Hiding Assets in Family Law Disputes

You may have heard someone say the line before, or maybe you have even thought to yourself – “I’ll just sell the ‘asset’ to my brother/mother/mate for a dollar”. This is quite possibly one of the most dangerous attitudes a party can have in a property settlement dispute and one of the strongest points to attack the credibility of a party that attempts to hide assets in this way. This blog will state the pitfalls of hiding assets in family law property disputes.

Alternatively, you may be aware of an asset that existed during your relationship that the other party now says no longer exists but have not explained what happened to it.

The reasons this attitude can be so harmful to a person’s case are: –

  • Upon producing evidence of the true value of the particular asset, the Court can treat the transaction as a deliberate attempt to defeat the other party’s legitimate claim; and
  • The Judge can become reluctant to believe your evidence on other points of your case if not corroborated by some independent source.

Immediate Consequences

If discovered during a proceeding, the Court has a wide range of powers to deal with these types of transactions, including: –

  • Dismissing all or part of the guilty party’s case;
  • Ordering the guilty party to pay a portion of the other party’s costs;
  • Restraining the guilty party from relying on any undisclosed information or document as evidence in their case;
  • Imposing a fine; or
  • Sentencing the non-disclosing party to imprisonment for contempt of Court in extraordinary cases.

Future Consequences

If evidence of the non-disclosure or adverse dealing is discovered after final orders have been made in a property dispute, there will be grounds to seek that those final orders are set aside and new orders made. In addition to the penalties that might be imposed listed above, further orders could be made granting a higher entitlement to the net assets of the relationship to the innocent party and that their legal costs be paid by the guilty party.

Finding the Evidence

The obligation of full and frank disclosure that all parties to family law matters have goes a long way to assist in discovering whether a party has disposed of assets or is otherwise hiding assets in some way. The documents parties are obligated to provide include:

  • Bank Statements for all accounts in either party’s name for the last 12 months;
  • Superannuation Statements for all super funds either party has;
  • 3 most recent Tax Returns and Pay Slips;
  • Any valuation reports either party has obtained;
  • Insurance Policies Statements;
  • Share Certificates/stock market portfolios;
  • Trust Deeds;
  • Business, Partnership or Company documents;
  • Title Deeds and Leases of Property.

In some cases, this has also extended to legal advice concerning a range of entitlements, medical reports and settlement offer where either party is making or has made a personal injuries claim.

Other methods of gathering evidence include calling particular witnesses to give evidence and be cross-examined at a hearing, issuing a subpoena to produce documents or conducting online searches through various property registers or ownership searches.

Need help with a family law dispute or want to discuss asset settlement?

     

    What is a property settlement and can you get it done before your divorce?

    If you are separated and heading for divorce, consider finalising your property settlement as soon as possible to secure the best outcome for your future.

    What is property?

    Property refers to all your assets, financial resources, superannuation and liabilities. The Family Law Act defines property as being the ‘net asset pool’ which can include:

    • matrimonial home
    • investment properties
    • bank accounts
    • family Trusts
    • jointly owned assets
    • superannuation
    • shares/interests in a business or companies
    • cars and/or any other vehicles
    • debts

    Why is it better to finalise your property settlement before you divorce?

    In Australia, you cannot file an application for divorce unless you have been separated for 12 months. However, you can commence and/or finalise a property settlement at any time after you separate.

    We strongly recommend people finalise their property settlement as soon as possible after separation and before getting a divorce order. This is because your assets at the date of settlement or trial are what is taken into consideration rather than your assets at the date you separate.

    Because it is likely each party will continue with their lives after separation and in doing so, may buy or sell assets, unless there has been a property settlement, these transactions will affect both parties even though the couple is separated.

    Are married and de facto relationships treated the same?

    If you are married, you must apply for a property settlement within a year of a divorce order becoming final. A divorce order becomes final one month and one day after the date on which the order was made.

    If you are in a de facto relationship, you must apply to the court for your property settlement within two years from the date of separation.

    Failure to commence proceedings in the court within these timeframes means you will need to seek permission from the court to commence proceedings out of time. It is at the court’s discretion as to whether or not they grant permission and they will only do so in limited circumstances.

    How is property settlement done?

    When the court is deciding on a just and equitable division of the relationship property, each case is treated as unique. The court will consider the contributions each person has made to the relationship (both financial and non-financial), together with each person’s future needs.

    Both parties will need to disclose all of their assets and the court has the discretion to split any of the property even if it’s under one party’s name. The factors the court considers when deciding are:

    • future financial needs of each party
    • earning capacity of each party
    • whether they have children and who cares for them
    • age
    • health
    • any other special circumstances
    • whether the division would be practical and in the party’s interests.

    How is a property settlement finalised?

    Property settlement can be finalised either by:

    1. an application for consent orders (which is filed in the Family Court) and orders are made by the court
    2. a binding financial agreement (which is not filed in court).
    Related articles DOMESTIC VIOLENCE IN AUSTRALIAWhat will happen to my pet after separation?

    Cornerstone Law Offices can help you understand your entitlements, negotiate property settlement with your former spouse or partner, and obtain a just and equitable outcome. Call us on 1300 267 637 or fill in the form below.

