Lease and Franchise Agreement Renewal

Lease Renewal

If you have or are taking over an existing franchise business, it is unlikely that the lease renewal and the franchise renewal will coincide.  You may have to deal with several lease renewals during the life of the franchise agreement term.  Generally, so far as lease tenure is concerned, more is better.  The franchise operation will be more secure (and therefore more valuable) if it has a secure long term tenancy.  Depending upon the situation, this may be a long lease or a short lease with multiple options to extend.

Time Limits

WATCH OUT FOR OPTION TIME LIMITS!

Virtually the most important thing with leases is to ensure that you accurately calculate and diarize the period during which you can exercise your option to extend your lease.  In some jurisdictions, retail shop lease legislation requires the Lessor to specifically notify these dates, but you should treat it as your responsibility to watch this time frame.

Options to extend

Some large retail outlets have a policy of not providing options to extend.  Those large retail organisations believe they have so much market power that it is better to threaten the tenant with being locked out on expiry, in order to pressure the tenant into higher rents, new shop fitouts and changed lease terms.  They are not concerned about a threat not to renew.

Retail Shop Leases Legislation

Most States of Australia have specific legislation which provides additional rights for tenants in retail shopping centers.  Check whether you fit the definition.  These acts of parliament provide higher obligations from the landlord with respect to disclosure, minimum first terms of lease, outgoings and other benefits.

Prior history with other tenants

Other tenants in your complex are usually very forthcoming with information regarding their dealings with the Landlord.  This can be a valuable source of intelligence where you are attempting to determine what your Landlord will do.

Exercise of Option

Your Lease will specifically state whether you have an option to extend or not.  It will also specify the window (often between 3 months and 6 months before the end of the current term of Lease) during which you can exercise.  If you issue a notice of intention to exercise the option, the Landlord has to offer you a further Lease upon the same terms, except that the rental will be renegotiated.

Things to watch for

1. Check the date and be sure;
2. Check the requirements for service.  The Lease will always have a paragraph specifying the rules for issue of notices.  Make sure that you have the correct address and the correct method of notice (post, personal delivery, fax, email etc);
3. Proof of service.  Make sure that you either have an acknowledgment of receipt of your notice, or some independent method of proof (registered post receipt or personal service details (date, time, place and person)) written down.

New rental negotiations

The Lease will usually specify the format and process for new rental.  The most common process is that the Landlord will be required to specify within a certain number of days, the figure that it believes should be the rental for the first year of the new term.  You will then have a certain number of days to agree or provide a counter proposal.

If the parties cannot then agree, the rental will be calculated according to a set format, usually by an independent expert.  Use this format sparingly, as it is costly, causes delay and will damage the relationship with your Landlord.

Registered verses Unregistered Leases

There are pros and cons for each of these.  Essentially a Registered Lease is a lease where the State Titles Office has noted the lease details on the Title.  This is more expensive and the additional cost will be paid by you.  The only benefit that you receive from having your Lease registered is that your options to extend your Lease are not always protected if your Lease is unregistered and the Landlord sells the freehold to a new owner.  If the Landlord sells the freehold and you have an unregistered Lease, it may be open to the new owner to deny that you have a right to exercise your option to extend.  New Landlords denying in this way are extremely rare and you have rights against the outgoing owner in this circumstance.

Most outgoing owners will ensure that they obtain a written undertaking from the new owner to honour any options, in order to avoid claims from disgruntled tenants.  You need to make a decision about a whether the additional cost of having your Lease registered (as it is your option to do so, not the Landlords) is worth the cost to avoid the risk.

Surviving Your Divorce: Chapter 8- Warning, Technical Content

1.         WHAT IS “MATRIMONIAL PROPERTY”?

The asset base to be divided between the parties is defined as Matrimonial Property.

Matrimonial Property can be all sorts of things, a house, bank accounts, superannuation, a business, investment property, shares; in fact, anything of value.

Occasionally there are assets owned by one party or another where there is an argument about whether or not these assets are matrimonial property.  Reasonably recent windfalls, an inheritance for example, just before separation, may not be considered a matrimonial asset. 

The thinking behind the Matrimonial Property decision is that, when both parties enter a marriage, they bring certain assets with them; often these are rather small, but can be large, and sometimes are lopsided, that is, one party will bring significant assets and the other will bring nothing.

The Court takes the view that over time, these assets blend together because of the joint contribution to the relationship, to become matrimonial assets.

What this means is that, the longer the marriage lasts, the more likely assets that you or your partner brought into to the relationship, will be considered jointly owned. 

There is no mathematic formula for determining what assets blend at what rate over what time.

Short marriages, those for 3 years or less, are often treated differently, and it is quite common for assets to be divided on the basis that the party that brought them into the relationship, takes them out.

