09.03.2010
News
Tenants are enjoying attractive lease proposals from landlords desperate to have their premises occupied during these tough economic times. Landlords are offering various incentives in both monetary and non-monetary forms.
Fit-out incentives are increasingly common. So how do they work and what are the tax implications?.
What is a fit-out incentive?
A fit-out incentive is a landlord contributing to the whole or portion of a tenant’s costs in fitting out premises in readiness for occupation of the premises by the tenant. Premises may already have a suitable fit-out in place when the tenant takes possession. However if not, a tenant will require a suitable fit-out to suit his business needs. Fit-out works are carried out subject to the consent of the landlord.
What are the tax benefits?
Treatments of tax benefits vary according to who ultimately owns the fit-out when the fit-out is completed.
If the fit-out exists at the time the tenant takes possession and the fit-out is the property of the landlord, there is no immediate tax deduction available to the landlord for the existing fit-out. However, a landlord may claim depreciation on the capital works over the life of the fit-out. For the tenant, obviously there will be no tax benefit as it has not paid for the fit-out, nor does it own the fit-out.
In relation to GST, as the landlord owns the fit-out, there are no GST consequences as the supply of the fit-out is part of the supply of the premises by the landlord to the tenant.
If the landlord makes a cash contribution to the tenant’s fit-out and the tenant is the owner of the fit-out, then the landlord is entitled to claim the cash contribution made to the tenant’s fit-out as a tax deductable expense The tenant may claim depreciation on the fit-out capital works over the life of the fit-out because the tenant is the owner of that fit-out.
There are some GST consequences in these circumstances. Where a landlord provides a cash contribution to fit-out works, the tenant will be making a taxable supply by entering into the lease which contains the provision for a cash contribution and therefore the GST component of that cash contribution must be remitted by the tenant to the Australian Taxation Office. In those circumstances, the landlord is entitled to claim an input credit for that GST.
How to ensure you get the benefits?
The landlord and tenant must ensure that the legal agreement to lease or the fit-out agreement properly reflects the intentions of the parties in order to achieve the desired tax outcome. The key issues to consider will be determining who pays for the fit-out and who will own the fit-out once it is completed.
Before entering into any such agreements, the parties should each seek taxation advice from their accountants. The documentation can then be structured to achieve the desired tax and GST outcome.
For more information
Contact Lucas Hewlett at redchip lawyers on 07 3852 5055 or email lucash@redchip.com.au
24.02.2010
News
In February 2009 an angry lot owner fired a bullet at a Gold Coast penthouse amid a bitter body corporate fee feud that is dividing bodies corporate across Queensland. As a result, the State Government presented a discussion paper of the controversial legislation.
The Current Law
Under the provisions of section 48(6) of the Body Corporate and Community Management Act 1997 when an application for adjustment of lot contributions is made, the Queensland Civil and Administrative Tribunal (QCAT) is required to adjust the respective lot entitlements of a body corporate so that all lots equally contribute to the costs of the Body Corporate unless it is just and equitable for the entitlements not to be equal.
The Supreme Court of Queensland in Fischer v Body Corporate for Centrepoint CTS 7779[1] has given consideration to the statutory requirement for equality of lot entitlements. In that case Chesterman J noted that the preferable view is that a contribution schedule should provide for equal contributions by lot owners except insofar as some lots can be shown to give rise to particular costs to the Body Corporate which other lots do not. For example, evidence of the cost of maintenance or painting on the exterior structure.
Whether a schedule should be adjusted is to be answered with regard to the demand made on the services and amenities provided by a Body Corporate to the respective lots or to their contribution to the costs incurred by the Body Corporate. When the starting point is equality, any departure from that position is allowable only where it is just and equitable to recognise inequality.
Robin Hood Arrives…
While some say that the legislation enables millionaire penthouse owners to slash their body corporate levies at the expense of other unit owners, others say they are paying 10 times more in body corporate fees than lower-floor residents to use the same facilities.
