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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.