      Selling property after a separation.

      Divorce and Family Law A separation or divorce can be one of the toughest things a person will face during their life. There is a lot to think about; where will you live, who gets what, who will the children and pets live with etc. Here are the things to keep in mind when selling a property after separation.
      One thing that can be particularly time-consuming and difficult to deal with in the sale of a property. How you proceed with selling the property after separation will come down to the relationship itself, how the parties are coping with each other and what they each want to do with the property.  

      There are two ways property is sold:

      1. Through agreement and negotiation of both owners, or 
      2. via court orders. 

      As you can expect, if you are in agreement with respect to selling the property, it is a lot easier than proceeding with option and seeking court orders to sell it. 

      Most people need to settle a property sale as soon as possible once they separate, as either one or both parties need to move out and find new accommodation. This is not easy to do if you are still paying a mortgageThere are many things to keep in mind, even if you have both agreed to sell the house. As we know in all relationships, each person has strengths and weaknesses and more often than not, there is one party who is better at handling matters like this and making quick decisions.  

      During the sale of a house, there are a few very important things that need to happen for a seller:

      1. Both parties need to give instructions to their solicitor. When dealing with a separation matter, your solicitor is unable to negotiate or act on your instructions until the same instructions are received from both parties. Remember, as you are both owners of the selling property, you are both considered that solicitor’s clients.  
      2. Some of the things you may need to sign include a Discharge of Mortgage if you have any mortgages over the property, Transfer documents to allow the property to be legally transferred into your name at settlement, Client Documents which is the initially written questionnaire and accompanying documents your solicitor will give you.
      3. Both parties will need to agree with the figures. This is where it can get particularly tricky.Family Law Property settlement

      Many separated couples struggle to agree on figures if a purchaser requests a reduction under a condition of the contract, most commonly the building and pest condition. Until both parties agree on the reduction, they are willing to give, no negotiations can be entered into with the buyer. 

      Some people also struggle on the split of funds at settlement. Someone may have paid off more of the mortgage during the relationship, someone may have put a lump sum into it, someone may have paid for renovations, someone’s parents may have gifted them the deposit, and the possibilities go on and on. 

      At the beginning of the matter, your solicitor will ask you if you have agreed on how the funds will be split at settlement. If you have not by that time, they will let you know you need to before settlement. When it comes close to a settlement, you will be given a statement showing how all adjustments (rates, water, mortgage discharges, reductions etc.) have been accounted for. They will detail cheques required to pay off their fees, any outstanding bills, any commission to your real estate agent, any payout figure to your bank. Most of the time there will be a lump sum left over – which you both, as the clients, need to instruct your solicitor on the agreed split of those monies.

      If you are unable to provide agreed on instructions on the way this will be split; your solicitor will have no choice but to retain all the excess funds from the settlement in their trust account until you can agree. This is generally when the parties will be instructed to take the matter further to obtain a court order for the way these funds will be split.

      Property SettlementShould parties not agree on the split of funds or one party refuses to give instructions or sign documents, your solicitor will then require that one party seeks independent representation in settlement of the contract or recommend you apply for orders to force the sale/detail the split of funds. Court orders (option 2 above) take time to be put in place, especially during the COVID-19 Pandemic. The courts are extremely busy, and it may take you many months to obtain a Judgment as to how the funds will be split at settlement.  

      Court orders can also be sought at the very beginning of the matter if one party does not want to sell the property. Please note the time it will take to obtain a Judgment and the cost of seeking the orders from the court.  

      As you can see, while it can be a very hard thing to deal with, especially when going through a separation, it is in everyone’s best interest to agree with selling the property and how the funds will be split, before you proceed to sell the property. 

      Each separation is different, and each party needs to do what is right for themselves in that situation. However, if you do need to sell a property following a separation, please keep in mind the above pitfalls and potential traps you may encounter so you are prepared for what may come.  

      Related articles What will happen to my pet after separation?Inheritance and Property Settlement During Divorce .

      Talk to your Family Lawyer now

        What will happen to my pet after separation?

        Every couple who are about to get separated will have this question “what will happen to their pets after separation?Family Law Property settlement

        Pets are your bundle of joy and a valued member of your family. They deserve to be cared for with love and respect.  When separation occurs, it can be a difficult time and even more difficult when there is disagreement as to what will happen with your pet’s future care and living arrangements.

        How does the court deal with pets in Family Law 

        Family Law is generally broken into two sections – Parenting and Property. The Family Law Act does not have specific provisions to deal with pets.  As a result, there is no clear or determinative way as to how the Court treats petsBut generally, the ownership of pets after separation falls under property and unfortunately, they are usually treated similar to inanimate objects such as chattels, furniture and white goods.

        Depending on the circumstances, and whether there are children involved in the matter, there is generally no possibility for shared ownership of the pets following separation since ownership goes solely to one person to finalise their financial relationship once and for all.  It may be the case that market value is attributed to the animal (which is inconsistent with the emotional value of the animal), and it forms part of the asset pool available for division. The person who keeps the animal then compensates the other for the value of the animal in consideration of the whole asset pool, including superannuation and the other assets, liabilities, and financial resources they are retaining. 

