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Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Are you a Tenant entering into a Commercial or Retail Shop Lease in Queensland? 

Found the perfect premises for your business and absolutely cannot wait to sign on the dotted line?

Pause.

Having negotiated with a landlord (or through the landlord’s agent) you will be asked to sign a Lease Offer (sometimes called Heads of Agreement or an Invitation to Lease) as part of your commitment to securing the premises.  

Here’s what you could do next:

a) Sign the Lease Offer and provide it to your solicitor

b) Ask your solicitor whether advice on your Lease Offer is an additional fee

Most businesses sign a Lease Offer before seeking legal advice. This is not wrong, although our experience is that seeking legal advice before you sign the Lease Offer often achieves better leasing outcomes, and can save you losing a non-refundable deposit.

Here are 5 reasons why seeking advice before you sign makes good business sense:

1. Every Lease Offer, just as every Lease, is different. Tailor it to your business needs. What you put in the Lease Offer forms the basis for the lease documents when drafted by the landlord’s solicitors.

2. Whether a Lease Offer is binding or not depends on its wording. Lease Offers generally bind a tenant by their wording but give the Landlord an “out” if they decide not to proceed for any reason, for example, they receive a higher rent offer. You can have the Lease Offer re-worded so that it is suits both party’s business interests before you sign.

3. You will be asked to pay a deposit, which you may be at risk of forfeiting to the Landlord if your lease does not go ahead. The Lease Offer wording can avoid this risk.

4. Your Lease Offer will also outline key elements of what you have negotiated to that point, which at a minimum will include:

  • the identity of the parties and identification of the premises
  • term of the Lease (how many years) – but consider whether an option to renew (or Options) should be negotiated and included it in the Lease Offer before you sign;
  • what you agree to pay under the lease – ie. base rent / outgoings / direct service charges / a deposit / bond or bank guarantee or other form of security / marketing or promotions charges / fit out approval fees.

Have you thought about how to negotiate these ? Have you considered whether a “gross lease” is available, which is where your outgoings are included in your base rent, providing certainty over the term of the lease. Does a net or a gross lease suit your accounting, cash flow and taxation outcomes ?

  • the permitted use of the premises (what you can and cannot do) – The permitted use should be broad enough to cover each of your possible uses. Here is an example: “a men’s barber shop” could be extended to “a barber shop and sale of related hair and beauty products and services”. With the extended definition you can include women and children, waxing, nail care etc.
  • whether exclusivity is granted or not – that is, can competing businesses let premises in the complex (or close to your store) ? Here is an example: a dance studio offering Pilates classes takes premises in a centre. Not long after, the landlord allows a gymnasium (offering the same group classes) a lease in the premises next door. In some instances clustering similar (even competing) businesses can be to the Tenant’s advantage, and in other instances it could be crippling.
  • what, if any, security (guarantees) are required for you to secure the premises? Providing a personal guarantee should not be considered ‘standard’ or even necessary. It may be that the landlord will not proceed without a personal guarantee, or you may be surprised to learn that not every landlord insists. Personal guarantees put personal assets at risk and for this reason are to be avoided where it is commercially viable to do so.

    5.  A Lease Offer is your opportunity to document what is important to your business and what promises or representations have been made to you. Promises made to you should appear in the special conditions to the lease but they are often overlooked. If the promise is written into the Lease Offer you have greater bargaining power when the lease documents arrive.

    Here are some case studies of how we have assisted our clients:

