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What To Think About Before Signing A Standard Commercial Lease Or Retail Lease

What To Think About Before Signing A Standard Commercial Lease Or Retail Lease

by | Aug 31, 2022 | Law for Online Business, Leases, Legal

What To Think About Before Signing A Standard Commercial Lease Or Retail Lease

We work with both landlords and tenants in Retail Shop Leases (RSL) and Commercial Tenancy agreements. This article is focused more on tenants.

 

What are some of the most important considerations that people should keep in mind before going into a lease?

Firstly, know the transaction that you’re entering into. 

It’s really important to know whether your documentation matches your intention. If this is a commercial lease, then typically you will be using a standard REI template contract, but if you’re entering into a retail shop lease, the format and content of the lease will be quite different. 

The reason this is important is that if it is a retail shop lease, then the tenant is afforded greater protection by law.

It is fundamentally important to get it right from the start. Your lease will last for years and has the potential to affect your business. 

Don’t be tempted by somebody saying to you, “Look, it’s quicker. This will save us money. We’ll just use a standard REI form.” It’s false economy because you could miss out on those really important protections, which can make the world of difference, particularly three, four, five years down the track.

“As you know, I work with retail and commercial shop leases from the outset in drafting and negotiating, but also when the parties are in dispute, as a mediator. I sit and I listen to both sides of the fence, arguing parts of the lease that was prepared five or seven years ago. I see things like someone trying to argue that QCAT, which is what’s meant to be a low cost, efficient and fast access to justice, with a specialization in retail shop leases. What I see is landlords perhaps trying to frustrate that process by saying, “Well, there’s no jurisdiction here because these documents are for a commercial lease, not a retail shop lease.” That in itself can cause stress, delay, expense for everyone. 

To circle back, know the transaction you’re entering into!”

Once You Know What Kind Of Lease You’re Entering Into, What Comes Next?

Tenants are often really excited by this stage – you’ve been doing some negotiations, you’ve found the premises. It seems ideal. 

Now is the time to slow down. Please slow down. 

You’re not on anyone else’s timeframe, but your own and your business. As a business owner, that is incredibly important to understand, and to stick to that, especially when you’re getting pressured.

You can be told there’s no flexibility on the other side, this must be done by a certain date. Slow down. 

Slow the process down and take advantage of the fact that you’re not in a rush to do this, or you shouldn’t be in a rush to do it, but this is your opportunity to design the best lease for your business. You don’t really get that opportunity at any other stage. Slowing down, making sure the documents are right is really important.

There are three stages to this leasing process. 

Negotiation, lease offer, and lease. 

In each of those stages there is some crossover. But with your lease offer, a lot of people, particularly landlords, come to their solicitor once the lease offer is signed. Tenants tend to think they should do the same. In fact that is not the best case for either party. You can come at any time to your lawyer to ask about the lease offer.

Part of that slowing down for a tenant is really important, because if you bring that lease offer to a lawyer to look at for you (and even your accountant as well for the accounting and financial taxation advice, because lawyers aren’t accountants) you have that opportunity to design a really perfect fit for your business before the lease offer is signed.

When you think about the length of time that you’re entering into this lease for, the more thought and time you can take at the beginning to really consider where your business is going to be in a few years’ time, also what’s in the market, the first property that you find may not be in fact the best one for you. 

If you properly consider these things before you sign a lease offer, you’re at least not committing yourself to potentially lose a deposit amount or binding yourself to some terms that in three years’ time are going to look not nearly as good as you thought they were when you signed the lease.

Due Diligence

Before entering into a lease, do your due diligence. What does due diligence mean? 

It’s things like comparing like premises in other suburbs or other centers. Finding out what incentives landlords are offering. Finding out whether there have been any security issues or flooding at that premises.

Start from the start, do it all right. Get as much knowledge and information you can in the process. In fact, we tend to observe that your negotiation skills mature as you do this. Then you feel more confident to push back when you see an unfavorable term say in a lease offer, or a request for a personal guarantee that you don’t want to provide. 

Lease Offers And Deposits

Nine times out of 10 we see that the landlord is only bound when the final lease is signed by both parties. That doesn’t seem unusual, but there are problems with that. The tenant on the other side of things is bound when the lease offer is signed. So as a tenant you are committed well before the landlord.