        While pets are considered property, the Court does acknowledge the comforting nature of pets. In many cases involving a child/ children, the Court will decide to make orders that the pet accompanies the child or children in moving between the parents’ homes 

        What factors does the Court consider?  
        1. If the pet is registered with the council, under whose name the pet is registered.
        2. Who is registered on the pet’s microchip.
        3. When the animal was purchased (before, during and after separation) and who paid for the purchase of the pet;
        4. Who the pet resided with before, during and after separation;  
        5. Who paid the bills for the pet (e.g. training, vet bills, food, etc.). 
        6. Who was the main caregiver of the pet.  
        7. With whom the pet has an emotional bond. 
        8. If there are children, the children’s bond with the animal and who the children live with. 
        9. Each of your living circumstances and whether it is suitable for the pet (e.g. pet-friendly, large backyard, fenced, etc.).  
        10. Any other relevant matters involving the pet’s care.   

        What are youoptions?  

        1.Negotiate directly with your former spouse/partner  

        Instead of leaving the decisions relating to your pet’s future arrangements to be determined by the Court, it is best to try and amicably negotiate directly between yourselves because you both know the pet the best and each of your circumstances If you are unable to negotiate directly between yourselves, you can consider attending mediation. With the help of an independent third party to assist you in reaching an agreement to decide who the pet lives withthe time the pet will spend with the other party and who pays for the pet’s expenses etc. You can maintain control over the outcome that works for both of you and is in the pet’s best interests.

        2. Consent Orders or Binding Financial Agreement which includes provisions for your pet

        If you can reach an agreement with your former spouse/partner, it is important to understand that the agreement is not legally enforceable. Until the agreement is formalised, it is only a reflection of your intentions.   For a legally enforceable agreement, you and your former spouse need to formalise the agreement by way of: Binding Agreement

        a)    Consent Orders; or b)    Binding Financial Agreement.                                                                                                                                                                   These documents cover property settlement matters but can also include provisions for your pet which will be considered as part of your property settlement.    

        3.Make an application for property orders in Court which includes your pet

        If you have exhausted all options, including negotiation and mediation with your former spouse, you can make an Application for Property Settlement Matters with the Court, which includes seeking specific orders for your pet.  If you take this option, you will need to consider the associated legal expenses to pursue ownership of the pet, with no guaranteed outcome at the end given the Court’s unclear way of dealing with such issues. It is also important to understand that the courts are often reluctant to deal with issues relating to pets. As is often the case with other chattels, such as furnishings and white goods, possession can often be a determinative factor of the issue.

        If we can assist you or provide you with further information relating to your pet and your unique circumstances, please do not hesitate to contact our office. Talk to us and let one of our family lawyers guide you in reaching an agreement best for your valued family member.   

        Related articles Inheritance and Property Settlement During DivorceWhat is a property settlement and can you get it done before your divorce?

         

          Contesting or Disputing a Will

          HOW TO CONTEST OR DISPUTE A WILL IN QUEENSLAND?

          There are generally two ways of disputing or contesting a Will:

          1. Questioning the validity of the Will; or
          2. Proving that there has been an inadequate provision for you under the Will. 

          QUESTIONING THE VALIDITY OF THE WILL

          A person may dispute the validity of a Will, by proving that the Will is not the last valid Will of the deceased. Some grounds to dispute the validity of the Will are:dispute

          • The deceased revoked the Will or made a later Will.
          • The deceased married after making the Will and the Will was not made in contemplation of the marriage.
          • The deceased lacked the testamentary capacity to make the Will as at the date of the Will. For example: the deceased had an intellectual or mental disability; the deceased did not understand the contents or nature of the document they were signing; the deceased was coerced (compelled by force), unduly influenced or was under duress to sign or make the Will.
          • The Will was not executed correctly. For example, the Will has not been signed by the deceased and witnesses on every page or a witness is also a beneficiary under the estate, or parts of the Will were amended after the Will was executed by the deceased.

          Generally, the Court decides the validity of the Will by granting or refusing Probate of the Will, or by revoking an existing Grant of Probate. Once a Grant of Probate is obtained, an executor may proceed to distribute the estate in accordance with the terms of the Will and carry out the deceased’s instructions under the Will.

          For this reason, It is important, if you doubt the validity of the Will, you must act quickly and let the Executor know as soon as possible and before the Grant of Probate is obtained.

          While not strictly contesting the validity of the Will, it is possible to challenge a Will by questioning the construction where the meaning is unclear or ambiguous.  For example, if the deceased left a Divorce, Family Lawhouse to their grandchild Joe and the deceased has two grandchildren with the name Joe. The Executor or beneficiaries may apply to the Court to have the Will interpreted by considering rules of construction and other evidence which shows the real intention of the deceased.

          INADEQUATE PROVISIONS/FAMILY PROVISION

          If you have been left out of the Will or you feel you have not inherited enough under the Will and are entitled to more from the estate.

          Generally, a person can leave their possessions and money to anyone they choose. However, you may be able to bring a Court action for a provision from the estate of the deceased even though the deceased did not provide you with anything or little in their Will.

          Who is Eligible?