    • Negotiating incentives with a landlord, such as the landlord paying money towards the cost of your fit out and/or providing a rent free period to help you get your business established in that location.
    • Avoiding incentive repayment triggers. Many leases include provisions that say if you end the lease earlier than the full term, you have to pay back any incentive received from the landlord. This is because an incentive amount is usually worked out against the income the landlord expects to receive over the whole of the lease period. These triggers are often woven carefully into the fine print of the Lease, and we have seen examples of triggers in 6-8 different places in a Lease (it is not always easy for an untrained eye to spot). We aim to include a prohibition on repayment triggers in your Lease Offer, to help demonstrate why they should be removed from any lease documents.
    • Ownership of the fit out – We will ask you if you have spoken to your accountant or taxation specialist about the upside and downside of owning the fit-out at the end of the lease. If you know what is best for your business, then it should go into the Lease Offer. Fit out can be tricky, especially when you are taking over premises with an existing fit out from a previous tenant. We will also aim to clarify who is responsible for any faults in existing fit out during your tenancy. Why should you be responsible for an air conditioning unit that didn’t work before you moved in?
    • Negotiating clauses such as a mould clause – We have had success in drafting a mould clause that gives certainty to the parties if mould becomes an issue during the tenancy. Mould IS AN ISSUE in Queensland and commercial premises can face numerous problems (health risk to staff and public, wearing the cost of mould eradication (or perhaps worse, ending up in lengthy / costly court or tribunal proceedings about who is responsible for removing mould, the landlord or the tenant ?
    • Business Interruption – what might impact your business ? COVID mandates ? Floor vibration (for example, this is important if you run a wellness business) ? Having the ability to put overflow chairs out the front of a hair dressing store for overflow customers ? We need to ensure that it is included in the Lease Offer.

    Documenting what is important to you at the start of your lease journey and can provide greater certainty and negotiating power when the lease documents are prepared.

    The Lease Offer, while important, is ultimately overridden by the suite of lease documents that you will sign. It is CRITICAL that the lease documents prepared by the landlord’s solicitors are read word for word to protect your business.

    A Word of Caution

    A word of caution: Our experience tells us that you cannot assume or rely on drafted lease documents (or subsequent amendments) being accurate and complete OR matching the terms of your Lease Offer.

    Approach your business to “plan for success”. Make sure you know exactly what your rights and obligations are and if you need help, the team at Onyx Legal can assist.

    How can Onyx Legal help you?

    If you are about to enter into a lease, renew a lease, or take over business premises from someone else, take time to get them reviewed.

    Under the Finfluence: What Do Australian Regulators Think?

    Under the Finfluence: What Do Australian Regulators Think?

    Under the Finfluence: What Do Australian Regulators Think?

    Compliance and enforcement priorities for two of Australian regulators, ASIC and ACCC, are now firmly focused on the Digital Economy.

    Compliance and enforcement priorities for two of Australian regulators, ASIC and ACCC, are now firmly focused on the Digital Economy. Some might say “it’s about time!”

    The regulators will coordinate with each other on many matters including combined financial and non-financial issues, so there is potential to be explaining your actions on two fronts.

    What is ASIC doing with Finfluencers?

    ASIC started ‘cautioning’ finfluencers in April 2022. Prominent social media influencers attended a briefing about the need for a financial services licence from ASIC in early April 2022. It was invitation only and about 30 turned up, with some commenting vocally on social media that the briefing heralded the end of their business. 

    So, what is a Finfluencer, and why is ASIC suddenly so interested?

    $99 million dollars lost by Australians in 2021 on scams involving crypto assets (ASIC Commissioner Cathie Armour, March 2022) is why ASIC is interested. That’s just crypto and doesn’t account for other significant losses on financial platforms.

    From ASIC’s perspective, a Finfluencer is “a social media influencer who discusses financial products and services online”.

    If you wanted to have a technical legal argument, we could look at the meanings of ‘social media’, ‘influencer’, ‘discusses’, ‘financial products and service’. Unfortunately, that is a tortured road and only really necessary if you land in a position where you must defend yourself.

    Prevention is better than cure!

    What it really comes down to is whether, in the online environment (websites and email lists included) you promote a financial product or financial service.

    In Australia, if you are providing financial product advice or arranging for your followers to deal in a financial product, you must hold an Australian Financial Services Licence (AFSL). There is a huge compliance regime around it and its overly complicated. It can also take quite some time to get a licence; its not at all like getting a diver’s licence.  

    THE LAW

    Financial product advice is a recommendation or statement of opinion which is intended to influence, or which could reasonably be regarded as being intended to influence, a person making a decision in relation to financial products.

    ASIC Info Sheet 269, March 2022

    Earning an income from discussing financial stuff online “indicates an intention to influence the audience”, according to ASIC.  

    So, a Finfluencer is someone making money from discussing financial stuff online. If what you say is purely factual – “property investment and on market trading are the most common forms of investment in Australia”, then you are ok.

    If you say something like “you get way better returns on crypto than shares” alongside promotion of a crypto trading platform, then you are likely to get into trouble. Especially if you are earning revenue from the promotion of the crypto trading platform.

