The insertion of a special condition into a contract of sale for residential property can provide important safeguards for potential buyers from both a property law and criminal law view point. Creevey Russell Lawyers encourages individuals looking to purchase residential property to be aware of their rights and the ability to add special conditions to a standard contract of sale to protect their interests.
Our firm is increasingly seeing a special condition being inserted into residential contracts of sale, worded to the effect:
“That the contract is subject to and conditional upon the buyer obtaining a satisfactory drug test report on the property within X days from the date of the contract. In the event the report is not satisfactory to the buyer, then the buyer may terminate the contract.”
Solicitor, Rachel Greenslade, of Creevey Russell Lawyers says that inserting a special condition into a contract, such as the one outlined above, provides protections for individuals investing in the property market, in a similar way to how a building and pest condition operates.
A building and pest condition is a common clause in many residential contracts and allows a purchaser to terminate a contract of sale in the event they are not satisfied with the results of a building and pest report. At the time of signing a contract, a buyer who has limited experience with the construction industry is unlikely going to be aware of any issues potentially impacting on the property, such as the existence of termite damage or structural damage. A building and pest condition provides a safeguard for buyers by allowing experts to come and inspect the property and inform the potential buyer of any building and/or pest issues effecting the property. If the buyer has concerns following receipt of the report, the buyer usually has the right to terminate the contract.
An insertion of a special condition similar to the one outlined above provides a comparable safeguard to potential buyers, but relevant to drugs. The presence of drugs in a property can have an impact from both a property law and criminal law perspective.
From a property law perspective, the Residential Tenancies and Rooming Accommodation Act 2003 (Qld) requires landlords to ensure that leased property meets minimum prescribed housing conditions including the obligation to ensure that the property is clean, fit for the tenant to live in, is in good repair and does not impair the health and safety of persons using or entering the property. The presence of drugs can have a long term impact on health and wellbeing, and should a tenant suffer loss as a result of poor health due to the presence of meth contamination, the landlord may find themselves at the wrong end of a claim. The insertion of a special condition allowing a buyer to carry out a drug search can help an investor avoid the undesirable outcome of purchasing a property which is deemed unfit for habitation without considerable expense after settlement is complete.
From a criminal law perspective, the condition offers an important safeguard for occupiers of a property. Section 129 of the Drugs Misuse Act 1986 (QLD) effectively says that an individual who is an occupier of a property is expected to have knowledge and control of items located in those premises and proof that a dangerous drug was located in a place the person occupied is conclusive evidence of possession – this provision is referred to as “occupier’s liability”. Occupier’s liability extends the usual definition of “possession” and imposes a reverse onus on occupiers of a property. This reverse onus, in practical terms, means that once drugs are located on a property (usually following police executing a search warrant), the occupier is required to demonstrate that they did not know, or ought not to have known, about the presence of the illicit substance or thing located. This is different to the usual onus of proof in criminal law matters, where prosecution bears the relevant onus of proving an individual’s guilt. Occupier’s liability reverses the usual presumption of innocence in criminal law proceedings.
It is unusual that property law and criminal law proceedings overlap in this way, but Creevey Russell Lawyers encourages individuals looking to invest in residential property to be aware of their rights and to carry out thorough investigations in respect to a proposed purchase for investment purposes as failure to do so can have serious civil and criminal ramifications.
Should you require advice in respect of any property law matters, please contact Ms Rachel Greenslade on (07) 4617 8777. Should you require advice in respect of any criminal law matters, please contact Mr Trent Jones on (07) 3009 6555.
Ph: 07 3009 6555
Ph: 07 4617 8777
Once you have made the decision to sell your business and found a buyer willing to pay the asking price it can be a huge relief. But there is a long road to travel between receiving the offer to purchase (which is usually made by way of a non-binding expression of interest through your broker), to the actual settlement of the business sale.
A business sale agreement still needs to be negotiated, agreed and signed by the parties to make the offer binding and then all the conditions in the contract need to be satisfied (or waived).