          In order to contest a Will, you must be an eligible person. An eligible person is someone who falls within one of the following categories:

          • The spouse at the date of death.
          • A De Facto spouse at the date of death.
          • A Child of the deceased, including a step-child or an adopted child.
          • A former spouse.
          • A person with whom the deceased was living in a close personal relationship at the date of death.
          • A person who was wholly or partly dependent on the deceased; i.e., relied financially upon the deceased.

          Grounds to Claim

          An eligible person who wishes to challenge a Will upon the basis that they have not received enough of inheritance must demonstrate that the provision provided for under the Will was inadequate for their proper “maintenance and support” and that they will suffer hardship as a result of the deceased’s decision to give their assets to others.

          The Court considers many factors when determining a family provision application, for example:

          • The applicant’s financial position with reference to their income, assets, liabilities and expenditure, as well as any medical, educational and lifestyle needs;
          • Whether any other person is liable to support the applicant;
          • Whether the applicant is bound to support any other persons;
          • The applicant’s health;
          • The deceased’s influence on the applicant’s lifestyle;
          • The age of the applicant;
          • The size and nature of the deceased’s estate;
          • The strength of any competing claims to the deceased’s estate;
          • The relationship between the deceased and other persons who might have a claim to a share of the deceased’s estate;
          • The relationship between the deceased and the applicant;
          • Any contribution made by the applicant or a beneficiary to the build-up of the deceased’s estate;
          • Any conduct on the part of the applicant which might disentitle them to order for provision (serious criminal behaviour, estrangement, drug or alcohol abuse, etc); and
          • Any other matter which the Court considers relevant.

          TIME LIMITS

          In Queensland, there are two important time limits that apply for contesting a Will.

          If you want to contest/dispute a Will in Queensland, you must first give notice to the Executor that you intend to contest the Will. This notice should be in writing and must be given within six months of the date of death. If the Executor does not receive notice of a potential claim after six months has passed, the Executor can distribute the estate and there may be no estate assets left for you to make a claim against.

          The second time limit which applies to family provision applications in Queensland requires you to file an application in the Court within nine months of the date of the deceased’s death.

          If you miss the second time limit, you can make an application out of time, however, it is at the discretion of the Court whether to allow you to make the application. In deciding whether to allow an “out of time” application, the Court will consider a range of factors, including:

          • The length of the delay;
          • The reason for the delay;
          • Whether the estate has been distributed; and
          • Your conduct relating to the estate; for example, have you followed the correct process, have you ignored correspondence from the Executor or the Executor’s legal representative, have you tried to resolve the matter directly with the Executor? etc.

          WHO PAYS THE COSTS OF CONTESTING/ DISPUTING A WILL?

          In Queensland, costs are at the discretion of the Court, but usually, they follow the event. This means that the successful party in legal proceedings will usually have some of their legal costs paid by the other party.

          This means that:

          • If you are successful and the Judge makes an order in favour of you, the estate will usually pay your standard legal costs; and
          • If you are unsuccessful and the Judge makes no order in favour of you, the Judge may order you to pay the Executor’s costs of defending the proceedings.

           

          Related articles Death to Distribution: Estate AdministrationEstate Planning during COVID-19

          Need advise in contesting or disputing a Will? Fill in the form to talk to our Estate Planning lawyers.

             

            Property Squatters:How to get them off?

            Property Squatters: Who are they? What rights do they have? How to get them off property?

            Who are they?

            A squatter is a person who resides in a property without the consent of the landlord/registered owner of that land.

            The difference between property squatters and a tenant is the absence of a formal/verbal agreement made between the squatter/tenant and the landlord/registered owner of the land. If an agreement exists, the person will most likely be considered a tenant. When there is no verbal or written agreement, and the landlord has never consented to the person living on the property, they will be considered a squatter.

            If you allow a tenant to remain in the property after the expiry of their lease, they will still be considered a periodic tenant. They do not become a squatter.abandoned property

            What rights do they have?

            A property squatter must vacate the premises when requested to do so by a registered owner of the land unless they can prove they have “adverse possession” of the property. Vacation, however, is a common issue when it comes to squatters. As they are already living on the property without a legal agreement to do so, it can be difficult to get them to agree to leave.

            When a squatter can prove adverse possession, it means they have a legal right to remain in the property. To prove adverse possession of a property, the squatter must have:

            1. Taken possession of the property for an uninterrupted period of 12 years;
            2. Treated the property as their own, i.e. made renovations or works to the property, paid the rates, etc.;
            3. Had the intention to execute the world at large/it was known to the “world at large”(telling everyone that they are the true owners) that it was their property, i.e. that they were the legal owner of the property;
            4. The legal owner must have abandoned the property.

            As you can imagine, proving adverse possession is a complicated thing to do. When a claim for adverse possession is successful, it extinguishes the original registered owner’s title – as such, they will no longer be the owner of the property.

            Actions you can take against property squatters.

            There are multiple ways to remove a squatter from the property, and each depends on the details listed above and the level of the squatter’s resistance.

            1. Have the police remove the squatter as they are a “trespasser.”
            2. QCAT Claim: Apply to QCAT for a warrant of possession under the Residential Tenancies and Rooming Accommodation Act 2008
            3. Magistrates Court: Apply to the Magistrates Court for a warrant of possession under the Property Law Act 1975.