    According to ASIC, dealing in a financial product can be as simple as posting a unique affiliate link for a trading platform.

    Understanding What Finfluencers Can and Can’t Do Online

    Penalties from ASIC for providing financial advice online without an AFS licence can reach 5 years in jail for an individual and more than $1 million in fines.

    If you’re worried about what you are publishing, including historical posts, and whether that might put you in the line to be part of the ASIC Finfluencer crackdown, make an appointment  with us to help identify your real risks and whether continuing to operate your business is realistic, or not.

    There may be strategies you can implement (and rules to follow) so that you sit outside those needing an AFSL, including becoming a representative for an AFSL holder.

    What’s the Risk of Prosecution by ASIC for a Finfluencer?

    Part of the recent awareness campaign is to ensure the ASIC will hear about problems now that more people are aware of their concerns. You might not get a complaint from one of your followers, but in our experience, regulatory complaints are often generated by your competitors rather that your customers.

    “ASIC takes enforcement action where it is in the public interest”

    Right now, ASIC is likely to be focused on finding someone to prosecute and make an example of to warn Finfluencers of the consequences of non-compliance. It also helps them encourage industry compliance.

    ASIC takes enforcement action where it is in public interest. If you’re not already known by ASIC, don’t have much of a following or haven’t been complained about, ASIC probably doesn’t know you exist.

    Unless:

    • you have a huge following, or
    • enough people complain about losing money as a result of interacting with you, or
    • you are already on ASIC’s radar (due to past behaviour), or
    • they’ve come up with an algorithm to find you on social media without human eyes having to complete all the searches,

    you’re unlikely to get any attention from the regulator in the immediate future. ASIC only has so much funding.

    And then there is ACCC and consumer protection laws…

    Digital Marketing is one of ACCC’s 2022/23 Priorities 

    The digital economy is now front and centre with ACCC adopting a focus on:

    • Consumer and fair-trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy.
    • Competition and consumer issues relating to digital platforms.
    • Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services.

    So Finfluencers are potentially in the firing line with both ACCC and ASIC. The regulators will coordinate with each other on many matters including combined financial and non-financial issues.

     

    What’s the Problem with Marketing and Advertising Online?

    ACCC is concerned with techniques that are manipulative and generate sales as a result of FOMO (fear of missing out). Techniques of concern include:

    • false scarcity reminders such as low-stock warnings
    • false sales countdown timers
    • targeted advertising using a consumers’ own data to exploit their individual characteristics
    • pre-selected add-ons (no, I don’t want McAfee with that!), and
    • design interfaces that discourage unsubscribing.

    A scarcity reminder is false when you have the stock or capacity to provide services but have chosen to limit the number for sale at a given time for the main reason of creating urgency in purchasers.

    It’s that level of pressure experienced by the purchaser that is considered manipulative, and the higher the priced item, the greater the problem in ACCC’s eyes. Intent can be implied rather than stated. So even if you say it wasn’t your intent to be misleading, where the end result is higher sales due to a perception of the buyer that if they don’t buy then, intent may be implied.

    The pre-COVID seminar industry provided an excellent example of the type of sales pressure that is a concern for ACCC – that emotional pressure to rush to the back of the room to complete a purchase before you miss out. Where marketing includes emotional triggers (doesn’t it all, at least marketing that works?) and those triggers are considered unfairly manipulative, you may have cause for concern.

    ACCC has previously warned that high pressure sales tactics may be considered unconscionable conduct [https://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-conduct] and if sales commissions are structured around that type of selling, it will only emphasise the risk that the sales tactic will be unconscionable.   

    Other practices of concern include manipulation of online reviews and search results – using false testimonials is a specific breach of consumer law – and comparison websites and social media influencers who don’t disclose commercial relationships and paid promotions. As long as it is clear that promotions are paid promotions, an accusation of manipulation could be avoided.

    The failure to disclose payment for comment is a red flag because it is thought that the comments are more likely to be misleading to potential customers than they would be if there was a wholly independent review without benefit to the writer or publisher. It is also suggested that if you do have a ‘adv.’ or ‘sponsored’ tag or notice somewhere obvious on the review that customers can better determine how much weight they will give to the writer’s opinion. 

    What’s the Risk of Prosecution by ACCC?