Gold Coast MP Peter Lawlor who has been driving the reversion to the previous situation, made a media statement on Friday 19 February 2010, stating,
“The present law means that in setting or adjusting body corporate contribution lot entitlements all lot entitlements should be equal, except to the extent that is just and equitable in the circumstances for them not to be equal. We’re putting a stop to this and changing the law so it’s fairer for everyone all round…The Queensland Government will allow those buildings and complexes which had lot entitlement adjustments made, to revert to their original method of dividing body corporate fees when the plan was registered.”[2]
What you need to do…
As lawyers knowledgeable in body corporate law and experienced in levy collection, we are able to provide comprehensive advice in relation to these matters. Whether you should seek an adjustment now, or wait upon the proposed changes depends upon your individual circumstances and we urge you to seek expert advice sooner rather than later.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
[1] [2004] QCA214.
[2] http://statements.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=68549
16.12.2009
News
If you are currently leasing commercial premises you may be unaware of what you need to do if your lease contains an option to renew provision and you wish to exercise that option.
What is an option to renew a lease?
An option to renew a lease, if properly exercised, allows you as the tenant to continue to occupy the premises after the initial term of your lease expires. Tenants have no automatic entitlement to renewal of a lease. That is, your rights only exist if a specific ‘option to renew’ clause is contained in the lease.
What do you need to do?
- You must ensure that you exercise the option in the timeframe as specified in the lease. For example, a lease may specify that the option to renew must be exercised no more than 6 nor less than 3 months from the expiration date of the lease. It is during this time frame that you must exercise your option to renew your lease.
- You must comply with your obligations under the lease during the term of the lease. A landlord may reject your notice to renew the lease on the grounds that during the term of the lease you had not complied with your obligations, for example, committing an act of default under your lease.
How do you give notice?
You must ensure that:
- the notice to exercise the option to renew your lease is in writing; and
- the notice is served in accordance with the lease. The clause of the lease which outlines what is required of you when exercising your option may specify on whom the notice must be served. If it does not, the notice clause will specify how notice is given under the lease.
What happens if you do not exercise your option properly?
In the event you fail to comply with your requirements to correctly exercise an option to renew your lease, it may result in your losing your rights to occupy the premises. Therefore, you may be required to vacate the premises at the end of your original lease - which may prove to be inconvenient and expensive.
For more information…
Leases and option to renew clauses are serious commercial matters - where experienced legal advice is always beneficial. For more information, contact Lucas Hewlett of our office on (07) 3852 5055 or lucas@redchip.com.au.
14.12.2009
News
Back in May 2009, we advised you that the Workplace Relations Act 1996 (Cth) was to be repealed on 30 June 2009, and would be replaced on 1 July 2009 by the Fair Work Act 2009 (Cth) (”FWA”).
That legislative change gradually brought in fresh reforms to Australia’s industrial relations system. Some particularly important changes will take effect from 1 January 2010.
On 1 January 2010, the National Employment Standard (the “NES”) will take effect, Modern Awards will be begin to apply to a significant number of employees and employers must give each new employee a Fair Work Information Statement (the “Statement”).
The Fair Work Ombudsman just released the Statement that employers must give to each new employee, either before or as soon as practicable after that employee starts employment. The Employer does not have to give a Statement to an employee more than once in any 12 months period. That means, an employer does not have to give a Statement to an employee that has been rehired after a short break.
The Statement, which can be accessed at the http://www.fairwork.gov.au/Pay-leave-and-conditions/Conditions-of-employment/Documents/Fair-Work-Information-Statement.pdfFair Work Australia website provides employees with information on:
- the NES;
- modern Awards;
- agreement making under the FWA;
- individual flexibility arrangements;
- the right to freedom of association and workplace rights as provided for in the FWA;
- termination of employment;
- right of entry (including the protection of personal information by privacy laws); and
- the role of Fair Work Australia and the Fair Work Ombudsman.
The Statement can be provided to employees in a number of ways, including:
- personally;
- pre-paid post;
- emailing a copy of the statement to the employee, or a link to the Statement on either the Fair Work Ombudsman’s website or the Company’s intranet page.
If you have any questions about the Statement, the Fair Work Act or employment law generally, please contact Chris Perkins on 07 3852 5055 or chris@redchip.com.au.
10.12.2009
News
What is a Certification of Classification?
It is a document issued under the Building Act 1975 which states the classification of a building and describes the way in which the building can be used. There are 10 different classifications of buildings, all of which have different uses.
Should I have one for my building?