            We recommend that if you are dealing with a squatter on your property, the first and best action to take is to talk to them and see if you can agree to have them vacate the premises. You can do this Eviction Notice personally, with the help of a Real Estate Agent, with the help of a Lawyer or even attend Dispute Resolution to deal with the squatter.

            Discuss the issue with your local police, so they are aware of the situation before you speak with the squatter.  After your discussion with the squatter, if they still do not want to vacate,  lodge a formal trespass complaint with the police and request they remove them from the property.

            Whenever a matter is taken to the courts, whether it be QCAT, Magistrates court or others, please be aware of the significant time and money it can cost. Each court has its time frames and fees for an application; however, as a general rule, once you lodge a claim, it will usually only be heard 4-6 weeks after lodgement.

            Related topics

            Pitfalls to avoid when buying or selling a houseFive steps to ensuring a smooth commercial property sale

            If you have a squatter on your property, contact Cornerstone Law Offices. We can review the history to determine if they are a squatter or a tenant.


              Inheritance and Property Settlement During Divorce

              The question often arises as to how the inheritance should be dealt with in a property settlement during a divorce. Inheritance in property settlement during a divorce generally fall into one of three categories:

              1. Inheritances received during the relationship;
              2. Inheritances received late in the relationship or following separation;
              3. Anticipated or prospective inheritance – where a party to a relationship is likely to receive an inheritance in the future. Divorce, Family Law

              Each case is different, and the extent to which an actual inheritance or a prospective/anticipated inheritance will impact on a property settlement will depend on the individual case. The Court has broad discretion on how to deal with issues in family law, but the question remains as to what weight will be given to the contributions of the parties. Some factors which are taken into account include:

              • When was the inheritance received (e.g. whether it was received early on in a lengthy relationship vs right before separation in a short relationship);
              • The value of the inheritance (in comparison to the size of the parties’ asset pool before the inheritance was received).
              • Relationship with the person leaving the inheritance (“the testator”) – even though one spouse may have been left an inheritance, the other spouse may also have had an important relationship with the testator and contributed in a way to the inheritance. (e.g. carrying out maintenance and improvements to the inherited property, doing odd jobs for the testator, allowing the testator to live rent-free with the parties, accompanying and/or taking the testator to appointments, etc.)
              • Whether the assets received by way of inheritance by one spouse became communal and co-mingled with a joint asset or whether the inheritance was quarantined by one party.
              • What is actually done with the inherited asset or funds (e.g. whether they were used to improve the financial circumstances of the family);

              You might also be interested in reading about What is a Binding Financial Agreement and when can it be challenged?

              Everyone must get early advice from an experienced family lawyer on their specific circumstances. Contact Us

              An inheritance received during the relationship 

              If an inheritance has already been received, this amount will be included in the asset pool available for the division, as no item of the property falls into a special protected category simply because it is an inheritance or the proceeds of an inheritance. The inheritance is taken to be a contribution made by the party who received it, and what weight the Court gives it will depend on all the other contributions made by the parties across the entirety of the relationship.

              An inheritance received late in the relationship or following a divorce 

              All assets, liabilities, superannuation interests and financial resources in each party’s sole name or jointly with another, or that each party has an interest in, at the time of reaching an agreement or trial must be considered in a property settlement. This includes assets, liabilities, superannuation and financial resources accumulated by either of the parties’ late in the relationship or post-separation.

              Accordingly, an inheritance received later in the relationship or following separation/divorce, will be factored into your property settlement matters with your former spouse. The inheritance may be included in the asset pool available for division, or it may be considered a financial resource of the party who received it depending on the circumstances. If it is included in the asset pool, then it becomes a question of what contribution the other party may have made to that asset.

              If your property settlement has been finalised, then your former spouse will have no claim to an inheritance you receive post-separation under family law. This is one of the reasons why it is essential to finalise your property settlement matters by way of the necessary legally binding paperwork as soon as possible after you separate.

              Anticipated/ prospective inheritance to be received in the future  

              Generally, if a party to a relationship is to receive an inheritance in the future and the person providing the inheritance is alive and still has the testamentary capacity, it is unlikely the inheritance will be considered in the property settlement. This is because that person can change their Will at any time before their death, and there is no guarantee that a party will ever receive the inheritance.

              However, in circumstances where:

              1. the testator has lost testamentary capacity, meaning that the testator cannot change their Will legally;
              2. there is a high probability that the testator will pass away very soon; and
              3. the party will receive the inheritance by the terms of the Will;

              then it is likely that the inheritance will be considered in your property settlement matters either as an asset forming a part of the asset pool available for division or as a financial resource. An anticipated inheritance may be considered a future financial resource, particularly in circumstances where the inheritance is not likely to be received in the near future, but again it must be more than a mere possibility that the party will receive the inheritance; it needs to be shown that the party has an expectancy of receiving the inheritance.

              Related topics Child Custody Law

                 

                Principles for negotiating commercial rent during COVID-19.

                As a part of COVID-19 response, the National Cabinet has implemented a mandatory code of conduct for commercial leasing that applies to all tenancies with an annual turnover of up to $50 million. This article will enlighten the principles for negotiating commercial rent during COVID-19.

