Property and Commercial – Tips & Traps March 2015

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By Tony Butler, Partner

Franchisors beware – ACCC announces target areas for 2015

The ACCC recently announced its key areas for scrutiny this year and all franchisors are on the hit list.

With the new Franchising Code of Conduct commencing on 1 January 2015 (Code), the ACCC now have enhanced powers to enforce the Code against franchisors, which includes handing out infringement notices with fines up to $8,500, and imposing monetary penalties up to $51,000, per breach.

Franchisors should ensure that they are across the changes to the Code which include new good faith obligations, updated disclosure document requirements and limits on enforcing a post-termination restraints of trade.

Public notification of development applications – get it right

A recent planning and environment case in Queensland highlights the importance of ensuring that developers comply with the public notification step in a development application process, as required by the Queensland Sustainable Planning Act (SPA).

In this case a developer was found to have failed to properly describe the proposed development and proposed use of the land, on both signage displayed on the site and in further material provided to interested parties. In particular, the developer had failed to properly describe what it mentioned were ‘ancillary facilities’, which were actually workers accommodation on the site for 30 staff.

The effect of failing to properly comply with the public notification requirements causes exposure to significant legal and other costs. These costs may include the costs of the appeal and costs associated with any further application for the development, including any further public notification of the development application in compliance with the requirements under SPA.

Tighter rules on foreign investment

Effective as of 1 March 2015, the Australian Government aims to tighten the rules and procedures concerning foreign investment, in particular foreign investors who purchase agricultural land in Australia. The Government will improve scrutiny of foreign purchases on agricultural land by reducing the screening threshold from $252 million to $15 million, which will apply to the cumulative value of agricultural land owned by a foreign investor. This means that any foreign purchase made over $15 million will require FIRB approval.

Mortgage Fraud – Ignorance is no longer bliss

Lenders should now be even more vigilant when ensuring that all parties to their documents are entering into those documents freely and without duress and that the parties understand the implications of those documents.

In the past, if a mortgage was registered, mortgagees could enforce their mortgage without being challenged, even if the mortgagor’s execution was obtained by fraud, provided the mortgagee had no knowledge of the fraud. However, a recent Victorian Supreme Court case found that if a mortgagor’s signature on a registered mortgage has been obtained by fraud, a lender will not be able to rely upon the mortgage despite the lender having no knowledge of any fraudulent activity.

The rationale behind this is that a mortgage document generally refers to ‘secured money’ as defined in the accompanying loan agreement. If the loan agreement was fraudulently obtained, it is void and not enforceable. Therefore a mortgage referring to a void loan agreement is, in effect, not securing performance of anything.

In Queensland, lenders are obliged to obtain 100 points of identification from the person executing the mortgage as mortgagor and ensure that they are the same as the registered proprietor on title.It is crucial that lenders continue to comply with this requirement.

Assessing a tenant’s damages claim

Tenants claiming damages in the way of reduced turnover and profits for improper conduct by the landlord (e.g interference with the tenant’s use of the premises) must:

  1. show that the conduct had an ‘immediate and continuing impact’ on turnover; and
  2.  be able to properly quantify the losses arising from that impact;

If those requirements are reached, a tenant need only also show sufficient evidence that the landlord’s conduct is “a” cause of the loss, not “the” cause to the reduction in turnover and profits.

If the landlord chooses to argue that other matters (for example, poor economic conditions, increased competition etc.) have caused or contributed to the tenant’s claimed losses, the landlord must provide sufficient evidence to support those claims.

Importantly, if the tenant cannot provide the requisite evidence outlines above, it may be awarded an equitable remedy, such as a rent abatement if it is able to demonstration that the landlord has acted improperly.

For further information, please do not hesitate to contact us.

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