    ACCC selects companies working in their current priority areas when deciding whether to pursue a matter. Again, ACCC doesn’t have the funding to follow up or prosecute every compliance complaint. They focus on those complaints that they believe will give them a win in court, or a negotiated resolution that can be published, and choose claims where the defendant can serve as an example for the rest of the industry.

    Despite having an online portal for collection of complaints, where a complaint is made about a small business, particularly one that does not operate outside state boundaries, it isn’t likely to get picked up by ACCC and the complainant may need to start their own legal action to get a remedy.

    ACCC has a range of enforcement remedies to address contraventions including litigation and court enforceable undertakings, which are designed to be proportionate to the conduct and the resulting or potential harm.

    Their stated first priority is to “achieve the best possible outcome for the community and to manage risk proportionately”.

    The main actions they use are:

    • encouraging compliance through educating and informing consumers and traders
    • enforcement using administrative processes or more formal processes such as court action
    • undertaking market studies
    • coordination with other government agencies.

    Regulators are slowly catching up to the way the digital economy works and taking an interest in consumer protection in that space.

    Now might be a could time to update your marketing strategies.

      How can Onyx Legal help you?

      If you have any concerns about a proposed campaign, or existing campaigns, and would like a review, make an appointment to discuss that with one of our team.

      Selling Your Business? 6 Common Mistakes to Avoid

      Selling Your Business? 6 Common Mistakes to Avoid

      Selling Your Business? 6 Common Mistakes to Avoid

      Before you make the decision to sell your business, you need to know how to avoid making the most common mistakes. 

      Before you make the decision to sell your business, you need to know how to avoid making the most common mistakes. A little thoughtful preparation can save you time and money and help you avoid making decisions you might regret later.

      For some people, going through the process of really thinking about what they are selling has led them to reconsider and make other adjustments in their business instead.

      1. Not knowing what you want to sell

      It sounds like common sense, doesn’t it? “I know what I want, I want to sell my business!”

      But what does that look like?

      We have worked with a few clients lately at different ends of the spectrum of preparation for sale. Some people know exactly what they are selling, have identified the assets to be sold and those not transferring with the sale, and know how much they want for it. They know whether the premises are part of it and what it looks like to transfer the premises.

      Surprisingly, other people come to us to prepare contracts for sale, and we spend weeks trying to get clarity on what is included, what is not included, and what is actually necessary to ensure that the sale is made as a going concern and will therefore not attract GST.

      And yes, if you didn’t get around to documenting a business sale when it occurred and would like it documented after the fact, that is still possible. Although it has its own peculiarities. 

      The Australian Taxation Office (ATO) guidelines for sale of a going concern are straightforward:

      • everything necessary to continue to operate the business, including staff, equipment and premises
      • continue to operate the business up until the sale date
      • buyer must be registered for GST
      • there is a written agreement showing that ‘going concern’ has been agreed between the parties, dated before the sale is finalised
      • both parties are to be a single purchasing entity and a single selling entity to claim the GST exemption – there can be multiple enterprises but these have to operate as separate sales (ie. land and business)

      To be a sale of a going concern you need to transfer everything that is necessary to the ongoing operations of the business. This still occurs in context. You might use certain software in your business (like Xero or MYOB) and consider that essential, but the buyer might have different software and no intent of changing. What is essential for the business is the customer and sales data, not necessarily the software.

      Prudent buyers will complete searches and due diligence before offering to purchase your business. Ideally, you will have anticipated and prepared all the information the buyer might want to see before promoting your business for sale; this makes the due diligence process much smoother and quicker.

      Apart from knowing what it is you want to sell and what you want for it, it is also important to consider whether it is important to you, or the continuation of the business, to sell the company or the assets.

      Obviously, if you are operating through a trust, it is an asset sale, but if you are operating through a company, there may be an option to sell the shares in that company. Lots of advisers will caution against purchasing shares because more due diligence is involved, and you may not be able to discover any skeletons in the company closet until after the transfer is complete. Yes, we can write in indemnities etc., but it is considered a higher risk position that purchasing assets. 

      However, there are regulated businesses where it may be much easier to transfer the company than attempt to transfer assets. For example, selling a business with government contracts, selling a business which has licenses or permissions that require an involved process, such as an RTO (Registered Training Organisation) if you are looking for potential buyers who do not already have that compliance set up.