                Image showing cases of COVID-19

                With many businesses facing a huge fall in revenue due to the pandemic, the government has encouraged landlords, tenants and financers to agree on new arrangments to provide rental relief. The code applies to those tenants who are suffering financial stress or hardship as a result of COVID-19 and are eligible for the Commonwealth Government’s Job Keeper payment.

                The objective is to share in a proportionate and measured manner the financial risk and cash flow impact during the COVID-19 pandemic and at the same time balance the interests of both tenants and landlords.

                 


                   Key Points:

                1. Principles of negotiation between the landlord and the tenant.

                2. What leasing principles should both landlords and tenants adhere to after the commencement of negotiation?

                3. What if both the parties can’t reach an agreement?


                Principles of Negotiation:

                This package intends to ensure that landlords agree on a temporary arrangement for each tenant on a case by case basis and the arrangement will be guided by the following principles listed below:

                • Landlords and tenants should work together to ensure business continuity and to aid in the facilitation of normal trading at the end of the COVID-19 pandemic.
                • Landlords and tenants are required to discuss issues to enable them to negotiate temporary leasing arrangements that will be in the best interest of both parties.
                • Negotiations will be made in good faith.
                • Landlords and tenants are to act openly and honestly when negotiating new terms and will be required to ensure they are acting in an open, honest and transparent manner.
                • Landlords are required to consider the impact that the COVID-19 pandemic has had on the tenant, including to its revenue, expenses and profitability.
                • Any arrangements will include a reasonable recovery period.
                • The landlord and tenants are required to assist each other in dealing with government agencies, utility companies, financial institutions to facilitate negotiations.
                • All parties are required to recognise the application and legal constraints of the Competition and Consumer Act 2010 and recognise that each lease is to be dealt with on a case by case basis.
                • The risk of default on commercial leases is borne by the landlord. The landlord must not seek to mitigate this risk in the process of negotiating temporary arrangements with their tenants.
                • The parties need to take into consideration the differing lease structures; terms of the lease; rent reviews and determination, expiration dates and whether the lease may already have expired.
                • Consideration is to be given to whether the tenant is in administration or receivership.

                Call our Property Lawyers on 07 3806 4354 or Click here and fill the form to negotiate terms for both the parties.

                What leasing principle should both landlords and tenants adhere to after the commencement of negotiation?

                • Landlords must not terminate leases due to the tenant’s failure to pay rent during the COVID-19 pandemic or the reasonable recovery period.
                • Tenants must abide by the terms of their lease, subject to any temporary amendments to their rental agreement following the principles of the code. Should a tenant not abide by the substantive terms of their lease they will forfeit any protections provided under the code.
                • Landlords are required to offer tenants reductions in their rent by way of a waiver or deferral of their rent determined on a case by case basis.
                • Rental waivers must be between 50% to 100% of the total rent owing under the lease, the tenant can waive the requirement for a 50% minimum waiver by agreement.
                • Payment of any rental deferrals by the tenant are to be apportioned throughout the balance of the lease term or for no less than 24 months whichever is the greater.
                • Any reductions the landlord receives for land tax, council rates or insurance are to be passed onto the tenant.
                • Any benefits the landlord receives due to deferral of loan payments should be shared with the tenant, proportionate to the amount payable by the tenant under the lease.
                • Should a tenant be unable to trade for a period the landlord should seek to waive recovery of any expense or outgoing during this time.
                • If the tenant is required to repay any amounts to the landlord at the end of the COVID-19 pandemic this is to occur over an extended period to avoid placing a financial burden on the tenant.
                • The landlord is not to charge any fees or interest on any deferred or waived rent.
                • Landlords must not draw on tenant’s security for non-payment of rent during the COVID-19 pandemic or for a reasonable recovery period.
                • The landlord should allow the tenant to extend its lease for a period equivalent to the waiver/deferral period to allow the tenant additional time to trade under the existing lease terms once the COVID-19 pandemic concludes.
                • Landlords agree to freeze rent increases (unless the lease is a retail shop lease based on turnover) during the COVID-19 pandemic and a reasonable recovery period.

                What if both the parties can’t reach an agreement?

                If the landlord and tenant are unable to reach an agreement on leasing arrangements, the matter should be referred for binding mediation.

                For retail shop lease disputes, the parties should apply to the Queensland Civil and Administrative Tribunal for mediation. For commercial leasing disputes, the parties should speak to a solicitor or contact us to arrange a mediation with our Principal Pravinita Singh-Pillay, who is an accredited mediator.

                Our property lawyers can help you draft an agreement that would help both Tenants and Landlords.

                Fill in the form below to download the Tenant Letter Template.

                  Pitfalls to avoid when buying or selling a house

                  Whether you are a buyer or a seller, a first-home buyer, an investor, or a seasoned household owner, there are many mistakes that people make in conveyancing.  Here are a few of the most common mistakes:

                  • using incorrect spelling or informal names on the contract
                  • failing to meet contract deadlines
                  • failing to obtain searches (as a buyer)
                  • failing to include chattels/fixtures in the contract.