Longer relationships are not quite so simple.

Contributions of the parties

The Court takes the view, rightly or wrongly, that in a marriage of reasonable length, the matrimonial assets, as a starting point, should be shared equally.

From that starting point, there is then a consideration of the parties’ relative contributions.

Again, rightly or wrongly, it is assumed that the contribution of, say, a stay at home wife is the same as that of her husband, regardless of his income earning capacity, success or failure in business or his ability to create and retain wealth for the couple.

This way, the wife of a Doctor might, apart from other circumstances, expect the same entitlement of a percentage of the assets of the couple as the wife of a basic wage earner.

This is often a cause for unhappiness with the system created by our Parliament for dealing with marriage breakdown.

There are however factors which alter this starting point. 

Factors for adjusting distributions of property (“75(2) factors”).

The factors which a Court will consider in adjusting the distribution percentage of matrimonial property are named after the section of the Family Law Act which lists them, Section 75(2).  This so called “75(2) factors”, are an attempt to adjust assets of the parties based upon their relative contributions, future needs, future abilities to earn income and create a life for themselves, and their need to provide for children.

All of these factors are considered by a Court (and by the Lawyers representing the parties), as increasing or decreasing that party’s percentage of the asset pool.

Again, there is no set formula and each case needs to be considered based on its own peculiar facts.

This is often what leads to misconceptions and arguments about the parties’ entitlements.

The commonly held view that, “the wife gets everything and the husband gets nothing, is often a misunderstanding arising from these 75(2) factors.

The most obvious factor moving assets in favour of a particular party is the need to care for children.  The Court recognizes that the person with whom the child resides will have immediate capital requirements for looking after that child or children.  The Court will provide a higher proportion of assets for the parent who has this responsibility.

This has become slightly more difficult to determine in the recent era where residence of children is far more fluid, and children will much more readily move between being looked after by one parent or another.  The Court has yet to create a set of guidelines to deal with a situation where a particular parent receives a greater proportion of the asset pool and then shortly after the child or children “move camps” to the other parent.

In future, I think we will see applications by parents to re-jig asset distributions in these circumstances.

Presently it is possible, indeed increasingly common, for property to be adjusted in favour of one party because of the need to care for children, only to find that at a later date, the children move to the other parents house.  There is presently no mechanism for re-adjusting the property.  The first carer simply keeps that adjustment.

This, unfortunately, is an example of society evolving faster than the Courts or government can react.

This cannot be helped and the courts particularly will look for and attempt to create rules (precedents) for changes in the pattern of society.

This particular one is yet to be dealt with but no doubt will come if the trend of fluid care for children continues.

2.         SUPERANNUATION

Until recently the Courts have had a great deal of difficulty with superannuation.  This is only now starting to be resolved in a uniform way.

Compulsory superannuation has been with us for a few decades, but the effect of these now large sums of money is being keenly felt.

Superannuation balances are now often large and are a central (commonly the largest) issue when trying to properly divide property.

The original problem was that superannuation was peculiarly owned by one party (often the husband), but not controlled by nor able to be used by that party.  The superannuation, whilst credited to that person because of years of employment, could not be accessed or used.  Worse still, there was originally no way to divide up the superannuation balance.  What this meant originally was that whomever had the super in their name was penalized because this was counted as an asset an allocated to that person but was of no use until retirement. 

The upshot was that super was a major disadvantage to the person who had earned it.  The super member could wind up receiving nothing else except the super but not be able to do anything with it.  Worse still, that party may have to find money to pay more than the rest of the value of the assets but not have any way to raise that money because all there is left is the super.

Consequently, arguments arose that superannuation was not an asset that should be considered as matrimonial property. 

A couple of decades of compulsory superannuation payments however, have meant that increasingly, superannuation is the major asset that the parties hold.

Still, the super member cannot access or use the superannuation until reaching a particular age, and therefore, there has been a problem balancing the distribution of the other assets without wiping out the share of the super member, and tying the whole thing up in the super. 

Recently, the Parliament has created rules which will allow “super splitting”. This involves effectively the parties agreeing, or the Court ordering, a proportion of the super be transferred into a new account for the non member party.  This puts both the parties into the same position.

These rules are, in the scheme of things, relatively new, and this part of the Family Law is still evolving.

There is at least now some mechanism for dealing with superannuation in an even handed way.  This has taken some of the sting and anxiety out of the super issue.

This part of the Law remains complex and it is essential that superannuation is dealt with using great care.  Given the changing nature of super rules created by the federal government and the flexibility currently available with super, taking a larger super split for a party not working or of a particular age, could be a major advantage.  It could be worthwhile to have your adviser take some specialist information from a financial planner to see if there is a gain to be had.