The implication of all of that is that you’ve paid a deposit, generally one month’s deposit, but it can be more, and that can be a sizeable amount of money and that’s put at risk. When you think about this logically, if you are bound from the lease offer and the negotiations go astray along the way, the landlord can get out without any financial implication, you can’t because your deposit will most likely go to the landlord’s solicitors.

Provided the lease offer hasn’t been signed, getting that wording right at the start in the lease offer is really simple. We just amend the lease offer, send it back with the wording that both parties are going to bear their own costs, and enabling you to have the deposit returned to you in certain circumstances.

Landlord Incentives

Firstly, if you’re not getting any, why not? 

Definitely be asking the question. 

Landlord incentives are generally a contribution to the fit-out cost or the first few months of rent. Remember, it is a contribution towards either fit out or rent. It’s not an entitlement to a lump sum in your pocket. That’s not how it works. When it comes to fit out it is about paying the actual cost of your fit-out, substantiated with invoices and receipts for payment. If it is to cover a rent-free period, then you will get a period of rent abatement, where your invoiced and the rent amount is already credited so that you don’t have to pay anything, or only have to pay half rent for a period of time.

There are also a couple of things to look out for. Firstly, in almost every draft lease there are what we call incentive repayment triggers. Those triggers effectively mean that if a certain series of events occur, such as falling way behind in the rent, assignment of lease, selling your business, changing your business name and so on, you are at risk of repaying these incentives. 

Now consider that if you received an incentive of $80,000, what happens if you decide that you need to get out, are you going to have $80,000 to pay back? The answer is generally no.

In a lease, it might be called a clawback. It might be called a repayment trigger, or it won’t even have a name, so it’s hard to find. 

For one of our clients we found reference to repayment of the incentive in six to eight different spots in the draft lease, in what appeared to be randomly inserted clauses where you wouldn’t normally expect to see those clauses. The same net effect without giving it a label. A trained eye can see it, which is why you as us to review your lease.

Make sure you understand what the triggers are to repayment, and whether they suit you? Generally speaking, our advice to our clients is don’t agree to any repayments. Push back on them.

The other important part is you need to know the taxation implications of your incentives. A really important question around that is, should you own the fit-out or not? 

We have a particular client who always wants to own the fit-out and is aware of any taxation implications and asks the right questions. Others don’t mind. Either way, you do need to speak to an accountant to understand the tax and accounting implications for your business.

Again, we’re designing something for you at the start of a lease. Work out with your contractor when it’s best to receive payment, marry that up so your cash flow is freed up. Often the landlord will agree to pay the incentive in two lots, for example, 50% upon commencement of the fit-out, and 50% on commencement of trade. That’s a nice clause and can help you manage cashflow.

If negotiated before the lease offer is signed, it is possible to manage the cashflow. If not, you may have to outlay the full amount of the incentive before you get it back from the landlord. Be smart, talk to someone about how to break it down and make those contributions work for you.

What’s Going To Happen At The End Of The Lease?

It’s really important to understand that when a lease expires, firstly, unless you’ve got options to renew, then you don’t have the right to stay on. If you do stay on, you’re in a period called holding over. There is no problem being in a holding over, as long as you understand it’s a month to month tenancy, meaning the landlord only has to give you one month notice to move out. It’s not that easy for a whole business to move premises.

But the most important part about designing and understanding and really being clear at the start what your end is going to be, is what are your obligations to “make good” when you hand back the premises? 

Case Study

The client is negotiating an “as is, where is”. They’re walking in to an existing and operating business and the fit-out is already there and the tenant is entering on that basis. At the end of the lease in this draft document, it has a “bare shell” requirement. A bare shell means that you have to de-fit. Which is stripping the premises back to bare walls and floors. The previous tenant is handing over as is, where is and they are not paying a de-fit.

The landlord is getting a speedy transition from one tenant to a new tenant and rent coming in, but at the end of the lease, the landlord will still require a bare shell because it creates greater flexibility for the landlord in finding a tenant.  

