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Month: March 2019

by Jacqui Brauman Jacqui Brauman No Comments

Offering vendor finance

So you’re selling your house, investment property or business? The person you’re negotiating with to buy it from you doesn’t have enough money to pay you what you want. Either the deal falls over, because they cannot pay you your asking price, or you can get creative and offer to help finance the deal for them. But vendor finance may be your solution.

If you don’t know what vendor finance is, read this first.

There are two prime ways in Victoria to offer vendor finance. Both have their advantages and disadvantages, so it really depends on your circumstances and what you feel most comfortable with. 

Terms contract

With real estate, you are able to enter into a long term Contract of Sale that involves instalment payments, and the purchaser taking possession of the property before making the final payment. 

You must pay out your existing mortgage to be able to enter into such an arrangement, or at least pay the mortgage off with one of the first instalment payments before the purchaser takes possession of the property. 

When the purchaser takes possession, other than your contractual rights, you can take security over the property in one of two ways:

First, you can retain the Certificate of Title. You don’t register any Transfer of Land, and you remain the registered proprietor of the property. The rates will still be in your name, so you will continue to pay these until a final settlement. 

Alternatively, if you don’t want to remain the owner, you can register the Transfer of Land, so that the purchaser is the registered proprietor of the property. You would then register a mortgage over the property based on the terms Contract of Sale. The purchaser couldn’t sell or otherwise deal with the property without your consent, and you would have rights to recover the property and resell it if the purchaser failed to pay you (just like a bank mortgage). You would also have your Contract of Sale that you could sue for damages under, if the purchaser failed to pay. 

Mortgage

Instead of taking a mortgage under a terms Contract of Sale, you could just settle as usual on the Contract (after 30 or 60 days), and then you would take the position of the bank. You would sign loan documents which would entitle you to instalments and interest over a particular period. You would then rely on that loan to register a mortgage over the property.

These methods offer much more security when you are dealing with real estate. If you are dealing with a sale of a business, you could negotiate a payment by instalments under the Contract of Sale. You could specify how you wanted to secure those payments, whether the Contract gave you a right to take over the business again, or whether you were allowed to register a security interest on the Personal Property Securities Register (PPSR) over stock or generally over the assets of the business. 

Alternatively, you could enter into a commercial loan arrangement, with or without some negotiated security, as you could just rely on the terms of the loan agreement if the purchaser failed to pay.

For more on buying and selling real estate, click here.

by Jacqui Brauman Jacqui Brauman No Comments

Protections for Small Business

As of November 2016, small businesses have some of the protections that consumers have under the Australian Consumer Law.

Traditionally, consumers are protected from unfair terms when buying goods or services from businesses, and this will continue. These protections will be extended to small businesses, so that small businesses will be protected when buying goods or services from big businesses, or even from other small businesses.

A small business will be any sole trader, partnership, or corporate entity that has less than 20 employees. There is no other revenue test, or any other test for a small business. So if you are a small business entering into a contract to sell goods or services to another business, it would be important for you to know if you were dealing with a small business or not.

The other condition is that the contract for the goods or services must be under $300,000, or if the contract is for services over more than 12 months then the price cannot be more than $1,000,000.

For big business, this means that they will need to review their terms and conditions for contracts with small businesses, to make sure that there aren’t any unfair terms.

So what are some terms that could be found to be unfair?

  • A term that allows the big business to terminate the contract, but not the small business
  • A term that penalises a small business for breaching or terminating the contract (like having to pay a fee)
  • A term that allows the big business to vary the terms of the contract, but not the small business
  • A term allowing the big business to change the price of the contract, without allowing the small business to terminate the contract
  • A term that allows the big business to vary the characteristic of the goods or services, without allowing the small business to terminate the contract
  • A term that allows the big business to assign the contract to someone else, without the consent of the small business
  • A term that tries to limit the small business from suing the big business
  • A term that tries to limit the evidence that a small business could use against the big business, or
  • A term that tries to shift the burden of proof onto the small business.

Small businesses that enter into contracts with big businesses and other small businesses might want to have two different versions of their standard terms and conditions. The small businesses will need protections from unfair conditions, but the big businesses get no such protection.

If you’re a small business, then you now know that you don’t have to be pushed around by bigger businesses anymore, and that you have avenues to seek remedies for unfair terms of contracts you enter.

Here’s some more information from the ACCC.

by Jacqui Brauman Jacqui Brauman No Comments

Homemade Wills and Will-kits

Another homemade will has just cost a family tens of thousands of dollars in Western Australia, with the family having to work out what the Will actually says in the Supreme Court. 

The will-maker must have thought they were very smart, but the language used in Wills has been developed over hundreds of years, for a reason. There are phrases that create trusts, and gifts, and duties and instructions that are in-built, not having to be spelt out. 

This Will was a 14 page will, without numbered paragraphs, but headings on each page dealing with different assets. Despite thinking he was thorough, the will-maker left out instructions as to what was to happen to the proceeds of the sale of many of the assets. He put time into giving instructions that he didn’t need to do, about how assets were to be sold, and about opening special purpose bank accounts, but then failed to direct who they were to be left to!

This case caused a flurry of comments from lawyers around the country on LinkedIn, and I was directed to a fantastic article written about a year ago by Darryl Browne. He succinctly confirms that will-making is not like filling in a form, although will-kits and online wills try to fill this gap. 

Darryl’s article highlight a few priceless comments by Supreme Court judges over the years:

‘Homemade wills are a curse”

“All of this could have been avoided if the testator had consulted a lawyer and signed off on a will which reflected his wishes. There is no question but that engaging the services of a properly qualified and experienced lawyer to draft a will is money well spent”

“But way [this will-kit will] has been drafted is difficult, and the parties have been put to the trouble and expense of coming to the court seeking directions as to its proper interpretation. If the will had been drafted by a competent legal practitioner, this problem would not have arisen, and the parties would have been speared a great deal of trouble and expense”

The finest being about a ‘friend’ who helped prepare a will: “The deceased either was offered, or sought, the assistance of an entirely unqualified person to prepare these three documents. That person would no doubt protest that she was just trying to help a friend. She was no help at all. A claim of good intentions is no defence. The fact is that unqualified people who intermeddle in the preparation of documents that have legal operation cause great harm. The defence for such officiousness is often one of trying to save the will maker money. That is sterile. This deceased could have had several wills professionally prepared for a fraction of the cost that has been imposed on her estate by this application. The legal system should not be blamed for that expense”

It will be interesting to see in the future whether friends who ‘intermeddle’ with the creation of wills could actually be charged with providing legal advice without the proper qualification, or at the very least be legally liable for the cost the estate incurs in having to get a badly drafted will interpreted by the Supreme Court. 

We do offer an online will service, for very simple situations, but we also offer a review service so that you can have your draft professionally reviewed, so that the cost of the online will and review costs less than a properly drafted will. This small cost saving might make you sleep at night, but with the cost of a will starting from $350, it’s a very cheap solution to preventing your hard-earned assets disappearing in legal fees later. 

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