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DO YOU HAVE PROPER CONSENT FOR THE BUSINESS YOU ACTUALLY CONDUCT ON YOUR LEASED PREMISES?

18-06-2016
by 
in 

In this Industry Update exclusive, solicitor Sam Saad, a commercial and property expert with Sydney law firm Clinch Long Letherbarrow examines two key legal issues which could save you valuable time and expense …

Most commercial and industrial leases have a clause to the effect that the landlord gives no warranty as to the suitability of the leased premises for the proposed use and the tenant must obtain any consent or approval for the use from the Council or other consent authority.

Some tenants have mistakenly taken these provisions too lightly. Often the tenant will be proposing:

• to continue the use of a prior tenant; or
• a use quite similar to a prior use; or
• a use that is quite common in the general area of the premises.

The tenant may therefore be lulled into a false sense of security, thinking appropriate approvals are in place.

Recently, a tenant wanted to use a warehouse premises not just for warehousing but for some limited retailing both on line and in premises. Such use was not uncommon in the general area. The area was zoned “light industrial.”

The tenant felt comfortable that the proposed use would not be a problem and did no checking. Six months after moving in, a notice from the Council was received requiring the discontinuation of the retailing use.

The issue finally had to be thrashed out in court, at great expense to the tenant and without a fully satisfactory outcome.

A tenant must not rely on the landlord’s understanding of Council’s requirements, as zoning and planning laws change. The landlord is unlikely to agree to make the lease conditional based on the accuracy of any representation he makes about the Council’s position on the proposed use.

So, if you are entering into a new lease, don’t take any current approval for or actual use of the premises for granted.

Make the appropriate enquiries to the consent authority(ies). If the relevant consents are not in place, take the necessary steps to put them in place before committing to the lease. The lease is no good to you if the Council stops you trading.A little effort at the start may save you an enormous amount of expense and stress later.

I lent my son money for his house. His wife has now left him and wants the house I paid for. What can I do?

Many parents are funding first home buyers but family law often leads to a terrible “sting” for parents.

A failure to correctly document a loan from a parent to an adult child can have severe consequences for both the parent and the child, if that child’s relationship with their spouse breaks down.

A set of facts we see time and time again is as follows:

  • A parent “loans” their child a sum of money for the purchase of a property and they do not prepare a document at all or they enter into a Deed of Loan thinking that this will be sufficient.
  • The child does not make loan repayments, or pay interest
  • The child separates from their spouse.
  • The spouse argues that the “loan” was a “gift” to both of the parties and is an asset of their relationship.
  • What can be done to strengthen the validity of parent to child loans?
  • The more “commercial” the terms of the loan, the more likely the Court will be to view it as a genuine liability to deduct from the assets.
  • It’s important to consider the following:
  • Loans should be acknowledged in writing by both the child and their spouse/partner.
  • At least annually the child should make some repayments off the principal, and definitely pay some interest (even if only a minor proportion of the total).

 The parent should issue yearly reconciliations of the loan balance showing interest that has accrued.

Ideally the child and their spouse/partner should enter into a Binding Financial Agreement (similar to a pre-nuptial agreement, where the spouses acknowledge the loan and that it is repayable).

The parent should consider taking a mortgage over the real estate or a charge over a business (i.e. taking security for the loan).

Any agreement to vary terms of the loan, like interest deferrals, should be documented.

If the couple sell and buy a new house, and you don’t get repaid, make sure a new document is done at that time.

If there is a dispute in the future, it will generally be the parent who has to prove that the loan was NOT a gift.
Proper paper work really does help.

Clinch Long Letherbarrow Lawyers
Ph: 02 9279 4888
www.clinchlongletherbarrow.com.au

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