That’s a big “no” for us in this scenario. We’ve said to the client, “you take it as is, where is, you leave it as is, where is, subject to making good any damage along the way that you might have caused. You clearly have to repair any damages, that’s your obligation.”

It is also important to remember that a fit-out can be incredibly expensive, particularly in a climate where there is problem getting materials and high demand for trades. Some first time tenants don’t really conceive of that. One of our clients told us they were estimating costs of $5,000 for fit out. They are not even in the ballpark. Their quote actually came back at $70,000 plus.

A de-fit can be just as expensive. We have a client with a series of pharmacies, and their de-fit is $250,000 for one pharmacy. The cost of de-fit can be the same or more than the fit-out. 

Remember, design it how you need things to happen at the end of the lease. If you are going to need to budget for an $80,000 de-fit at the end, make sure that your accountant has sat down with you and worked out how that’s going to happen, because if it is due to happens in three year, you’re going to have earned enough money to have that money set aside.

It does not matter if the landlord contributed to, or covered the cost of the fit out and owns the fit out if you are required to de-fit back to bare shell at the end of the lease. You cannot just assume that because the landlord owns the fit out they will be prepared to keep it. We have seen leases where the fit-out is stated as owned by the landlord, but it’s almost like a discretionary ownership. So they can own it if they want to at the end for a dollar, but they don’t need to. It depends on what is written in the lease.

Tip

Please read every word of these documents. As any other human being will do, you will probably be tired by page three of 47. So that’s why you need to get someone to read it for you as well. It doesn’t take away or mitigate your obligation to read the whole document, but that trained eye is really important.

As humans, when we look at the same document over and over, you tend to want to say, “Oh, well, okay, that’s about this.” You don’t look at the detail as much as you should. Well, you actually have to with leases.

Take Aways

  • Get legal advice 
  • Get accounting and taxation advice 
  • Plan for success at the start
  • Do all of your due diligence, and if you’re not sure what that means, ask 
  • Push back on terms that are not favorable to you. You don’t have to agree to them
  • Slow down
  • Incentives can have red flags with them
  • Negotiate it with vigor
  • Invest in the process from the start

Fundamentally, it’s about knowing that your lease document is the most important document for the transaction. It’s your go-to guide for whenever there’s any sort of issue that arises. You need to design it, you need to know what’s in it. You need to know your rights and responsibilities. Respect that document. Treat it with respect, and invest in the process from the start.

From the dispute perspective, hindsight is a good thing. You don’t want to end up in a dispute thinking that if you had your time again, that clause probably wouldn’t be there. Take it out now.

How can Onyx Legal help you?

If you are looking to lease premises, or you are having problems with the premises you are already in and need help, make an appointment to have a chat with Andrea.

Make an Appointment

Employers’ Obligation to Protect Employee Mental Health 

Employers’ Obligation to Protect Employee Mental Health 

by | Jul 29, 2022 | Employment, Law for Online Business, Legal

Employers’ Obligation to Protect Employee Mental Health 

What Obligations Do Employers Have For Employee Mental Health?

 

We’ve all taken a ‘doona day’ off work because we just can’t face it on that day. Or we know someone who has. It doesn’t matter whether the stress is arising from work or not, some days, you just want the world to stop, so you can get off.

But what about your obligations as a small business employer?

Employers have a duty to provide a safe system of work, which includes a duty to take reasonable care to avoid psychiatric injury to employees.

In the 2022 decision of Kozarov v Victoria, the High Court has stated that “the circumstances of a particular type of employment may be such that the work to be performed by the employee is inherently and obviously dangerous to the psychiatric health of the employee (just as other kinds of work are inherently and obviously dangerous to the physical health of the employee). In any such case, the employer is duty-bound to be proactive in the provision of measures to enable the work to be performed safely by the employee.”

So, it is clear that if you have a business where the work is known to create a risk of PTSD (such as
emergency services), then you have an obligation to take steps to protect your workers. In the Kozarov case, the Court found that as a result of the type of work done (by a solicitor working constantly with young victims of sexual assault), the duty of care arose at the time the employee started work, and that no later event was required to raise a duty of care.

But what if you run a business which has no obvious inherent risk, like retail? There may not be an
immediately obvious duty of care, beyond the general duty to provide a safe work environment.