One of the main conditions will be the buyer obtaining suitable finance. This is outside the control of the seller and rests entirely on the buyer’s ability to finance the business purchase. There are however other conditions and issues that could arise within a business sale transaction which could lead to the buyer pulling out of the purchase either by not signing the binding business sale agreement or by rescinding or terminating the agreement.
A prudent seller should consider these issues, seek advice and take steps to avoid these issues derailing their business sale before going to market. Here are some top tips on what to watch out for and how to avoid these being an issue for your business sale:
Issue #1: buyer gets cold feet
People don’t like surprises, especially if you have a nervous buyer who does not understand all the nuances of buying (or running) a business.
There are obvious things that could lead a buyer to think that there is something wrong with your business, for example:
- Finances not being readily available (‘What are they trying to hide?’). Make sure you have your last 3 years’ accounts, BAS statements and POS records ready to provide to a buyer who has signed a confidentiality agreement
- The business name not being registered to the seller – if they are paying an amount for goodwill the seller will expect the Intellectual Property in the business to be robust.
- Long lists of charges registered against the business on the Personal Properties Securities Register (PPSR) – this may indicate to a buyer that the business runs on credit or was struggling. (‘Who else do they owe money to?’).
Tips to avoid the issue: sort out any potential issues.
We regularly come across issues in a business sale that should have been addressed by the seller before the business went on the market (more commonly when the business is being sold privately without a broker). If you sell your business through a broker they will analyse the business beforehand and identify any matters that are likely to negatively impact upon the sale price or cause problems down the line. Engaging a commercial lawyer to conduct a Seller’s Due Diligence early on in the piece can also be useful in flushing out and addressing these issues, they can help you to:
- Ensure that the business name is registered to the seller (for example where an old business partner has it in their personal name or it is simply not registered). The same goes for a trademark.
- Discharge any old PPSR charges (for example from previous supply arrangements) so you don’t need to provide the buyer with covenants or delay settlement.
- Ensure that all key contracts are documented – handshake arrangements have no value to a buyer so it is important to get all key customer and supply agreements in writing.
- Ensure that you have everything you need to complete the business sale agreement, for example all schedules, as it is preferable to send across a complete first draft contract to the buyer.
- Address any issues with your lease.
Issue #2: landlord won’t accept the new tenant
If you lease your business premises, the business sale agreement will need to be conditional upon the assignment of lease to the buyer. But what if the landlord won’t accept the new tenant? In that case, the conditions regarding landlord’s consent to assign the lease will not be satisfied and the contract will fall over.
Tips to avoid the issue: Understand the lease and communicate with your landlord
- Speak to your landlord – If the sale is not highly confidential, have conversations with the landlord early on in the piece so that you are both on the same page.
- Vet your buyer – Determine what the landlord’s priorities are and make sure that the buyer ticks their boxes (the higher offer might not be the better offer if the landlord won’t accept the buyer).
- Review the lease: – Make sure that you are aware of all the assignment conditions in the lease and that these are notified to the buyer. For example, that they need to provide personal guarantees, a bond or a bank guarantee and how much that will be for (they will need to factor this into their financial analysis when determining whether they can buy your business or not).
Issue #3: The lease is too onerous
The buyer may decide after reviewing the lease that it is not ‘satisfactory’ and not to go ahead with the assignment.
This is likely to occur where the lease is onerous or if the lease term is too short and the landlord is unwilling to amend it to provide for further options to renew or grant the buyer a new lease for a longer term. This is likely to occur where:
- The landlord does not want the buyer to become its tenant; or
- Where the landlord has plans to redevelop the premises and there is no redevelopment clause in the lease.
Tips to avoid the issue: Make sure you understand your lease
- Review your lease before listing your business for sale – conduct a seller’s due diligence and make a plan to address any issues.
- Where you have a lease with only a short term left to run and no further options it is worth addressing this before you go to market.
- Consider negotiating further option terms which are likely to be more attractive to a buyer and their financiers. (Don’t extend the initial term of the lease though because, if the sale does not go through you will end up being liable to pay rent for a longer term).
- This may also be a good time to renegotiate other onerous terms in the lease. So, send to a commercial lawyer to report on what needs changing to make the lease more ‘commercial’ in the current climate.