      2. Not getting advice early, whether legal, financial or from a business broker

      Working with a business broker can help you identify what you are selling and the value of what you have to sell, before you go to market. Some business brokers are great, will work closely with you to achieve what you want and really look after your interests. Some aren’t.

      We’ve worked with business brokers in the past who are so focused on getting their commission that they write the sales contract in favour of the buyer, and insist on controlling the contract contrary to any legal advice to the parties. This is where it helps if you understand what you are selling and what you want to achieve. You’re not likely to be persuaded to just take any sale.

      Sellers don’t always consider planning for life after the sale of business (apart from much needed holidays) and may struggle to ensure they have adequately provided for their next venture, or even retirement. You want to be better off financially at the completion of the sale, instead of regretting your decision.

      Achieving the best possible price means that careful planning needs to be in place; a quick sale due to financial pressure or personal reasons is can potentially impact your ability to achieve the best price for your business.

      You can put processes in place to limit your risk and protect your interests. You can put boundaries around what you are prepared to commit as part of the sale in terms of your assistance to the buyer after settlement.

      If you get appropriate advice before you sign anything, you have the opportunity to walk away from a transaction that is only going to cause you grief in the future.

      I would add addressing PPSR’s, as they tend to get overlooked and can cause a big problem with completion. The main issue I have found is that most sellers do not have a comprehensive exit plan that details every step, especially the preparation stages that will make the process more seamless. 

      Another process which is becoming more popular is to engage a registered business valuer, or other expert to complete a pre-sale audit report that that will highlight the true strengths, weaknesses, opportunities and threats confronting the business. 

      Hugo Martin, Business Broker and Registered Business Valuer 

      Getting appropriate tax advice

      It is essential to consult with a tax professional to make sure you understand that tax implications of your sale and the amount of tax liability you will have to pay. GST, CGT and income tax may all need consideration depending on what you are selling, when and in what structure.

      We are not tax lawyers, and you will need to consult your tax adviser for advice appropriate to your circumstances.

      Ideally you will have your financial reporting for the past 2-3 years available for inspection by the buyer (after they have signed an NDA) and a business structure that is attractive to a potential purchaser. As part of the business purchase, the buyer will want to review the financial records of the business, because this supports the price you are asking the buyer to pay.

      Another consideration will be the way the selling price is determined and if the future performance of the business will generate a percentage to be paid to you as the seller.

      Stamp duty

      Depending on which state or territory you are located, and where the buyer is, there may be transfer duty or stamp duty on the sale of the business.

      Duty is usually calculated on the arm’s length value of the business sale. So, if you transfer the business to a friend or relative at a discount, you may need to submit an independent valuation with the application for assessment.

      Depending on the value, nature and place of business, an item like goodwill can still attract transfer duty. The sale of goodwill alone does not always attract stamp duty, but that type of sale is also not likely to be a sale of a going concern. Lots of different things need to be taken into consideration.

      Case Study

      An example of where goodwill was found not to be included in a sale was a case involving the sale of two McDonald’s restaurants in NSW. The Chief Commissioner for Taxation assessed stamp duty on the sale price and included an element for goodwill. The restaurant owner argued that the goodwill was not sold and instead remained the property of McDonald’s due to their licence agreement. The Court held that any goodwill the restaurant owner enjoyed would be terminated at the end of the licence agreement. In those circumstances it was determined that no goodwill was transferred, and no duty was payable by the restaurant owner in respect of goodwill.

      3. Not understanding the ownership of the assets in the business sale

      A little careful pre-planning for sale will ensure that the correct assets are in the correct business entity name and will attach to the sale.

      We’ve had interesting situations in the past where clients have, at the last minute and only after we’ve reviewed a contract from the potential buyer (it’s not always the seller who prepares the contract, although that is a good idea) that it was discovered some of the assets sat in a forgotten entity that was about to be deregistered by ASIC. The company was quickly reinstated and added to the sale contract as one of the sellers.

      In that instance it was a trade mark registration, but it could just as easily have been a motor vehicle, manufacturing machinery or office equipment.