There is an earlier 2005 case (Koehler v Cerebos) in which the High Court states that an employer “is entitled to assume, in the absence of evident signs warning of the possibility of psychiatric injury, that the employee considers that he or she is able to do the job.”

What Is An Evident Sign? 

As a small business employer your employment contracts may include a request that employees disclose any pre-existing condition or injury which might affect their ability to fulfil their role. Increasingly, and with less stigma being attached to mental health conditions, employees are disclosing existing conditions such as anxiety and depression in those declarations.

If you haven’t closely reviewed your employee acceptances of employment, perhaps now is a good time to do so.

There are also instances where employers engage people from employment agencies known to support individuals who have been out of the workforce for an extended period, or who experience a form of disability which impacts their ability to gain work. Some of those services are proud to state that they support people with mental health conditions. For example, EPIC shares that “Among EPIC’s cohort of job seekers, 38% have a diagnosed mental health condition.”

If you are engaging people you know have a mental health condition, or whom you should reasonably suspect may have a mental health condition, then a finding that there were “evident signs” of risk of psychiatric injury may well be made out. In those instances, as a small business employer, you should have in place a policy or process to ensure that someone in the workplace has the ability to identify and assist people with a mental health condition in order to provide a safe work environment.

As someone who has a lived experience of a suicidal crisis, MHFA Instructor, Donna Thistlethwaite, is passionate about creating safer workplaces.

“Often people spend more time with colleagues than they do with family and friends which may result in others miss the signs of poor mental health. 

 

Having the support of a MHFA trained colleague can facilitate someone accessing treatment and can speed up their recovery, allowing them to return to strong performance and reducing the impacts of poor mental health which can include absence, conflict and poor performance. The skills a MHFAider learns improves their communication skills in other areas of business.

 

Mental Health First Aid helps to break down stigma and educates participants to recognise the signs that they, or someone else, is experiencing a mental health problem. Early intervention results in faster recovery which is great for both the individual and the business.”

Donna Thistlethwaite Mentally Wealthy

You Have A First Aid officer. Why Don’t You Have A Mental Health First Aid Officer?

You might be in a position where you suspect there are people in the workplace with mental health issues, but don’t have the first clue about how to identify who they are and, in another instance, you might know you have people with mental health problems, but not how to get the best out of them.

So Where Do You Start?

Take responsibility for the mental health of your workforce at work. If you sometimes wonder why it’s your problem and why employees can’t just ‘leave those issues at home’ and get on with their work, then someone with mental health first aid training could be a real asset in your workplace.

Once you realise you have the ability to make an impact, you empower yourself and your workforce and gain the potential to decrease the impact of mental health problems in the workplace.

Consider that almost 45% of people of working age are likely to experience mental health problems at some stage in their lifetime (ABS 2007), whether at home or at work, and if they are affected, their productivity will be too.

There are a large variety of support programs available for free to employees and small business employers, including the following:

Mental Health Resources for You and Your Workforce

 

Heads Up – https://www.headsup.org.au/ 
Mental wellbeing support for small businesses and individuals, including resources for employers, employees, managers and small business owners.

New Access – https://www.beyondblue.org.au/get-support/newaccess/about-newaccess 

A free coaching program, designed to provide accessible, quality services for anyone finding it hard to manage life stress using Low-intensity Cognitive Behavioural Therapy practices aimed to help people break the cycle of negative or unhelpful thoughts. 

Ahead for Business – https://aheadforbusiness.org.au/ 

Personalised resources and tools tailored to the specific needs of you as a small business owner.

[NSW] Mental Health at Work – https://www.nsw.gov.au/mental-health-at-work

– Free training and coaching for your workplaces, and other resources.

[QLD] Your Mental Wellbeing – https://mentalwellbeing.initiatives.qld.gov.au/ 

– Improving mental wellbeing resources for individuals.

[TAS] Mental Health and Wellness –
https://www.business.tas.gov.au/manage_a_business/mental_health_and_wellness. 

[VIC] Wellbeing and Mental Health Support for Victorian Small Business –
https://business.vic.gov.au/grants-and-programs/wellbeing-and-mental-health-support-for-victorian-small-businesses 

Mental health support for the challenges of running a small business.

