice?
  • The nature of the employer’s business and characteristics of the employee.  That is the closer the employee is to the employer’s customers, the more likely the restraint will be reasonable.
  • Whether any consideration was given for the restraint.
  • The duration and geographical area of the restraint.  The longer the time and wider the area, the less likely it will be reasonable.  This can often be resolved by cascading clauses relating to time and area.

The reasonableness of the restraint must be decided at the date of entering into the employment contract. For this reason, it is important that the parties to the contract each have an opportunity to negotiate the terms of a restraint. In addition, employees should be encouraged to seek legal advice about the length and the effect of the restraint.

 

The trend of Waterfall or Cascading Clauses

Restraints are often applied for a specified period, in relation to a particular geographic area.

A common device for reducing the risk of invalidity on the ground of unreasonableness is to include a ‘waterfall’ clause, which is so-named because it contains a number of varying periods of time and geographical constraints as alternatives.

The advantage to these is that each one is severable by a court without affecting the validity and enforceability of the restraint.

 

How do Courts enforce restraint of trade clauses?

Restraint of trade clauses are prima facie void and the onus is on the employer to persuade the Court that the clause is reasonable and therefore valid and enforceable.  When considering enforceability, the Court will consider two key issues:

  • Whether the employer has a legitimate interest to protect.
  • Whether the restraint is a reasonable protection of that interest.

 

What are the legal remedies?

The common remedy sought by employers faced with an employee’s breach of a restraint clause is to seek an injunction to restrain an employee or former employee from acting in a way, or continuing to act in a way, that breaches a term of the former employment contract. For example, an injunction may prevent a former employee from working for a competitor for a certain period of time or from using or disclosing information confidential to the former employer and its business.

 

Some Tips for business owners

Some tips for drafting restraint clauses in employment contracts:

  • Make sure the period of restraint is appropriate to the employee’s position and access to confidential information;
  • Make sure the prohibited activities to be prevented are similar to the employee’s current activities; and
  • Ensure contracts are reviewed regularly and updated to reflect changes in the employees role.

 

Conclusion

Having an enforceable and valid restraint in employment contracts is crucial if an employer hopes to rely on it to enforce a former employee’s post-employment obligations.

 

This issue needs to be considered by employers when the employment contract is drafted because a court will consider the reasonableness of the restraint as at the time the contract was entered into. The Courts will only find that a restraint clause is valid and enforceable where a business can demonstrate that it has a legitimate interest to protect and that the clause is reasonable.

We are able to review, draft and advise on restraint clauses and their enforceability generally.  If your business needs assistance please contact us on 03 9497 2622 or email amsr@amslaw.com.au.

Why it’s a bad idea to write your own Will

It is relatively easy to find a free Will template on the internet and fairly cheap to buy a Will “kit” from a newsagent or online. There are also websites that have “data collectors” that take your information and create a Will for you seemingly without any legal expertise required.

So, is it really a good idea to write your own Will?

 

Why you need a valid Will

The sole purpose of writing a Will is that you can direct where your assets go when you pass away.

If you have a valid Will your executor applies through the probate process and distributes your estate in accordance with what you have written in your Will. If you hold joint property with your spouse probate is not usually required unless substantial assets are held in your own name.

There are many common situations however where a valid Will is required to properly distribute your estate and look after your family and loved ones.

If you have a Will that is deemed not valid by the probate court then your estate will most likely be exposed to delay in distributing your estate, increased legal and court costs and perhaps resulting in financial hardship and emotional anguish for your family.

Most people think that their situation is simple and that a DIY Will is enough but consider the following situations and whether they may apply to you or someone you know.

 

Your home-made Will is lost or cannot be found

When a lawyer prepares a Will for you they usually hold the Will after signing in their safe custody and provide you with copies.

Even if you take the original Will the lawyer will keep properly certified copies of the original Will. If you subsequently lose the original Will your family can ask the court to look at the copy of the Will and allow the wishes in that Will to stand.

If there are no copies the family is put to the expensive task of applying to the probate court for a grant of administration which is a more lengthy and costly method of dealing with an estate than the usual grant of probate.

 

Your hand-written Will is not signed correctly

There are very strict requirements for the signing and witnessing of Wills, if your Will is not signed correctly or is not witnessed properly it may be invalid.

If your Will does not deal with all of the assets and liabilities that you leave when you die your Will may be ineffective in dealing with those assets.

Once your Will is made even writing on it later or making any changes will invalidate that Will and may render it ineffective, either partly or fully, in dealing with your assets.

 

You own a business

It is likely that the business will continue to run after you die. You will need a validly appointed executor to run the business until it is either sold or dissolved. You can achieve this in a valid Will.

Consider that the business may have ongoing expenses such as rent and staff costs that still have to be paid and may cause the family hardship until the business can be liquidated if there is no one validly appointed to run the business.

 

You and your partner are not married

When you purchased the property together it was bought in equal (or unequal) shares, for example because you both have children from a previous relationship.

Again the property may not get transferred to either your de facto partner or your children as a matter of course. If you do not have a valid Will your property cannot be dealt with in a simple and cost-effective way.