Issue #4: buyer wants to renegotiate price
We have all come across buyers who have little regard even for a signed contract and use any opportunity to renegotiate the purchase price just before settlement.
The sad thing is that this often occurs where the buyer has or perceives that they have the bargaining power, for example where the sale has to go ahead quickly and they know that the seller will not:
- be able to afford to fight them in court; or
- want to waste any more time putting the business back on the market and trying to find a new buyer.
Tips to avoid the issue: Make sure that the contract stacks up:
- Take a large enough deposit from the buyer to discourage a breach of contract.
- Make sure that all conditions are drafted tightly enough to ensure that the buyer has little ‘wriggle room’ for example, if there is a due diligence clause make sure that it is tight enough to point to exactly want constitutes unsatisfactory due diligence. Do not leave it to the buyer to say that they are simply ‘not satisfied’.
- When you need to rely on a clause in the contract you want to be sure that there is no ambiguity and that the interpretation finds in favour of the seller. The standard REIQ contract is not adequate to protect a seller, it needs well drafted ‘buyer’s’ special conditions.
- Even before the contract is signed, having all the terms documented in a well drafted set of heads of agreement or terms sheet will help avoid this. Both parties will be on the same page and understand what the process of the business sale will be.
It is important to work with experienced business sale professionals when you sell your business to maximise the chances of success. We regularly assist with business sales and would be happy to assist you through the process.
If you require any assistance with your business sale or business purchase or need help with other commercial legal issues, please contact our commercial legal team:
November 13, 2017 in Property Law
At the time of purchasing property consideration should be given to what the intended use of the property will be as town planning schemes govern what is an acceptable use of property within certain areas. A due diligence clause should be included in the contract so there is an opportunity to investigate whether the current use of the property is lawful and if the proposed development will be considered accepted development, assessable development or prohibited development under the Planning Act.
Accepted development is development for which a development approval is not required, whereas, assessable development requires a development approval and will be either code or impact assessable.
If a due diligence clause has been included in the contract then investigations should be undertaken to ascertain whether the property is suitable for the intended use. Undertaking these enquiries will assist with having a greater understanding if the intended development or use will be consistent with the town planning scheme.
When undertaking due diligence enquiries certain factors should be considered such as:
- the current use of the property. This will have an impact on whether the current use is lawful and if the intended use will be considered development and be subject to the development approval process;
- if any development approvals/conditions attach to land. This may affect the future use or development of the Property. It may also reveal any compliance issues or outstanding items that have not been finalised which may incur additional expenses or affect plans for its intended use;
- the relevant zone that applies to the property (eg residential, rural, industrial). Each zone provides for different assessment criteria and outcomes when obtaining a development approval;
- the boundaries and size of the property. This is important as there are minimum requirements for land size for developments depending on what zone the property is located in. Any encroachments or registered easements may affect any plans for its intended use.
We encourage anyone who is unsure of what their obligations are under the Planning Act or requires assistance with undertaking due diligence enquiries to contact the Property Team at Creevey Russell Lawyers Team on 07 4617 8777 to obtain further advice tailored to your individual circumstances.
Whilst it is common knowledge that the major banks have tightened their investment lending criteria to unit purchasers in Brisbane, recent industry news has pointed to major banks tightening their lending rules further by applying more stringent conditions on properties located in certain postcodes, such as mandating that buyers have at least 20% equity in the property.
Therefore the finance clause becomes an important clause for both buyers and sellers of these properties.
Potential buyers will want to ensure that the finance clause is drafted in a manner that allows them the right to terminate should finance approval not be forthcoming, even if the finance condition date has passed. Otherwise buyers may be locked into a contract they cannot complete.
Alternatively, sellers may consider modifying the standard REIQ contract finance condition to allow finance to be deemed satisfied if the buyer has not terminated the contract by the finance due date.
Therefore the drafting of finance clause must be considered in light of the party’s position in the transaction and personal circumstances.
Creevey Russell Lawyers has extensive property experience throughout both its Brisbane and Toowoomba office, and can offer pre-contractual review and advice as part of the conveyancing process if you require.
Please contact Damian Bell or Daniel Birch at Creevey Russell Lawyers on (07) 4617 8777 for further information.