[WA] Managing Stress and Anxiety – https://www.smallbusiness.wa.gov.au/people/managing-stress-anxiety. 

Some businesses and professional industry organisations also offer Employee Assistance Programs (EAP), which have been around for a long time and are relatively easy to implement. Unfortunately, some issues with EAPs have been the small amount of use due to lack of knowledge of their existence, the cost to the employer, and employees who may be concerned that their problems will be reported to the employer if they use the service (even though that usually does not occur).

Just as you train First Aid officers in the workplace, you can now also have trained Mental Health First Aid officers. The training is usually offered in mixed mode or face to face and provides valuable insight into recognising mental health conditions and how to support people with those conditions in the workplace.

Case Study

We were recently approached by a client who was concerned about the behaviour of a casual employee who failed to turn up for their shift after a discussion with their supervisor where the supervisor asked them to ‘go home and think about what you have done’.

Over the following weekend some text messages were exchanged between the supervisor and the employee attempting to clarify whether or not the employee was required for work on the Monday. One of the supervisor’s messages included words along the lines of ‘as long as there is no drama’.

These exchanges occurred in a context where the employer had engaged the employee from a disability support employment agency and knew that the employee suffered a mental health condition. In fact, the employee had stated “you told the agency you had experience working with people like me”. In the context of the employee’s condition (anxiety and depression), the condescending language expressed by the supervisor was more than unhelpful – it probably increased the employee’s anxiety and precipitated the employee’s failure to show for work on the Monday.

The employer consulted us about dismissing the employee for abandonment of employment.

Leaving aside that in a casual employment relationship an employee is entitled to refuse a shift without penalty (although here there was no clear communication to that effect), it is important that employers start considering the training of supervisors in the workplace to recognise and more appropriately respond to mental health conditions than was evidenced in the case study above.

Any employer that has more than 15 employees (so not a small business) should consider Mental Health First Aid training and having a Mental Health First Aid Officer (similar to a First Aid officer) in their workforce to better manage situations like that described here.

Clear, specific communication without the frustrated condescension may have completely changed the results of our client’s interaction with their employee.

Providing A Safe Work Environment

As a small business owner, you don’t need another job to do that detracts from your revenue generating activities. However, you still need to provide a safe workplace.

Safety at work is making sure that workers and visitors are not exposed to avoidable risks and hazards. This is usually done by assessing the risks in your workplace and putting in place safeguards to reduce or avoid those risks. People in workplace health and safety can help you with this, otherwise there are a large variety of resources online to help identify and manage usual risks in, say, an office. You then have a policy or procedure or both in place to help employees manage that risk.

Not every single risk needs to be identified and managed. Every person is expected to have a reasonable measure of common sense; like, don’t stand on a chair with wheels to reach something on a high shelf!

Assessing risks and managing them has to be reasonable in the context of the workplace and the people working there. If you know you have people in your workplace with mental health conditions, then having something in place to support them is reasonable.

“Many workplaces are recognising the importance of having Mental Health First Aid, the training can provide participants with the skills to recognise signs of mental health, assist during a mental health crisis, offer initial help, and connect individuals to the appropriate professional, peer, or social services. It is important to recognise that a MHFA is not to provide counselling, their role is to assist and support, but with ongoing professional development training, a Mental Health First Aid Officer can play a vital role in the workplace by implementing wellbeing tools to create a mentally healthy working environment.”

Jo Stevens from The Zen Zone is an advocate for Mental Health and provides Professional Development Training for Mental Health First Aid Officers.

Mental Health First Aid training

Mental Health First Aid Australia offers a variety of training and courses to train mental health first aid officers for your workplace. A first aid officer is not a medical officer and doesn’t provide diagnosis or treatment. It’s about learning the skills necessary to recognise symptoms of mental health conditions and support someone with a mental health condition to identify that support is available and where to find it.

Mental Health First Aid training with The Thrive Movement

You will learn. How to assist an adult who may be experiencing a mental health problem or mental health crisis until appropriate professional help is received or the crisis resolves, using a practical, evidence-based action plan. Including Depression and Anxiety, Psychosis, Substance Use Problems, Suicidal Thoughts and Behaviours, Deliberate Self Harm, Severe affects of Drug and Alcohol Abuse.