 

Previously made Wills are not automatically revoked when you make a new Will

If you have a Will that you made when you were younger, perhaps leaving all of your estate to your parents, and then move residence and commence a relationship and have children.

If your new Will is invalid your estate may go to your parents not to your new family as you intended and if it does it will be a costly and longer process.

 

You are married but hold property solely in your name

You may have bought the property when you were single or owned the property from a previous marriage or inherited it from your parents.

If you have no valid Will and no executor to put into effect what you have written in your Will, the property cannot be transferred until the Court appoints an administrator after delay and costs have been incurred.

 

If you leave your superannuation in your DIY Will

Superannuation may form part of your estate and be dealt with in accordance with the terms of your Will, but in most cases superannuation will be paid directly to a beneficiary nominated in your superannuation policy without any reference to the terms of your Will.

Whilst you can provide in your Will that your estate be given to whoever you would like there is only a small eligible group of beneficiaries who can directly receive superannuation benefits on your death.

Superannuation funds have particular rules for releasing funds to an estate and an invalid Will makes this process more difficult to navigate.

Again the release of funds is not automatic to your family and your loved ones may suffer hardship if the release of funds is delayed.

 

Lawyers are trained to write valid Wills

Your lawyer will always do these two things when drafting your Will, they:

  • take into account the strict law requirements for a Will to be considered valid by the state probate court; and
  • also consider your particular situation and the specific individualised elements you need included in your Will.

Your lawyer can also help plan other aspects of your estate such as whether you need to appoint a guardian for your children, a trustee to run your business or whether an elderly relative needs to remain in your home after you are gone and a myriad of life circumstances that are particular to you.

If you or someone you know wants more information or needs help or advice in preparing a valid Will please contact us on 03 9497 2622 or email amsr@amslaw.com.au.

Can you be separated and live under the same roof?

Before a person can apply for a divorce they have to be able to establish to the Family Court that their marriage has irretrievably broken down. This can be established if the Court is satisfied that the parties to the marriage have separated and have lived separately and apart for a continuous period of not less than twelve months prior to the filing of the Divorce application.

 

The twelve month period commences from the date of communication of an intention to separate.

 

Separated but living under the one roof explained 

 

Being separated and living under the one roof is when a husband and wife separate but continue to live in the same home. It may be for any length of time – a few days, weeks, months or years following separation.

If the husband and wife lived in the same home during part or all of the required 12 months separation period, they need to provide additional details to the Court before they can apply for a divorce.

 

Two practical examples of how it works:

 

  1. The parties have been separated for 18 months. They have lived in the same home for the first 8 months after separation. They need to provide additional details about living under the one roof for two of the last months to the Court.

 

  1. Husband and wife have been separated for 4 years. They lived in the same home for 2.5 years after separation but for the past 1.5 years have lived in different homes. Here they do not need to provide extra information to the Court

 

Additional proof required  
The additional details are provided through an affidavit (which is a document sworn or affirmed by the party). The affidavit needs to establish evidence before the Court that there has been a change in the marriage, gradual or sudden, showing that the parties have separated. If the parties are making a joint application each must file a separate Affidavit.

 

If the Application for Divorce, relying on separation under one roof, is made by one party alone then there must be an additional Affidavit from someone else corroborating the evidence – and this could be a relative, close friend, or family member over the age of 18 years.

 

The Affidavit should contain the details that show the ending of the marital relationship and this usually includes the following:

 

  • Not sleeping in the same bed
  • Separation of financial affairs such as separate bank accounts
  • Separating household tasks
  • Reduction in or cessation of shared activities
  • Not representing that you are still in a relationship, such as no longer socialising together
  • Communicating to family and friends that you have separated
  • Notifying Government Departments that you have separated if you receive Centrelink benefits or Child Support and attach any correspondence showing this

 

It is easier to prove separation under one roof if you can show there were good reasons why you had to continue or resume sharing the same accommodation (such as for the sake of the children or one party could not find or afford separate accommodation) and that husband and wife intend to live apart in the near future.

 

Household services still being done can be explained

 

The Court understands that sometimes following a separation, husband and wife may still have to share the same accommodation and one party may still perform some household services for the other, such as washing or ironing, for example, where it is necessary for the running of the home and the convenience of others who live there. This does not adversely affect the application.


Attendance at Court

 

If it is a sole application and there are children under 18 years (whether relying on separation under one roof or not) the Applicant and/or their legal representative must also attend Court for the Divorce hearing.

 

In cases where there is a joint application and both parties are relying on separation under one roof and there is Affidavit material from both, then there is no need to attend.

 

In all other cases the Applicant and/or their legal representative need not attend so long as the Court has sufficient detail about the circumstances of your separation in your Application and Affidavit.

 

 

Conclusion

 

If you know someone who may need family law assistance, particularly if they are thinking of divorcing and continue to live under the one roof they should seek legal help from a lawyer experienced in family law. As you can see more details need to be placed before the Court to explain the circumstances.

 

For any help call us on 03 9497 2622 or email amsr@amslaw.com.au.