                  Incorrect spelling or use of informal names

                  For an agent:

                  • When drafting a contract, ensure you write down both the seller’s and buyer’s names correctly. Obtain copies of all parties’ government-issued identification (drivers’ licence) so you can check.
                  • Ensure you have a copy of the title search for the property you are selling as this will ensure you have recorded the seller’s name exactly as it is depicted on title.
                  • Make sure you include all parties to the settlement i.e. multiple buyers must all be correctly listed.

                  For a buyer or seller:

                  • Check that the contract has your name spelt correctly.
                  • If you have a middle name, use it.
                  • If your name is spelt incorrectly, change it.

                  Repercussions:

                  As a buyer or seller, if your name is spelt incorrectly on a contract and you proceed with the contract, your conveyancer will need to have this amended. This can incur extra costs with some fixed-fee conveyancing agreements.

                  If the buyer’s name is spelt in correctly in a contract and they are obtaining finance, the financier will require the contract to be amended to ensure the name is listed correctly on the contract. Depending on how long both parties take to agree to amend the contract, your finance could be delayed by weeks as a financier cannot progress a loan agreement until the application matches what’s on the contract.

                  If your incorrect name happens to slip past all these parties, the property will be transferred into the name of the person on the contract. This will not be your legal name and can have significant impacts on your estate should something happen to you. To change a name once it is registered on title, an application to amend needs to be lodged with the Queensland Titles Office. This will incur further costs and can take months to be amended.

                  The rule is simple: spell check before you sign.

                  Contract deadlines

                  The most common deadlines or dates in a residential contract of sale are:

                  • cooling off
                  • finance
                  • building and Pest
                  • special conditions
                  • settlement.

                  On a standard Real Estate Institute Queensland (REIQ) contract, most of these conditions have a date within which they need to be met. This can be a certain number of days from the contract date (i.e. 14 days from contract) or have a specific date listed (i.e. 11 July 2019). A settlement date can be written in a few different ways which can be confusing to the parties of the sale.

                  Cooling off
                  A cooling-off period is automatically built into all REIQ residential sale contracts. You will find the disclaimer just above the execution panel on your contract. This disclaimer advises that you as a buyer have five business days, following the execution of your contract, to pull out of the contract for any reason.

                  A termination penalty of 0.25% of the purchase price is required to be paid by the buyer should they pull out under this condition. This is included as a protection for the seller to prevent people signing contracts and pulling out for no reason.

                  The cooling-off period does not apply to the seller. Once a seller signs the contract, they cannot terminate unless the purchaser is delayed in satisfying one of its conditions detailed under the contract.

                  Finance, building and pest, and special conditions
                  The date each of these conditions must be met will be listed on the contract. The most common timing for these conditions is 14 days from the contract date. Buyers should be proactive and start applications to ensure these conditions are satisfied within the specified timeframes.

                  A finance application with a general bank will take a minimum of seven days to be conditionally approved. However, they can take anywhere between 14 to 21 days to give formal approval. When you start looking to purchase a property, go to your financier or mortgage broker and get conditional approval. Once you are conditionally approved, the formal approval is much easier to obtain and you can become conditionally approved without a contract. The financier will advise you of the maximum amount you are conditionally approved for and you can proceed to look at purchasing houses for that amount and under.

                  In order to satisfy a finance condition, you need to provide your conveyancer with the following:

                  • a copy of the formal approval letter you received from your financier
                  • written advice (an email) from you advising you are happy with the offer from that financier and wish to satisfy this condition in the contract.

                  Your conveyancer must obtain these instructions from you in order to satisfy this condition.

                  Depending on the size of the property you are purchasing, a building and pest inspection generally takes between one and two hours to complete. Once you sign a contract, you need to call around to obtain quotes and book an inspection as soon as possible.  You should arrange a time for an inspector to attend the property when it is suitable for the sellers to provide access to the property. Liaise with the real estate agent to arrange a suitable day and time.

                  Once the inspection is done, most inspectors will give you a short verbal run down of the property. They will then forward you a written report.  Be patient as this takes time for them to write up (generally 24 hours following inspection).

                  It’s important to have this inspection done as soon as possible as issues may arise in the report that you may want to negotiate on.

                  If you want to negotiate under the building and pest condition on a contract, you need to provide your conveyancer with a copy of the report and detail in writing (email) exactly what the issues are and what you want the seller to do about it. Once they have that information, your conveyancer will contact the agent and the seller’s conveyancer to begin negotiations.

                  Negotiations can take days or even weeks to resolve and generally take one of two forms: either a price reduction or a request for repairs. If you request a price reduction this means you are willing to accept the property as is, if the seller agrees to reduce the purchase price by an agreed amount. This reduction will then be accounted for at settlement. If you request repairs be done by the seller, they need to undertake these repairs/works prior to settlement and provide you with a copy of the invoices showing the work was completed by suitably qualified tradesperson.

                  Once you satisfy the building and pest condition, no further negotiations take place. So, you should ensure everything is agreed in writing before your condition date under the contract.

                  Special conditions can take many forms. They can be for due diligence (generally when you need further information on the property because you are wanting to do something like build), or for when the seller needs to do something prior to settlement (repair something broken or replace something in the property), concurrent settlement (of your sale property) etc. There are many special conditions that can be written into a contract of sale.