This course is based on guidelines developed through the expert consensus of people with lived experience of mental health problems and professionals.

Why Attend. Evaluations consistently show that MHFA training is associated with improved knowledge of mental illnesses, their treatments and appropriate first aid strategies, and confidence in providing first aid to individuals with mental illness. It is also associated with decreased stigma and an increase in help provided. An added benefit you will know how to look after your mental health better.

What’s the Format?
The 12-hour course can be delivered in 1 of 3 ways:

  • Face-to-face: a 2-day course led by an accredited MHFA Instructor.
  • Blended face-to-face: a self-paced e-learning component, followed by a 4-hour face-to-face session led by an accredited MHFA Instructor.
  • Online: a self-paced e-learning component, followed by 2 x 2.5-hour video conferencing sessions led by an accredited MHFA Instructor.

Course and Instructor. For further information and enquiries for attending this course or a bespoke training for yourself or your team contact- ‘Derek Rogers of The Thrive Movement Australia’

How can Onyx Legal help you?

If you need help reviewing a risk assessment, an employment agreement, or preparing employee policies or procedures to support better mental health in your workplace, or simply concerned about managing one of your employees, make an appointment to talk with one of our team.

Make an Appointment

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? 

by | May 25, 2022 | Law for Online Business, Leases, Legal

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.

Commercial Lease or RSL Queensland

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, Book an Appointment to get them reviewed.

    Make an Appointment

    Under the Finfluence: What Do Australian Regulators Think?

    Under the Finfluence: What Do Australian Regulators Think?

    by | May 16, 2022 | Law for Online Business, Legal, Legal Issues for Small Business

    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.

      Make an Appointment

      Selling Your Business? 6 Common Mistakes to Avoid

      Selling Your Business? 6 Common Mistakes to Avoid

      by | Apr 4, 2022 | Buying or Selling a Business, Law for Online Business, Legal, Website Terms

      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.

      Make an Appointment

      12 Common Issues with Privacy Policies

      12 Common Issues with Privacy Policies

      by | Apr 1, 2022 | Law for Online Business, Legal, Privacy, Website Terms

      12 Common Issues with Privacy Policies

      1. Thinking a simple privacy policy template will do the job

      For many small business owners, protecting the privacy of personal information just isn’t a priority. There are lots of reasons for that.

      • Not placing any value in a privacy policy or the protection of personal information
      • Not knowing what makes up personal information
      • Not realising when the business is collecting personal information
      • Not understanding what the business is doing with personal data after its collected
      • Thinking that publicly accessible data, like through Facebook or a website, means its ok to collect it
      • Not understanding the difference between privacy and confidentiality, or the importance of privacy
      • Having competing priorities – like the need to make money – that mean privacy always sits on the back burner

      A template might work. It might not. If you never read it or attempt to understand it, it probably won’t help your business meet its legal obligations.

      I have heard of a company that copied and pasted their privacy policy from a crematorium, without having read it. One of their customers pointed out to them that it was a little weird to read about burial when that wasn’t their business.

      Are you prepared to put your credibility at risk?

      If you don’t know what your obligations are, how do you know a simple template will protect your business?

      2. Copying and pasting a policy from somewhere else

      It is easy to check out a friend’s website or a competitor’s website and decide to simply copy and paste what they have done. A friend might even offer it. The problem with getting help from friends like that is that they probably don’t understand their own privacy policy or the legal impact it can have on your business.

      I’ve even come across a business spruiking a service of theirs offering advertising through Facebook that simply linked the privacy policy of a random website they did not have any control over, not having read it, understood it or worried about the promises they were making by using that privacy policy and simply seeing it as a ‘hurdle’ to overcome to get their adds showing in as many feeds as possible.  That is potentially misleading and deceptive conduct offending both privacy law and consumer law.

      If you haven’t read it or don’t understand it or are looking at a website from outside your country, don’t put your business at risk by copying and pasting a privacy policy from someone else’s website.

      3. Thinking a cookie policy covers privacy obligations

      Having a cookie policy or a cookie choice pop up on your website doesn’t meet your obligations to protect the privacy of personal information.