      To help you think about your business, the assets of the business are defined in the Real Estate Institute of Queensland (REIQ) Business Sale Contract, under Clause 3.1 to include the following:

      • Goodwill
      • Fixtures
      • Fittings
      • Furniture
      • Chattels
      • Plant and equipment
      • Industrial and intellectual property
      • Work-in-progress
      • Stock in trade
      • Permits
      • Licenses
      • Any other assets listed by the parties

      There are usually warranties in the contract for sale of business that you as a seller give, promising that the assets are ‘unencumbered’ or not subject to the interests of another party, like a financier.

      It will be a necessary part of the sale to provide clear title for the assets, including paying out any lenders who hold the existing loans and securities registered under the Personal Property Securities Register (PPSR). If this does not happen before or at settlement, then if the buyer defaults on the payments, the financier can repossess the asset.

      4. Not understanding what is going to happen with your employees

      Do you tell them, or don’t you? And when?

      If you are about to list your business with a broker, then it’s a good idea to have a discussion with your staff beforehand. You don’t want to embarrass your employees by having them find out from someone else that their job might be at risk.

      Some buyers will be interested in all your staff. Some buyers may be interested in some of your staff and some buyers just want the assets and don’t want any people. The size of your business, and the size of the purchaser, are likely to make a difference.

      If you are listing with a broker, you can let the broker know what your expectations are around your staff – that they buyer will take them, or the majority of them.

      It is the option of the purchaser to make your employees an offer, or not. You can’t force a new owner to take all your employees. You also can’t force your employees to work for a new owner. Some careful negotiation may be needed.

      As a seller, you will be under an obligation to give all the employee details for transferring employees, their entitlements, any accrued leave and the pay rates and any Awards they might be employed under.

      If the purchaser does not take your employees, then you will need to pay out their entitlements, which may include accrued bonuses, annual leave, long service leave, notice or redundancy. If you are thinking ahead and have a year or so before you expect to put your business up for sale, you might consider reviewing what entitlements have been accrued and suggesting some people use their leave.

      Once offers and agreements with the employees have been made by the buyer, there is likely to be an adjustment to the purchase price for some entitlements, such as personal leave, annual leave, long service leave and accrued bonuses.  

      If you need advice on understanding what is going to happen and what your responsibilities will be, and even answering your employee’s questions, then let us know and we are happy to help.

      5. Not thinking about what you will do with the premises if not part of the sale

      Not every business requires an office and with the changes in working habits brought about by COVID, a buyer may not be interested in taking over any premises you have for your business. So where does that leave you?

      If the buyer does want your premises:

      • If you lease the premises, then you will need the landlord’s consent to a novation or assignment of the lease. A novation gets you out of any liability associated with the lease and an assignment means you are still on the hook (financially liable) until the lease ends, which may include option periods.
      • If you own the premises, you may be able to negotiate a sale in conjunction with the sale of business.
      • If you own the premises, you may be able to negotiate a lease with the new business owner, and yes, the lease still needs to be documented separately from the sale of business.

      Most landlords are prepared to agree to an assignment but not a novation. Why not have two people responsible for covering the lease when you have no obligation to let the first tenant out?

      If the buyer doesn’t want your premises:

      • Think about how much time you have left on the lease.
      • Think about alternate uses for the premises.
      • Consider whether you still have a use for the premises, or if you need to break the lease.
      • Instead of breaking the lease, you may be able to find someone else to take over the lease – again by novation or assignment, or you may be able to find someone to sublet some of the space from you to reduce your costs.

      It is not uncommon for a business to ‘hold over’ after the end of a lease on a month-by-month tenancy pending a sale of business to limit the risk of having to maintain a lease without a business to fund it. We’re happy to talk through your options with you.

      6. Forgetting to transfer licenses, permists and social media accounts

      Some businesses need specific licences and permits to trade.

      Think about:

      • food business licences
      • liquor licences
      • building trade licences
      • transport licences
      • commercial parking permits
      • and so on

      The buyer’s expectation will be that the business sale contract includes at least reference to necessary llicences and permits, and possibly your cooperation in transfer, if that is available. Some permits require a new application from the buyer and that takes time. The buyer might ask you to stay in the business as the licence holder pending their application. If so, you will need to think about your risks if their application is unsuccessful. It is possible that the sale will fall over if the purchaser cannot get the necessary permits or licenses.

      Online assets

      Business brokers don’t always consider your online assets when helping you prepare for sale. In our online world where people increasingly search online to find what they are looking for, online assets can have a significant impact on the continued operation of the business.