If your building was built after 1 April 1975, a certificate of classification should have issued for the building. These certificates were originally issued by the relevant Council but now are issued by private certifiers. If you cannot find your certificate, you can apply to the Council for a copy.
What does the Act say about displaying these?
The Act was amended in April 2008 to require owners of buildings other than class 1a buildings (for example single houses) and class 10 buildings (for example domestic garages and carports) to display the certificate of classification issued for the building.
Where do I display it?
Before class 1b to class 9 buildings can be occupied, the certificate of classification must be displayed as near as practicable to the main entrance to the building. If the building has more than one entrance, it is only necessary for it to be displayed at one entrance.
It is advisable for this entrance to be the one where emergency services personnel are likely to enter the building in the event of an emergency, as the certificates contain information which will be of assistance to those personnel and also to the occupants of the building. If there is more than one tenancy in the building, the certificate does not have to be displayed in each tenancy but should be displayed near the main entrance of the building, although a copy of it may be displayed near the main entrance to each tenancy.
How do I display it?
It is advisable for the certificate to be displayed in a frame securely attached to a wall to ensure it is not damaged or lost. If it is to be displayed in an area which is affected by the weather, it is also advisable for the frame or whatever it is displayed in to be weatherproof.
What happens if I do not display the certificate?
If you do not display the certificate of classification as required or if you fail to comply with any restrictions stated on the certificate, you commit an offence and can be liable for a monetary penalty.
What if I sell the building?
The standard Contract for the sale of commercial buildings provides for the vendor to deliver the certificate of classification to the purchaser on settlement. It is therefore advisable for you to keep a copy of the certificate readily available for this purpose in the event of a sale.
For further information….
Please contact Lucas Hewlett at lucash@redchip.com.au , Rob Lalor at robertl@redchip.com.au , or Brian McLaughlin at brianm@redchip.com.au or telephone them on 3852 5055 for specific advice.
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10.12.2009
News
Unpaid sub-contractors who have performed building work may issue a payment claim upon a builder under the provisions of the Building and Constructions Industry Payments Act (BCIPA).[1] If the receiver of a payment claim does not respond within ten business days with a payment schedule, the issuer of the payment claim is entitled to a judgment for the sum as a statutory debt.
Payment Claim - strict compliance is necessary
The statutory regime under the Act is strict. Its object is to ensure that a person is entitled to receive, and is able to recover, progress payments if the person undertakes to carry out construction work. A valid payment claim is a pre-condition to the entitlement to judgment. Formal requirements of the claim are that it must identify the construction work and related goods and services to which the claim relates; state the amount payable; and state that the claim is made under the BCIPA. It must be served as a formal notice on the other party’s registered address. The claim may look like a standard invoice but it will see you in Court if you don’t address the payment claim straight away.
Disputed Claim - What to do…
Do not ignore a payment claim. Often the amount claimed may be for unauthorised variations or retention amounts not yet due to be paid to the subcontractor. These facts must be detailed in the schedule that is sent in reply to the payment claim. If you don’t put these details in a payment schedule and reply within the ten business days you are precluded from bringing any counterclaim against the person seeking the money from you, and you cannot raise a defence in relation to matters under the building contract.
If you are issuing a payment claim, make sure that you were licensed at the time of doing the work. We often see works undertaken while the licence was suspended for non-provision of financial details to the QBSA. Not only will this invalidate your claim but will get you into difficulties with the QBSA.
Who can help…
As lawyers experienced in building and construction disputes, redchip lawyers can provide comprehensive advice in relation to payment claims and schedules.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
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[1] 2004 (Qld).
10.12.2009
News
The Federal Government has announced important changes to the Franchising Code of Conduct, and some ancillary provisions in the Trade Practices Act, including:
- the introduction of fines and penalties for unconscionable conduct and false and misleading representations;
- random audits of franchise systems to be conducted by the Australian Competition and Consumer Commission (ACCC);
- public warnings about rogue franchisors;
- an acknowledgement of good faith in relation to franchise agreements;
- a requirement to clarify end of term arrangements, including mandatory period of notice of renewal; and
- provision to include all affected franchisees of a group to be included in ACCC actions.