                  You should discuss these with your conveyancer prior to signing a contract containing special conditions to ensure you are aware of their implications during the sale process.

                  Generally, settlement date is listed in the contract as 30 days from the date of the contract. When it comes time for your contract to settle you need to ensure you are ready.

                  As a buyer you need to ensure:

                  • Your financier is ready to provide funds.
                  • Any extra funds you are putting into the purchase are with your financier or conveyancer.

                  As a seller you need to ensure:

                  • Your mortgagor (if any) is ready to release your mortgage on the property.
                  • You are packed up as you need to be out of the property by settlement time.
                  • You have completed any repairs under negotiations made during the process of the contract.

                  What happens if you don’t meet a condition by its due date?
                  This is a question that not many people ask, but all parties involved with a sale contract should. As a purchaser, if you miss a deadline, you give the seller an opportunity to terminate the contract. Under REIQ contracts, a condition is not assumed satisfied simply because the due date has passed. All conditions are due by 5pm on the due date.

                  If the due date passes and a condition has not been satisfied, then the first email received by either party is taken to have precedence, that is, if the purchaser doesn’t satisfy the building and pest condition by 5pm on the due date, then the seller is within their rights to terminate. If you have your conveyancer send an email at 8:31am the following morning to satisfy, but they already received an email from the seller’s conveyancer terminating the contract prior to this time, the contract will be terminated. If they haven’t received any email, then your satisfaction email is taken to have precedence and the contract is still on foot or valid.

                  If you are still in negotiations on a condition and the due date is looming, you need to request an extension of that condition prior to 5pm on the due date. Please note that until the seller agrees in writing to that extension, at any time between 5pm on the due date and receipt of that extension agreement, the seller can terminate the contract.

                  This is why it is extremely important to start on contract conditions immediately after executing the contract. This allows enough time to negotiate, extend and receive a response before the due date.

                  Searches
                  As a seller, you don’t need to obtain any searches. It is the purchaser’s responsibility to obtain the searches required to complete settlement. Sometimes you may be asked to provide copies of your latest rates and water searches to assist in a quick settlement.

                  As a purchaser, there are a couple of standard searches that you need to obtain so your conveyancer can adequately prepare for settlement. Upon your instruction, your conveyancer will order searches. These standard searches include:

                  • rates
                  • title
                  • special water meter read
                  • land tax clearance certificate
                  • body corporate (if applicable).

                  There are many other searches you can obtain in addition to the required searches. Depending on what you want to do with the property, you may wish to obtain further searches.

                  For example, if you want to dig in the yard to build a shed you will most likely need to get a sewerage and drainage search. If you are buying a property with a pool, you’ll want to do a pool register search. If you know there is development in the future that might affect you at the property, you could seek a copy of the Department of Transport and Main Roads search.

                  A due diligence special condition is inserted as a special condition when there are specific searches that you want to get and if the result is unsatisfactory to you as the purchaser, you may wish to terminate the contract. These generally occurs in sales where the purchaser intends to demolish and rebuild on the property.

                  In a standard purchase, if you don’t obtain the above standard searches, you are putting yourself at risk of having to pay outstanding fees. These searches advise what has/hasn’t been paid for each service. For example, there might be outstanding land tax payable on a property, but if you as the purchaser don’t obtain the search to find out and subsequently request this amount be paid by the seller at settlement, then you become responsible for paying this amount. This is the same for outstanding rates, water, and body corporate bills.

                  Chattels/fixtures
                  The general rule to determine whether an item is a fixture or a chattel is to consider the degree to which that item is affixed to the property. For example, if you must unscrew something which will damage what it is screwed into to remove the item, it is generally considered a fixture.

                  There is a specific section on an REIQ contract where both the buyer and seller need to write down what will be staying/leaving the property upon settlement.

                  If you are expecting to take anything as a seller, include it in the contract.

                  If you are expecting anything to stay as a purchaser, include it in the contract.

                  The rule is that any fixtures are required to stay with the property and any chattels are required to be taken away following settlement unless specified in the contract.

                  General examples of fixtures:

                  • carpets
                  • blinds
                  • pool filter
                  • solar panels
                  • clothesline.

                  General examples of chattels

                  • fridge
                  • washing machine
                  • pot plants
                  • television.

                  Remember: it all comes down to the degree of affixation. If in doubt, include it in the contract.

                  These are just some of the common mistakes that agents, buyers and sellers make on a contract of sale/purchase. To avoid these pitfalls, remember that the more information you put into a contract, the safer and easier the transaction will be. If you want to include special conditions, discuss it with your lawyer or conveyancer prior to signing the contract to ensure it gives you the protection you want.

                  Let us help you avoid these pitfalls
                  At Cornerstone Law Offices, we are a full-service, general practice law firm. We specialise in Family Law, but also practice in property, crime and traffic, migration and wills and estates. We pride ourselves on providing our clients with the highest quality of service to assist them in any matter they may experience in their lives. We have specialist lawyers in all areas of law, with offices in North Lakes, the Brisbane CBD, Logan and the Gold Coast. We can be contacted on 07 3806 4354 or email info@cornerstonelawoffices.com.au