The security of land tenure in rural Australia is often on the mind of pastoralists. With the introduction of rolling term and perpetual leases, pastoralists were given greater security over their interest in the land. There have been further developments that give leaseholders the opportunity to have their interests converted to freehold title so that rural landholders can enjoy the most secure interest available to property owners.
Leasehold conversion is offered by the Department of Natural Resources and Mines (“DNRM”). Landowners can apply to DNRM for the conversion of their leasehold interests to freehold title. DNRM can then make an offer to the landowner often called an “Agreement to Offer a Conversion of a Lease” (“Offer”). These Offers are usually conditional which means that certain requirements must be satisfied before the conversion of land tenure will occur. Conditions will most likely include: payment of a deposit, signing of the Offer and satisfaction of any Native Title interests that may exist in relation to the land subject to the conversion.
Upon receiving an application for conversion, DNRM will research the tenure history of the land. If the land has never been held with exclusive possession, such as a previous freehold title, Native Title will need to be addressed as a condition to the conversion being made. This is a common requirement in rural pastoral areas where exclusive possession has not previously been granted.
Native Title interests can be addressed in a number of ways. These include: negotiating an agreement called an Indigenous Land Use Agreement (“ILUA”) with peoples that may hold an interest to the area, or by non-claimant applications to the Federal Court for a determination (decision) in regard to the native title interests in the area.
Once the conditions of the Offer have been satisfied, DNRM can then grant the conversion of leasehold interests to a freehold title.
Creevey Russell Lawyers have an experienced team that can assist you in the intricacies of these conversion applications. If you would like to discuss the conversion of leasehold interests, contact our Damian Bell on (07) 4617 8777.
On 3 July 2017, Queensland’s new property planning system commenced. The system was implemented by the Planning Act 2016 (Planning Act) to replace the previous system under Sustainable Planning Act 2009. The new system relies on various pieces of legislation, regulations and rules including the Planning Act and the Development Assessment Rules (DA Rules) that make up the development assessment framework.
The changes to the development assessment framework amends the categories of development which are now classified as ‘accepted, assessable or prohibited’ development. ‘Assessable’ development is now either code assessable or impact assessable and must be carried out with a development approval.
The IDAS system is replaced by the DA Rules which is now the new instrument used in the development assessment process for obtaining a development approval. The DA Rules consists of 5 parts to the development assessment process as follows:
- Information Request;
- Public Notification;
The DA Rules incorporates various changes to the development assessment process including the terminology and definitions used, the procedures for obtaining development approvals such as the ability to opt out of an information request, increasing the flexibility for the placement of public notices on premises, the removal of automatic time extensions and the ability to stop a current period for a maximum of 130 business days.
We encourage anyone who is unsure of their obligations under the Planning Act to contact the property team at Creevey Russel Lawyers Team on 07 4617 8777 to obtain further advice tailored to your individual circumstances.
June 27, 2017 in Property Law
The Queensland Law Society and the REIQ have now released a revised standard form contract to be used for real property transactions (including residential and commercial property) that are entered into from 1 July 2017.
The revised contracts incorporate the Federal Government’s amendments to the Taxation Administration Act 1953 (Cth) for capital gains withholding, in particular:
- a reduction in the withholding threshold from $2,000,000 to $750,000; and
- an increase in the withholding rate from 10% to 12.5% if sellers do not obtain a ‘clearance certificate’ prior to Settlement.
With the threshold being lowered to $750,000 a greater percentage of sellers will be affected by the requirement to obtain a ‘clearance certificate’ prior to Settlement.
Any contracts entered into on or before 30 June 2017 will be subject to the existing threshold and rate.
We encourage anyone who is unsure of what types of assets the capital gains withholding tax rules applies to or their obligations to obtain a ‘clearance certificate’ to contact Creevey Russell Lawyers on 4617 8777.
Queensland primary producers and their family members can apply for financial assistance to gain professional advice with farm related succession planning.
Creevey Russell Partner Damian Bell said the firm welcomes the launch of the Farm Management Grants Scheme by the Queensland Rural Adjustment Authority (QRAA).