The Government has also announced it will establish a panel of franchising experts to consider making further amendments to the Code “to prevent behaviours that are inappropriate in franchising agreements”. That means the Government will seek to limit specific franchising behaviours it considers inappropriate. The Government considers the following seven behaviours to warrant specific attention:
- End-of-term arrangements;
- Dispute resolution;
- Unforeseen capital expenditure;
- Unilateral contract variation;
- Attribution of legal costs;
- Confidentiality agreements; and
- Changes to franchise agreements when a franchisee is trying to sell the business.
What Franchisors need to do…
As a result of the proposed amendment franchisors must:
- Be prepared for random audits by the ACCC by ensuring they keep their records up to date and implement an appropriate compliance program;
- ensure that they can substantiate any claims they make in their advertising;
- amend their franchise agreements and disclosure documents to explain and disclose arrangements that apply at the end of the franchise term;
- maintain a reminder system to notify franchisees no later than six months before the end of the term as to whether the franchise agreement will be renewed.
The Federal Government will release draft legislation detailing the changes to the Franchising Code early in 2010. We will keep you advised of the details of the changes once they are available.
For more information
Contact Peter McLaughlin or Lucas Hewlett at redchip lawyers on 07 3852 5055 or email peterm@redchip.com.au or lucash@redchip.com.au
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07.12.2009
News
Sometimes it’s just plain not fair…you have bought a lot within a community titles scheme or as a current owner your circumstances change and suddenly you are told you cannot do something - it’s against the body corporate by-laws!
Monetary liability -What a by-law cannot do…
A by-law must not impose a monetary liability on a lot owner or occupier.[1] While there may be other means by which a body corporate may recover costs which it has reasonably incurred,[2] it may not do so by means of a by-law and any such by-law is invalid to the extent that it purports to do so.
Renovation bonds - How much is too much…
A recent matter[3] considered by the Commissioner’s office concerned the compulsory payment of a bond by a lot owner in circumstances where they intended to undertake renovation works to their own lot. The bond was to reimburse the Body Corporate for any costs incurred as a result of any damage caused to common property.
The existing by-laws provided for a bond of $2000.00, however the Committee considered that this was inadequate and a resolution was passed at general meeting for an uncapped bond of “$2000 or 10% of the total cost, whichever was greater“. In this situation a lot owner carrying out quality renovations to a penthouse was looking at a bond of $30,000.00. In our view - an unreasonable monetary liability.
The lot owner was successful in having both the proposed by-law and the original by-law declared invalid and of no effect. No bond at all was needed. As a result he could commence his works without tying up further funds for months unnecessarily.
Change the by-laws - It’s not too late…
The scheme by-laws are established at the commencement of the scheme and may be added to or amended by the passing of a special resolution at a general meeting of the body corporate.
Although required to do so within three months, sometimes the body corporate having passed the resolution, hasn’t actually yet lodged the request to register the new Community Management Statement (CMS) containing the new by-law, but nonetheless invalidly relies upon it. A by-law doesn’t come into force until the day the registrar records the CMS or a later date stated in the by-law.
An application to the Commissioner’s Office seeking to declare void a resolution of the body corporate must be made within three months of the meeting at which the resolution was passed.[4] However, it’s not too late…an Adjudicator may, for good reason, waive the non-compliance. All it requires is a dispute resolution application to the Commissioner’s office testing the validity of the resolution or the by-law.
For a by-law to continue to operate may be un-just as it is inconsistent with the BCCM Act no matter how much time has lapsed since the resolution. It must not be presumed that a CMS is valid or enforceable merely because the registrar records it.[5]
Another way to seek change is to circulate a proposed motion and obtain the supporting signatures of just 25% of lot owners in a requested extraordinary general meeting.[6]
What you need to do…
As lawyers experienced in body corporate law, redchip lawyers are able to provide comprehensive advice in relation to strata and body corporate by-laws. By-laws relating to pets, vehicle towing, and cost recovery for levy collections are just some examples of body corporate matters that we advise upon.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
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[1] Body Corporate and Community Management Act 1997 (the “BCCM Act”), s180(6).
[2] See Pacific Breeze Apartments [2009] QBCCMCmr 317 (26 August 2009) (0152-2009).
[3] River Place Apartments [2009] QBCCMCmr 411 (21 October 2009).
[4] BCCM Act, s242.
