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HELD LAWYERS

Est.1991

Property & Commercial Law

Law Matters

June 2013 Newsletter

Welcome
In this months bulletin, we look at several recent leasing decisions. 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 later in 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. Until next time happy 30 June!
Adam Held
Principal

Lease - negotiations proposed lessee


bound by agreement to lease?
A recent decision of the NSW Court of Appeal looked
at whether parties negotiating lease could assume
they were bound to an agreement before they had
signed and exchanged final documentation (BBB
Constructions Pty Ltd v. Aldi Foods Pty Ltd [2012]
NSW 224).
Aldi sent a lease proposal (subject to board approval)
to BBB, which included BBB undertaking certain
building works. Negotiations followed, during which
time BBB commenced works. An agreement for
lease was prepared for signing, despite outstanding
issues. After some time, BBB also entered preliminary
discussions with a competitor of Aldi. Aldis board did
not give approval. BBB alleged misleading, deceptive or
unconscionable conduct.
The Court found that there was no such conduct - both
parties, being large commercial enterprises sought to

first produce an agreement for lease acceptable to both


parties, which in any event was conditional on board
approval.

Lease - interest of tenant can a landlords


liquidator disclaim?
The High Court has granted special leave to appeal the
unanimous decision of the Victorian Court of Appeal
that allowed the liquidator of a landlord to disclaim a
tenants lease in certain circumstances under Section
568 of the Corporations Act 2001 (Cth) so that the
tenant no longer had any interest in the land (In the
Matter of Wilmott Forests Ltd (in liquidation) [2012]
VSCA 202).
The grounds for appeal are that:
the liquidators use of its disclaimer powers for a
lease is a novel use previously, the liquidators
power to disclaim a lease was used where the
insolvent company was the tenant, not the landlord;

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Malvern VIC 3144
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there is no case law supporting such a use;


the Victorian Court of Appeal currently means every
tenants lease is at risk;
there are significant consequences for retail tenancy
leases, including shopping centre leases.
The appeal is due to be heard in August or September
2013.
In the meantime, please contact us if you are a tenant and
receive a disclaimer notice an application to set aside
should be made within 14 days of receipt.

Lease non-rent breach notice to tenant


To maximise the likelihood that a notice to a tenant for
a non-rent breach is valid and to avoid a challenge to
termination of the lease, a notice should clearly state:
the alleged breach;
what the tenant must do to remedy the breach and
avoid forfeiture of the lease; and
a reasonable notice period for compliance/response.
In Primary RE Limited v. Great Southern Property
Holdings Limited (Receivers and Managers Appointed)
(in liquidation) [2011] VSC 242, the Victorian Supreme
Court held that reasonable time to respond to a breach
notice or to provide an acceptable response depends on
the circumstances.

Properties Pty Ltd v. Commissioner of Taxation [2013]


FCA 56).

GST implications sale of commercial property


subject to lease
The ATO published a GST Determination in February
2012 regarding the sale of commercial property
subject to lease. Following the sale, the purchaser (not
the vendor) is liable for GST on rent. However, the
Determination does not deal with which party bears the
GST liability for the period in which settlement occurs.
A recent decision of the High Court (Commissioner
of Taxation v. Qantas Airways Ltd [2012] HCA 41)
determined that GST is payable once, and attributable
to the first period in which any of the consideration is
received (Division 156 of the GST Act 1989 (Cth)). The
vendor is liable for the GST because it, not the purchaser
makes the taxable supply and receives the rent for the
period in which settlement occurs. The purchaser adjusts
for the pre-paid rent at settlement.

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
GST implications going concern concession

Property Law including conveyancing and leasing

The going concern concession in a contract of sale


prima-facie removes the application of the GST to a
transaction, so that a vendor does not need to collect and
pay GST to the ATO, nor does the purchaser have to find
the extra money to make the payment.

Commercial and Business Law

Notwithstanding the concession, a separate, unintended


liability to pay GST may sometimes be created (Division
135 of the GST Act 1989 (Cth)). The purchaser (not
the vendor) is liable for a GST adjustment where the
purchaser acquires property, subject to lease, with the
intention of using the property as leased residential
premises, thereby creating input taxed supplies (MBI

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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