Surviving Your Divorce: Chapter 7- Common Problems

1.         IT’S TAKING TOO LONG

The time that this matter takes is affected by many different factors: the attitude of each of the parties, the number of issues that have to be resolved, the type of assets involved, children’s issues, the age of the children, the attitudes of the extended family, health issues and, unfortunately, sometimes the attitude of the advisers to the parties. 

Your Lawyer should stay focused on getting you to your goal.  If this means either a hardball or softball approach is the best strategy, then they should advise on that. 

Some of these matters are resolved very quickly with co-operation and a measure of goodwill between all of the parties.  Some will resolve quickly but then take time to finalise due to the complexity of issues relating to assets and logistical arrangements for children.  Some will fall into dispute at the end; and some, unfortunately, will need to be hard-fought every step of the way. 

Even if your partner is acting irrationally or belligerently, you can assist in keeping these matters to their shortest possible time frame by:-

(i)                Co-operating and providing timely instructions to us;

(ii)               Taking the time to understand the process and your place in it;

(iii)              Keeping your credit arrangements up to date;

(iv)              Not buying into the emotional tug-of-war and staying focused on your goal;

(v)               Seeing your adviser as your guide rather than somebody to argue with;

(vi)              Working with them rather than aiming your frustrations at them.  They are here to help you but we are only part of a multi-party process and if your partner is being irrational and causing trouble, your best move is to be logical, sensible and focused. 

2.         IT’S COSTING TOO MUCH

Unfortunately, when the Government set up the Family Law system in the mid 1970’s, they decided that there should be a “no fault” system.  Part of this process means that Orders from one party to pay the costs of the other, even if they have not complied with the Rules, are frustratingly rare.  This is changing to some extent but it is true that there is insufficient penalty for parties who delay and defy Court Orders.  The same factors that relate to delay also relate to cost.  Your advisers are there to follow your instructions and to try and get you to your goal as quickly and simply as possible.  If your opponent will not co-operate in that, then the positive use of the Court system is your only option. 

The cost of running this matter will, unless you can prove to the Court that particular parts of it are your opponent’s fault, have to be paid by you.

Whether this matter resolves quickly and simply depends to a large degree upon your opponent and his or her adviser, and is out of our control.  Your adviser can influence this outcome however, and so can you.  Your assistance in staying focused on the goal, not engaging in irrelevant and emotional issues, and thinking about your conduct and how it fits in with your goals, is absolutely vital. 

3.         MY EX WON’T RESPOND

There may come a time where you are simply not getting anywhere, either because you can’t get a response or the response is not advancing things.  At that stage if there is no advantage in continuing to negotiate, your adviser will recommend to you that you start Court proceedings.  This choice is yours, but you do risk the matter drifting on and wasting time and costs if you delay this step. 

You also risk encouraging your opponent in this conduct. 

4.         WHAT CAN I DO TO SPEED IT UP?

Ultimately, it is the outcome that is important more so than the speed with which it is achieved. 

Having said that, getting the matter resolved quickly and simply is important.  You need to recognise however that your Ex may have a different agenda.  Your Ex may not be emotionally ready to focus on the issues.  This may mean that the matter does not progress as quickly or settle as simply as you would like. 

You can influence this by:-

(i)                Staying focused on the issues;

(ii)               Not unnecessarily antagonising your opponent;

(iii)              Negotiating whilst that is viable but seeking the Court process if it is not;

(iv)              Giving proper, timely instructions and providing documents as quickly as possible;

(v)               Engaging with your advisers rather than taking a combative, belligerent attitude.

Unfortunately, many clients fall into the trap of seeing their advisers as people to argue with.  These clients are unable to argue with their former partner and, deprived of that opportunity, use their advisers for this outlet.  Not only does it make the adviser’s job more difficult, it slows down the process, causes unnecessary distraction in the conduct of the matter, and increases the costs. 

If you believe that your adviser is incorrect, or you do not understand the agenda, ask questions until you do.  If you are still unsatisfied or have a lack of confidence about the advice you are receiving, CHANGE ADVISERS. 

5.         BEING SIDETRACKED WITH OTHER ISSUES (KEEP YOUR EYES ON THE PRIZE)

A significant number of Family Law matters get side-tracked and go round and round with emotional and other small issues which are blown out of perspective. 

Each year many millions of dollars around Australia are miss-spent arguing about whether a child is returned from access with dirty knees, or a look that one party gave another at an access hand-over. 

Dozens of applications a year are brought to Courts dealing with small issues that parties will not let go. 

It is important at the commencement of the matter to realise:-

(i)                Your opponent will most likely be quite unhappy with the outcome of the relationship and might be thinking of some kind of petty point-scoring exercise;

(ii)               You need to determine what outcomes you need from this process;

(iii)              You need to determine a pathway to those goals;

(iv)              It is important to keep those goals uppermost in your mind if delaying or distracting tactics are being used;

(v)               You need to decide what issues are important to you and stick to achieving a resolution of those issues.