[5] Land Title Act 1994, s115L(2)(b).
[6] Body Corporate and Community Management (Standard Module) Regulation, s67.
02.11.2009
News
The increasing popularity of living and investing in medium to high density housing has brought increasing enquiries on community titles law. This area of law is not exclusively for residential apartments. The legislation[1] applies to a wide range of property development projects - for example, residential units, hotels, business parks and commercial offices, or a mixed use of all of these.
Dealing with disputes - the wrong approach can be expensive…
The legislation provides for the “exclusivity of dispute resolution provisions” and a process to be followed in the resolution and determination of a dispute. With only some limited exceptions, any dispute in regard to property registered as a community title scheme (CTS) must at first instance be referred to the Commissioner for Body Corporate and Community Management. Where a matter has been brought to a Court at first instance, it may well be referred back to the Commissioner with costs brought against a plaintiff for bringing proceedings in the wrong jurisdiction.[2] Not only is this a very expensive and unnecessary process causing delay to the resolution, but had the dispute been brought to the Commissioner at first instance the dispute resolution provisions outlined in the legislation provide a far less adversarial approach. This is particularly important in community title matters where often there is a need for an ongoing relationship between the parties.
Unpaid levies - being late does matter…
The issues of unpaid levies by a lot owner is a matter which we frequently see. Any irregularities on the calculation of quarterly levies on a contribution notice needs to be resolved immediately the discrepancy arises. In one extreme matter, unpaid levies totalling $15,664.31 developed into a matter where the lot owner failed to make payment of 38 levy notices resulting in the imposition of penalties and the recovery of legal costs totalling $106,792.22.[3]
Management rights disputes…
Equally, disputes concerning management rights need to be addressed early and expert advice sought. Often the holders of management rights of schemes have invested heavily in purchasing the rights and are prepared to expend considerable funds to defend their position. Not only is a body corporate not obtaining value from the non-performing managers, but more importantly lot owners’ asset value is being diminished by poorly maintained common property.
What you need to do…
To understand when you can refer an issue directly to Court; your rights in relation to unpaid levies; and how to deal with management rights disputes without eroding value, the appropriate person to contact for advice is a lawyer experienced in body corporate law
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
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[1] Body Corporate and Community Management Act 1997 (Qld), and the applicable Regulations.
[2] Penberg Pty Ltd v. Body Corporate for Market Town [2007] QDC 20 (25 January 2007).
[3] Body Corporate for Sunseeker Apartments CTS 618 v. Jasen [2009] QDC 162 (18 June 2009).
07.10.2009
News
26 August 2009 was a big day for the High Court. Not only did they find the Australian Military Court unconstitutional, they also overturned the decision of the Full Court of the Federal Court in Bruton Holdings Pty Ltd v Commissioner of Taxation [2008] FCAFC 184.
The decision of the Federal Court
Director Penalty Notices are undoubtedly one of the ATO’s best debt recovery weapons but s260-5 Notices (”garnishee notices”) were an even better weapon after the Bruton Holdings decision. The Full Federal Court’s decision, in summary, would have meant that:
- The Tax Commissioner could take priority over other creditors, including secured creditors
- The Tax Commissioner could have issued garnishee notices AFTER a winding up had commenced - thereby gaining priority
- The decision made a “trade on” by liquidators a riskier proposition as the Tax Commissioner could issue garnishee notices and take any profits
- Garnishee notices could require any debtor to pay money to the Tax Commissioner
The High Court decision
s500(1) of the Corporations Act 2001 says that:
Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void
While the Federal Court thought that this did not apply to s260-5 Notices, the High Court held that it does and thus:
the power conferred on the Commissioner by s 260-5 does not extend to the case of a company in liquidation … the Commissioner’s general powers under s 260-5 are not available if there has been a resolution passed for the winding up of a company or if an order for winding up has been made
What does it mean?
The High Court decision is great news for insolvency practitioners. Once a winding up resolution has been passed or a winding up order made, recoveries from debtors are now available to fund a trade on, be available for distribution and indeed fund the costs of liquidation. The Tax Commissioner’s freedom to “leapfrog” all other creditors has been wound back.
For more information
Call 07 3852 5055 and ask for Darrell Kake or email me at darrell@redchip.com.au.
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