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HELD LAWYERS

Est.1991

Property & Commercial Law

Law Matters

November 2013 Newsletter

Welcome
In this months bulletin, we examine: Australian Consumer Law; Vendors price in the REIV
standard sale authority; and sale of a small business purchasers key risk checklist.
If there are topics you would like us to look into, please let us know.
Each bulletin touches on a broad range of topics in an easy to read, practical way. We aim to
give you a brief, but better understanding of current issues as they arise, and food for thought!
We are happy to visit you before the end of 2013 and provide staff or client briefings about a
range of topics or matters of interest to you. Please feel free to contact us in that regard.
We hope to see you (again) soon in person.
Adam Held
Principal

Fair trading legislation beware!


The Australian Consumer Law (ACL), and its Victorian
state counterpart (Fair Trading Act 1999 (Vic.) (FTA))
deal with fair trading principles, and seek to cover most
issues that arise in a consumer protection environment.
While the ACL is limited to corporations acting in trade
or commerce, the FTA applies to both corporations and
individuals carrying on business in Victoria, or persons
ordinarily resident in Victoria.
The ACL contains prohibitions in trade or commerce,
including those against:
misleading and deceptive conduct (s18)
unconscionable conduct (s20)
false or misleading representations in relation to
dealings with land (s30).
The ACL also has a blanket prohibition on unfair contract
terms (s23), unless they appear in a standard form
contract permitted by law (s26).
These 4 main prohibitions may catch some vendors,
and potentially also their estate agents (who are usually
incorporated, and are also engaged in trade or commerce):
a private vendor of land selling the family home,
although not engaged in trade or commerce, may still
breach the unfair contract terms by way of certain

special conditions that go beyond the standard


General conditions in Form 2 of the Estate Agents
(Contracts) Regulations 2008 that appear in the
standard form contract (and are therefore saved by
s26(1)(c) as provisions permitted by law).
a private vendor of an investment property is
considered to be engaged in trade or commerce and
will be caught. This may even apply to a vendor of
a vacant block of land purchased as an investment
rather than for the building of a home.
failure to disclose or disclosure of false or misleading
information in a Vendors Section 32 Statement may
also be caught.

TBA or not TBA that is the question!


The REIV standard sale authority used by estate agents
provides for the Vendors price to be nominated. General
Condition 1.3 of the authority states:
1.3 binding offer means

1.3.1

an offer at the Vendors price which


would result in an enforceable contract
of sale or


1.3.2

an enforceable contract of sale signed


by the Vendor and the Purchaser.

For the purposes of GC 1.3.1 the offer must be


in a contract of sale signed by the purchaser
and Vendors price has the meaning in GC 1.14.

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Melway59C8

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CarltonVIC3053
Melway2BF10

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Malvern VIC 3144
W: www.heldlawyers.com

T: 03 9509 0710
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1.14

Vendors price means a price equal to or


greater than the Vendors price stated in
the Particulars of Appointment.

However, what if Vendors price stated in the Particulars


of Appointment is left blank, or TBA (to be advised) is
inserted at the time the authority is signed? On that basis,
it might later prove difficult to seek recovery of commission
pursuant to GC 1.3.1, as there may never have been a
binding offer.

Business sale of business purchasers key


risks checklist
In last months Newsletter we considered some key risks
for the seller of a business.
Some key risks for a purchaser to consider include:
obtain independent financial advice on the viability of
the business.
Section 52 Statement and business operating report: should be reviewed by an accountant for accuracy.
the absence of a Section 52 Statement or a defect
in the Statement may give a purchaser the right to
rescind the contract within 3 months from the date
the purchaser signs the contract (that right is lost if
the purchaser has gone into early possession).
issues associated with early possession hazardous
and should not be done. There are many aspects to
a business that require time-consuming investigation
before a purchaser takes possession, e.g. accountants
review of Section 52 Statement (see above).
check for conditional clauses and note their requirements,
especially a subject to finance clause and the possible
need to seek an extension of time prior to the deadline.
need for comprehensive standard searches and
enquiries depending on the circumstances, there are
risks if particular searches are not obtained, e.g. ABN
search to ensure that the vendor is registered for GST
prior to settlement - this is essential for a purchaser
to comply with its withholding tax requirements and
the requirement applies regardless of whether the
transaction is subject to GST.
review superannuation fund and policy.
check with the relevant planning authority as to whether
there are restrictions in the planning permit or scheme
that will inhibit the operation of the intended business.
review liquor licence (if applicable) and requirements for
transfer.
consider the need for a restraint of trade clause and
what is reasonably required to adequately protect the
purchasers position. If a wide restraint of trade clause,
this should take the form of a stepping down clause.
seek confirmation that all schedules are accurate.
where the seller is assigning a retail lease, receiving
disclosure statement in schedule 4 of the Retail
Leases Regulations 2013 (Vic). It should be provided
before requesting a landlords consent.
it is the seller who must satisfy the landlord about
any assignment of lease requirements and obtain the
landlords consent.

check whether the property is mortgaged. If so, ensure


that the mortgagee has consented to the assignment of
the lease in writing.
any guarantees given in connection with the business.
guarantees given to suppliers purchasers should
check with suppliers to confirm the position.
settling without executed releases from guarantees,
accepting indemnities or even providing additional
guarantees to third parties.
the parties have agreed in writing that the supply is
of a going concern. If there is doubt that the sale will
qualify as the supply of a going concern, treat the sale
as taxable.
timing issues when separate vendors are selling both
freehold and business to a single purchaser or for a
single vendor selling both freehold and business to
separate purchasers.
need to receive details of employee entitlements
together with employment records. Who is responsible
for long service leave, annual leave, sick leave and
termination payments? Ensure there is a clause
requiring adjustment at settlement. Receive full details
of employee entitlements. If necessary, take specialist
advice from an employment lawyer on how to manage
employee entitlements and the transfer of employees.
pay careful attention to: schedules are they accurate, particularly in relation
to plant and equipment, intellectual property and
financial data?
Definitions - particularly employee entitlements.
the default mechanism and the consequences if
default occurs.
formula: particularly retention amount. The formula
should be tested to ensure it works mathematically.
(source: LPLC Key Risk checklist small business Purchaser, October 2013)

Referrals
Should you require non-legal assistance with various
matters, we are happy to provide you with contact details for
a range of service providers, including financial institutions,
accountants, real estate agents, brokers, etc.

Areas of practice
Property Law including conveyancing and leasing
Commercial and Business Law
Banking and Finance Law including mortgages and
guarantees
Wills and Estates Law
Intellectual and Industrial Property Law
Litigation
If you would like further details or assistance or to discuss
information contained in this publication or generally, please
do not hesitate to contact us. For copies of this and other
publications, visit our website at www.heldlawyers.com.

Disclaimer
This publication is intended to provide commentary and general information only. It should not be relied upon as legal advice. It is not intended to be a complete
or definitive statement of the law on the subject matter covered. Further professional advice should be sought before any action is taken in relation to the matters
described in this publication. Persons listed may not be admitted in all jurisdictions.
Liability limited by a scheme approved under Professional Standards Legislation

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