Unfortunately for many people, the dispute becomes the focus, almost a comfort.  It is their thing, it is what they do. 

Becoming focused and embroiled in a petty point-scoring process that never ends, is almost a comfort to them and a substitute for thinking about the real factors behind the breakdown of the relationship, or what they will do when the matter is finalised.

If you find yourself either in this situation or with one of these people as an opponent, it will help to write down the goals you wish to reach in the process, and to speak with your adviser about writing a program to reach them. 

You will then be able to determine whether a particular issue is important to you or can be ignored.  This may also take some of the emotion out of both the process and your interaction with your opponent. 

6.         SPEAKING DIRECTLY TO MY EX

Contact with your opponent is unavoidable and on-going in many cases.  This can be seen as:-

(i)                An opportunity to influence the outcome;

(ii)               A chance to cause trouble and make your opponent feel miserable (usually setting back the process many months);

(iii)              A major recurring traumatic experience that shapes your world and creates never-ending turmoil.

This contact is inevitable and necessary, particularly if there are children involved. 

It is important to approach these pieces of contact with your goal in mind, using this contact to work towards the outcomes that you want. 

If you allow yourself the luxury of a short-term, feel-good, destructive argument, you will be stepping away from your goals. 

Of course, this does not mean shrinking from an argument if your goals are at risk. 

You can expect at these contact points that your opponent will have his or her own agenda and may seek to cajole, bully, sweet-talk, or outright deceive you into taking a step or conceding a point which is not in your interests. 

A cold, simple assessment of whether this step matches your goals, rather than an emotional response, will allow you to keep the upper-hand. 

7.         KEEPING CLEAN HANDS

One of the biggest problems that we as advisers have in these types of matters is trying to explain to clients the importance of keeping clean hands, that is, not engaging in conduct which shows you to a court in a bad light. 

When faced with the provocation of an opponent who is continually breaking the rules, missing deadlines, ignoring Orders, breaching undertakings and using manipulative behaviour (particularly manipulating children involved), it is extremely tempting to use the same tactics and reciprocate. 

Unfortunately, though the Court Rules allow for significant penalties for this behaviour, those penalties are too rarely and too lightly meeted out.  This is an added provocation for you. 

What I can tell you is that descending into reciprocal conduct will:-

(i)            Exponentially increase the amount of time and costs to resolve the matter;

(ii)           Constantly drag the matter off the main issues and into irrelevant side issues which are not necessary for the resolution of the matter (perhaps this is the agenda of your Ex);

(iv)              Quite likely lead to Court proceedings over small secondary issues depleting the assets available to both of the parties, and fuelling a permanent resentment between you and your opponent, and between your children and both parties. 

Attention to detail is vital in the conduct and “winning” of these types of matters.  It is important to remember however:-

(a)        “Winning” means reaching your goals rather than depriving your opponent of their goals; and

(b)        Attention to detail should not be confused with a manic obsessive focus on irrelevant trivia. 

8.         CASH FLOW – HOW DO I PAY MY BILLS IF I HAVE NO ACCESS TO MONEY

A common anxiety for people in a pending separation is worrying about how to pay bills with no access to family bank accounts, and no ability to earn income.  This is not always a gender based issue but in traditional household units it is often the wife who has given up the chance of a career, and any job prospects to stay home and look after the house and the children.

Well over half the time statistically, it is the wife who will have day to day care and control of any children, and will be concerned about maintaining food, shelter and clothing for those children in a separation.

Most commonly in those scenarios, it is the husband who has generated all or the majority of the income for the family.

In those circumstances, it is a natural concern for a wife in separation to worry about how she is going to pay the bills, feed, clothe and educate the children after separation.

It is also a commonly held feeling among men that after separation their financial obligations are or should be finished.  Men often ask “why should I continue to pay out money for a household that I am not allowed to live in?”

The Courts, of course, have a different view.

Whether you agree or not, the Court follows the rules set out by the Parliament in the Act.  These rules start from the standpoint that both parties have contributed equally to the build-up of assets and the making of the relationship.  It’s then up to the parties to shift the pendulum one way or the other based upon extraordinary contributions based upon a list of criteria set out by the Government in the Act.

At the same time, the same rules require that no party is left without any support and this is a real source of tension and conflict.  Understanding how this works (whether you agree with the rules or not), is a major advantage in the process.  It’s like having the map to the minefield when your opponent doesn’t.

There are subtle variations and exceptions to these very general rules and your adviser’s job is to navigate you through them to your best advantage.  It is important for you to distinguish between asking questions until you understand these rules, and, on the other hand, arguing the fairness of the rules with your adviser and spending your own money for the privilege!