“Creevey Russell Lawyers applauds the introduction of the QRAA scheme which offers a rebate of up to 50 per cent of the professional costs associated with seeking the advice for up to a maximum of $2,500 per financial year,” Mr Bell said.
To be eligible for the scheme you must be a primary producer, or a relative of a primary producer. The Grant allows eligible parties to offset the cost of succession planning.
“You have to be in the process of seeking professional advice in relation to the transfer or sale of the primary production enterprise including but not limited to the intergenerational transfers of farm businesses as part of a succession planning strategy,” Mr Bell said.
“The advice must come from a suitably qualified professional such as a lawyer, accountant and/or financial planner.”
The QRAA scheme is available until June 30, 2019. Please refer to QRAA’s website http://www.qraa.qld.gov.au/current-programs/farm-management-grants for further information or contact Damien Bell or Rachel Greenslade at Creevey Russell Lawyers on 07 4617 8777.
March 14, 2017 in Property Law
Indefeasibility of title is central to Australia’s system for recording land ownership. In Queensland any person who is involved in a land transaction can rely on the accuracy and validity of the land register as maintained by the Department of Natural Resources and Mines.
However, the land register is only accurate and valid to the extent of any exceptions as provided for in the Land Title Act 1994 (Qld) (‘the Act’). One example of an exception to the indefeasibility of the title rule is whether another person would be entitled to be the registered owner because that person is in ‘adverse’ possession of that land. Adverse possession is a claim where a person in possession of land owned by another entity/person may have a claim to be the registered owner.
When a claim for adverse possession has been made, various factors are considered including whether the person making the claim has had continuous possession of the land to the exclusion of the landowner for a period of at least 12 years.
An adverse possession application must be made in accordance with the requirements as set out in the Act. A person claiming to already own the land has the opportunity to dispute the application made by the adverse possessor by registering a caveat over the subject land within the prescribed time frame.
The Act restricts an adverse possession claim so it cannot relate to a:
- part of a lot;
- lot that may be created in the future by way of a subdivision;
- lot for which the registered owner is the local council or the State;
- lot subject of an encroachment where the adverse possessor claims possession of the lot to the extent of the encroachment.
Due to the complexities surrounding claims for adverse possession we recommend that you contact Creevey Russell Lawyers to obtain legal advice tailored to your individual circumstances.
Property Lawyers Toowoomba
Property Lawyers Brisbane
Property Lawyers Roma
Press Release 14 March 2017
Regional Queensland towns are struggling through lack of services and support with all areas needing greater understanding from Government, says leading legal firm Creevey Russell Lawyers.
The firm’s Principal Dan Creevey has just completed a two-week regional road trip to offer free consultations with community members on any legal or other issue they may be experiencing.
Mr Creevey’s 3000klm tour stretched from Toowoomba to Middleton and back and included the Central West and Central Highlands communities of Roma, Charleville, Longreach, Winton, Barcaldine, Emerald, Rolleston, Moura and Taroom.
“Country towns are really struggling with lack of services and lack of support is extremely apparent,” said Mr Creevey, who plans to make the regional road trips regularly.
“They just want a greater understanding of their situation from authorities. Each area has its unique issues whether it be flood mitigation, prickly trees, bad roads or artesian water problems.”
Mr Creevey said clients and contacts were pleased to see a regional law firm in their town experiencing their situation first hand.
“We take great pride in the fact that Creevey Russell Lawyers is a rural and regional firm and we are always looking to give back to those communities,” Mr Creevey said.
“There is clearly a demand for us to be in our clients’ country and we will keep coming back. We can offer a wide variety of services to our clients, with expertise in areas of Agricultural Law, Commercial Law, Criminal Law, Property Law, Wills & Estates, Succession Planning, Family Law and Personal Law.
“It is no secret that many of the state’s regional communities have been doing it tough for many years due to a wide range of economic and environmental factors.
“The purpose of our regional tour was to connect with the people in these communities and listen to their concerns. We are already planning our next road trip for later in the year.”
If you would like to get in touch with Dan Creevey – or call 07 4617 8777
Creevey Russell Lawyers