      Whatever you use to promote your business online is your intellectual property and needs to be part of the sale.

      Your domain name, business website (a domain name and website are different things) and social media accounts will also need to be transferred across to the new owner. Different platforms have different requirements and its important you understand what you have to do when settlement comes around.

      How can Onyx Legal help you?

      If you are thinking of selling, have a chat with us before the deal is done. If you’ve found a buyer and want to move forward, we can prepare your contract for sale and if you’ve somehow sold without any written agreement and would just like to clarify any remaining liability before anyone forgets what the agreement was.

      Australia Consumer Law: How Does it Affect Your Business?

      Australia Consumer Law: How Does it Affect Your Business?

      Australia Consumer Law: How Does it Affect Your Business?

      australian consumer law: how does it affect your business?

      From 1 July 2021 the monetary limit that applies to consumer goods or services under the Australian Consumer Law increased from $40,000 to $100,000. So, what does that mean for you?

      Let’s start by looking at who is a consumer.

      Who is a consumer under the Australian Consumer Law (ACL)?

      Since 1 July 2021, a consumer can be any person or entity that purchases goods or services from you, where those goods or services –

      • are purchased for $100,000 or less;
      • or are ordinarily acquired for personal, domestic or household use,
      • or are a vehicle or trailer used for transporting goods on public roads (more than personal use).

      For anything purchased up to 30 June 2021, the value was $40,000. This is the first uplift in that value since 1986 and aims to protect a broader group of consumers. Whether your customer is a person, or a company or any other type of entity is irrelevant is the goods or services purchased were under $100,000. So, if you deal B2B, your business still has to meet consumer law obligations.

      Similar rules apply to the provision of financial services under the Australian Securities Investment Commission (ASIC) legislation, and the monetary limit of financial services has also been lifted.

      What protections apply to consumers?

      As soon as a purchaser is classified a consumer, the ACL consumer guarantees apply. Consumer guarantees are automatic and apply in addition to any warranties you might offer.

      A warranty and a guarantee are similar things. They are both promises that you make about your business goods or services. It might be helpful to consider them from an ‘active’ and ‘passive’ perspective. Consumer guarantees are automatic. A business doesn’t have to actively do anything, they just exist. A warranty is a voluntary promise, something you offer in addition to consumer guarantees. So, a ’30 day money back guarantee’ is actually an express warranty. Go figure.

      There are nine consumer guarantees for goods, and three for services.

       

      ProductsServices
      • Will receive clear title
      • Will have undisturbed possession
      • No undisclosed security over the goods
      • Acceptable quality
      • Fit for purpose
      • Match description
      • Match sample or demo
      • Repairs and spare parts are available
      • Express warranties will be met
      • Acceptable care and skill
      • Fit for purpose
      • Delivered within a reasonable time

      Clear title and undisturbed possession just mean that when you purchase it, the buyer knows that there is not another owner or some other costs in the background. An example might be a business or relationship break up where one person sells something second hand and it actually belonged to the other partner. The person who really owned it can argue that the person who sold it did not have the right to do so and claim it back. Equally, a customer might want to pick something up from customs only to discover there are fees owed before they can take away the goods.

      Undisclosed security is where money is owed. For example, if you want to buy a piece of machinery and there is finance owed on it and a PPSR registration against it, so the lender has priority over your claim and can sell the machinery to recover the debt, even though you bought it in good faith.

      Many of the consumer guarantees are straight forward, but acceptable quality will depend on the value and quality of the goods. If you pay $100 for something that is advertised as an outdoor marquee, you might expect it to last at least a day, but you wouldn’t expect it to last for years and you wouldn’t expect it to last through high winds. On the other hand, you would expect a $1200 marquee to be more robust.    

      For something to be fit for purpose, the consumer has to let you know what purpose is important to them. So, if a customer says it is important to them that the office chair they are buying can recline, but not fall over with someone who weighs 110kg in the seat, then the office chair needs to be able to meet that specification to be fit for purpose.

      The availability of spare parts is important because it can affect what people are prepared to pay for an item. A consumer might be prepared to buy something that will last for a limited period without repair if it is cheap (consider home printers), but not pay for a large office copier without the ability to rely on regular service and repairs.     

      What happens if you do not meet a Consumer Guarantee?