      Cookies may not be classified as personal information but cookies can be functional (you won’t get full use of the website without them), performance focused (like analytics), focused on personalisation (like advertising based on your search history), or marketing focused.

      Internet cookies are little data packets that store enough information to identify you when you return to a site for the purpose of say, pre-filling your username or password, or adjusting the display of a website, or advertising to better reflect your preferences. Cookies have to be matched with other data before they can be used to identify you and the information stored is not generally available for inspection. Cookie data may be collated to create a picture of who you are.

      There was a ‘horror’ story that went around some years ago about a pregnant teenager being discovered by her family because her search history meant her parents got served advertising for pregnancy help.  The cookies didn’t identify her, but enable her parents to put two and two together.

      Personal information is information about an individual which by itself identifies that individual, or with other information can be used to identify an individual. Types of personal information can include:

      • photo
      • name or alias
      • postal, street or electronic address
      • enrolment in a course
      • testimonial
      • biological samples
      • genetic data

      So, a cookie pop up by itself just won’t cut it.

      4. Never reading your own privacy policy

      If you don’t know what your privacy policy says, how can you possibly be implementing the protections necessary to protect the personal information you are collecting?

      How many businesses do you know have a blank page when you click on the privacy policy link in the footer of their website? Clearly they missed checking what was supposed to be written on that page. Your web developer or tech person is not responsible for you meeting your privacy obligations. They probably know marginally more than you do about your privacy obligations, are not lawyers and shouldn’t be uploading just anything for you.

      5. Not understanding your own privacy policy

      Privacy obligations only apply to information about real people – whether in their personal or business capacity – but do not apply to companies or other entities. Depending on where you are in the world, privacy obligation may also be limited to people who are still alive, and not the deceased.

      So, what do you do with the personal information you collect? Unless you use integrated technology, you probably have data about your clients and supplies in a variety of places:

      • your CRM
      • your finance software
      • your email marketing software
      • your email management system
      • a project management tool
      • other software used in your business

      Whilst the problem of keeping information consistent across databases is widely acknowledged, the type of protections each of those systems offer, and how you use them, probably isn’t.

      For many types of businesses, your privacy obligations mean that you can’t send data overseas without the consent of the person providing it. This is particularly so for financial or health data. Personal trainers, life coaches, psycho-therapy providers all collect health data and probably don’t realise that every email they send pushes personal information overseas.  

      I’ve also gone to privacy policy links on websites that don’t cover privacy at all, and in fact display the e-commerce terms of that business instead, which perhaps a throwaway line saying “we respect your privacy and will never sell your personal information.” That is not a privacy policy.

      6. Not considering any procedures to support your policy

      When you run a small business, the people who work with you, employees or contractors, need to understand your priorities around personal information and what can and cannot be done with it.

      Do you allow contractors to keep contact details on their mobile devices outside your systems?

      What controls or oversight do you have over what they are doing with their mobile device each day?

      How many times have you seen parents hand a mobile device to their child to keep them quiet or entertained? Do you know the personal data of others isn’t being accessed?

      For businesses in Australia which are obliged to comply with the Privacy Act 1988, there are now also mandatory data reporting obligations so that if any data is lost or accessed, it needs to be reported. Leaving a device on public transport can be a reportable event if that device cannot be remotely locked and contains any personal information that is supposed to be controlled by your business.

      7. Not knowing where you are collecting data or what you are doing it

      We’ve spoken with many small business owners who simply don’t realise how often or in what way they are collecting data.

      • a form filled through a website
      • an email received
      • a video conference recorded
      • a note made of a telephone conversation
      • a voicemail received
      • video feedback recorded and sent by a client
      • patient notes written and yet to be filed

      All these examples involve the collection of personal information. Does your business have protocols in place for the destruction of information that is no longer required for the purpose of your business? Privacy law generally requires that you only collect what is necessary, and destroy it after it is no longer required. Interestingly, many large organisations, like banks, appear to keep your information indefinitely.

      The GDPR (regarding information about EU residents) now requires that you monitor what you collect, how you collect it, and how long you keep it.

      We can help you put together policies to assist people in your workplace to manage how information is collected, stored, used and destroyed.