      If you don’t meet a consumer guarantee, the purchaser has rights to remedies which can include repair, replacement, refund and may also include damages and consequential losses.

      Depending on how the failure to meet consumer guarantees came about, you may also be liable for penalties for breaching a prohibition on making false or misleading representations, another provision of the Australian Consumer Law.

      The type of remedy will depend on the problem with the product or service. If it is capable of being fixed, it is probably a minor problem and will need to be repaired or replaced. Depending on the value of the product, you also have the option of providing a refund, or the customer may have the option of requesting a refund.  

      Consider large retail chains which will refund or replace most items without question simply because it is more efficient than arguing with customers or sending items off for assessment or repair. It also ensures a loyal customer base. Not every business has the same scale to do that.

      If it is a major problem and cannot be fixed, then it is the customers choice about replacement or refund and the supplier must provide that replacement or refund and may also have to pay damages for any foreseeable loss resulting from the failure. In considering whether or not something is a major failure, you need to consider whether a reasonable consumer fully acquainted with the nature and extent of the failure would still have purchased the item for the amount that it was sold.

      Consider how you might feel in the same position. 

      For example

      ACCC v Jayco Corporation Pty Ltd [2020]

      As most people would know, Jayco is a brand of caravans and recreational vehicles (RVs). Jayco is a manufacturer that sells through dealerships.

      The ACCC took action against Jayco to determine whether 4 RVs were of acceptable quality (a consumer guarantee), fit for purpose (a consumer guarantee) and whether the manufacturer was compliant with its express warranties. There was also a claim of misleading and deceptive conduct.

      The first RV was a camper trailer. The issues it had were mainly a collection of relatively small poor finishes, but there was also a problem with the alignment of the chassis and a strut that failed in lifting the tent, causing further damage. The Court said –

      At that price point ($27,000+), a reasonable consumer was entitled to expect a commensurate level of quality, including fit and finish. That expectation is consistent with the brochure that Jayco Corp published, and which Consumer read, which was calculated to convey the impression that a Jayco camper trailer was a durable, quality product. The combination of defects with the RV had the cumulative effect that the RV as a whole was not acceptable in appearance and finish, and its presentation was not consistent with the impression conveyed by the Jayco brochure…. In consequence, Consumer was entitled in April 2014 to reject the RV on the ground that the failure to comply with the guarantee of acceptable quality was a major failure…. As a result of the failure of the strut for the tent section on the second occasion, the RV was substantially unfit for purpose.”

      The second RV was pop-top caravan that leaked, which was something the Consumer specifically asked about before purchase. Over a 15-month period it was in for repair on approximately 10 occasions. The Court considered the inability to provide shelter from the weather (the leaking soaked mattresses) “went to the heart of one of its purposes” and that “a reasonable consumer, fully acquainted with the defects and what was involved in attempting to repair them, would not have acquired the RV, and therefore there was a major failure” which entitled the Consumer to a replacement or refund.

      There was also discussion around the fact that Jayco promoted their products as suitable for a relaxing family holiday, and a leaking roof and chassis would make it unfit for that purpose.

      In all cases, Jayco had not provided a replacement or refund of the purchase price of the RVs and in one case was found to have led the consumer to believe that the only remedy available was repair. The court found those representations to be misleading or deceptive (s.18 of the ACL) and false and misleading (s.29 of the ACL). As a result, Jayco was required to pay a penalty of $75,000. It then had to deal with the owners of the RVs.

      How to manage your risk of a consumer plan

      We can help you to review your terms and conditions of supply of goods or services, whether you make them available online through your website or otherwise.

      There are provisions that can be written into terms and conditions to provide you with a level of certainty around what you must do to meet consumer guarantees. For example, with consulting services it might be easiest for you to simply provide the services again rather than offering a refund. This will depend on how amicable the relationship remains with your customer, but may be more attractive that having to refund the consulting fee.

      The ACL does require specific wording in terms and conditions depending on the goods, services or warranties you offer.

      Once we have your terms worked out, then we can look at your processes with you and how information is shared within your business so that you and your employees understand how best to respond to and deal with requests for replacement or refund.

      How can Onyx Legal help you?

      Your terms and conditions of supply are important documents for managing your risk. Understanding your risks and having a clear understanding of how to respond to and deal with consumer complaints also makes a big difference. Book at time to discuss your situation with one of our team.