      8. Not updated to match data practices

      Laws are changing all the time. If you haven’t looked at your privacy policy for more than two years, it is probably time you did.

      Not only that, but if you’ve changed the software or technology you are using recently, that should also prompt a review of not only your privacy policy, but also the privacy policy of your new software or technology provider.

      You might be offering a new product or service that means you collect additional information from your clients, more than you did previously.

      You might have started working with another business in a joint venture, which means they now have access to some of your personal information, and vice versa.

      Take time to review your practices and procedures for managing personal information and privacy, as well as checking that you are legally compliant with your obligations.

      9. Doesn’t address all the different people affected – customers, partners, developers, general users

      You may or may not treat personal information from different relationships in the same way. By relationships, consider the different people you interact with in your business – your clients and customers, your suppliers, your employees and contractors, volunteers, etc.

      Consider: if you still have a business that uses paper forms, you might have collected similar or only slightly different data on different forms. You might scan that information and store it electronically, but then what happens to the paper copy? Is it securely destroyed? Is it stuck in a filing cabinet somewhere? Is that filing cabinet locked? Is any member of staff able to access that filing cabinet?

      Do you have forms to be filed sitting on someone’s desk without any security or privacy around that information?

      Do you have phone numbers written on a white board that can be seen from outside your office? This happened on a morning TV cross to a bank financial data room.

      You might have a list of supplier details stuck on a wall, or a piece of paper near the computer.

      If you treat the personal information you collect about different groups of people differently, all those scenarios need to be covered.

      10. Hiding the terms

      When your business has privacy obligations, you should share how you meet those obligations with the people whose data you collect. So, if you have employees, you should have an employment policy around how you manage their personal information.

      With regard to your customers, you should have a policy about how you manage their personal information and what you do with it.

      The easiest way to share a privacy policy with customers and suppliers is through your website and the convention is to have a link to that policy in your website footer.

      A link to a blank page is not helpful.

      11. Wrong laws or no laws

      A contract came across my desk the other day between two Queensland, Australia based small businesses. Goodness knows where they got it. The agreement was four years old and mentioned the laws of Ontario, Canada as the governing law. No, no, no, no. Not helpful at all!

      If you copy and past a privacy policy from someone else there is a risk that you have inadvertently referred to laws that don’t even apply to your business. Like COPPA, the Children’s Online Privacy Protection Act which is law in the United States. Reference to that law in another country is likely to be inaccurate and potentially misleading, or create obligations in your business that never actually existed until you voluntarily assumed them.

      If you’ve copied something from overseas, it is also possible that you’ve not complied with the laws that do apply to your business, putting your business at risk.

      Although there are certainly some similarities in obligations in different countries, law is not universal and there are often inconsistencies within countries, particularly federated countries, as well as between countries.

      Make sure you are undertaking to comply with the laws that apply to your business.

      12. Hard to read – legalese or no whitespace

      Lastly, don’t make your privacy policy so hard to understand that people don’t or won’t read it. If you write for the comprehension level of a child of around 12, then most people who read your privacy policy, whether customers, suppliers or staff, will understand it.

      You shouldn’t need a post-graduate degree to make sense of what has been written. It doesn’t help your business or anyone else you deal with. Back in 2019 The New York Times did an article about readability and found that Facebook’s then privacy policy was more difficult to read than Stephen Hawking’s ‘A Brief History of Time’. Don’t be that business.

      Simply headings like:

      • How we collect your personal information
      • What we do with your personal information
      • Where we store your personal information
      • Your rights regarding the personal information we have collected about you

      All make it easier for someone reading your privacy policy to make sense of what it is you do to help protect them. Short sentences, simple words, easy to follow headings, pleading of white space, all aid understanding.

      If you are not sure, get a child you know to read your privacy policy out loud and ask questions about anything they don’t understand. If they stumble over a sentence, or have loads of questions, go back to the drawing board.

      How can Onyx Legal help you?

      If you’d like help reviewing or updating your privacy policy, or perhaps having one tailored to fit your business and your business processes, make an appointment with a link to your policy (if you have one) and let us know what you’d like to achieve.

      Make an Appointment