When an existing lease expires, a tenant may have the “option” to renew the lease. Essentially a tenant has the right to have a new lease granted to them on the same terms as the existing lease. However, the rent will be reviewed in accordance with the rent review terms of the existing lease.

So, what should a landlord be aware of when the initial term of a lease is coming to an end?

Here is a handy checklist for landlords:

  1. Option Notice Period: It is important to ensure that you have entered into your calendar the correct dates the tenant is required to exercise their option to renew the lease. Usually, there will be a window (for example, a window of 3 to 6 months before the terminating date of the initial term) when the tenant can provide notice exercising their option to renew the lease. If the tenant misses this window, then the option period lapses and you may have cause to refuse the grant of a new lease.
  2. Validity of the Notice to Exercise the Option Term: The existing lease will usually mandate and set out the formal requirements for notice of the exercise of an option term by the tenant, such as the required method for service of the notice. As surprising as it may sound, a notice can be deemed invalid based on such a technicality, so it is important to seek legal advice in this regard, if you are unsure.
  3. Ask Yourself – are there any Subsisting Breaches Under the Lease? A breach of an essential term of the lease can include, amongst other things, the tenant’s failure to pay rent, maintain the condition or permitted use of the property. If the breach is still subsisting at the time the tenant serves their notice to exercise the option, they may no longer have a right to a new lease term. In such an instance, you will be required to notify the tenant in writing of the breach within 14 days after the giving of a notice or within 14 days after the breach occurred if the breach occurred after the giving of that notice, in accordance with the relevant legislation. This is something worth considering in the lead up to an option term and certainly something worth seeking legal advice on.
  4. Acknowledgement of Notice and New Rent: It is important that you provide written acknowledgement to the tenant if you agree to grant the further term. You will then need to determine the new rent payable at the commencement of the option term, in accordance with the rent review terms. If, however, you decide that you do not wish to grant the further term to the tenant, then we would strongly suggest you seek legal advice, to ensure that the grounds for refusal are in line with the terms of the lease and any relevant legislation. This could potentially save you from any legal action by the tenant.
  5. Preparation of the Option Lease: It is essential that you engage your solicitor to prepare the lease for the new term, to ensure that the option lease terms are properly documented. Unless otherwise agreed to between the parties, the terms will be essentially the same as the existing lease.

In summary, the process for option leases can be a delicate and quite complex task for landlords. Ensure you are aware of all your legal rights and obligations by seeking legal advice prior to delving into the option lease process.

In the latest issue of the F&P (Fundraising & Philanthropy) magazine, Joanne Grant, Partner at Makinson d’Apice takes a look at the legislative and compliance requirements that will impact the charity and not-for-profit sector in the next 12 months.

Click on the image to read the article.

Most Australian entities will now be aware that the Modern Slavery Act 2018 (Cth) (Commonwealth Act) commenced on 1 January 2019.

However, you may not be aware that the NSW government has recently passed its own Modern Slavery Act 2018 (NSW) (NSW Act), which will commence on 1 July 2019.

Obligations under the Commonwealth Act

Under the Commonwealth Act, entities based or operating in Australia which have AU$100 million or more in annual global revenue must report annually on their efforts to address modern slavery in their operations and supply chains. “Modern slavery” constitutes things such as human trafficking and child labour.

Entities covered by the Commonwealth Act are required to provide a “Modern Slavery Statement” every year. The Minister will publish these on a Modern Slavery Statements Register, which is available to the public online.

In preparing a Modern Slavery Statement, a covered entity is required to:

  • identify the risks of modern slavery practices in their own operations and those of their supply chains as well as the supply chains of any subsidiary entities they may have
  • describe what actions the covered entity (and any subsidiary entities it may have) has taken to assess and address those risks; and
  • assess the effectiveness of such actions. Whilst the Commonwealth and NSW Acts have many similarities, the NSW Act has a wider range than the Commonwealth Act. It applies to entities which:

What will change under the NSW Act

Whilst the Commonwealth and NSW Acts have many similarities, the NSW Act has a wider range than the Commonwealth Act. It applies to entities which:

  • are not government agencies;
  • have employees in New South Wales;
  • supply goods and services for profit or gain; and
  • have a total turnover in a financial year of $50 million or more.

The requirements for Modern Slavery Statements under the NSW Act will be set out in regulations which are yet to be passed. However, the information required under the NSW Act is likely to be very similar to that required under the Commonwealth Act.

One of the criticisms of the Commonwealth Act is that it currently does not contain any penalties for non-compliance.

However, under the NSW Act, if an entity fails to prepare a Modern Slavery Statement under the NSW Act, the maximum penalty is $1.1 million.

How should you prepare for the NSW Act?

To prepare for the commencement of the NSW Act, you should consider whether there is any risk of modern slavery arising from your (and your subsidiaries’) operations, as well as those of their business partners and suppliers.

We would suggest that all entities do this, even if they believe that they are likely to be below the threshold for either or both of the Commonwealth Act and the NSW Act.

Some examples of NSW entities whose operations may be at risk of modern slavery are:

  • schools who have their uniforms manufactured by third parties overseas
  • importers of sea food from Thailand or Burma

Entities should also consider reviewing their contracts with third parties as to whether those contracts include a provision relevant to modern slavery.

Please do not hesitate to contact us if you have any questions about the Commonwealth Act or the NSW Act.

It is quite common for charities to provide gifts or honorariums to individuals who are important to their organisations as a gesture to express their gratitude and appreciation. However, as registered entities with the Australian Charities and Not-for-profits Commission (ACNC), charities are required to comply with the ACNC’s Governance Standards when applying its resources. Therefore, careful consideration should be given to certain potential legal issues and financial reporting requirements when making the decision to provide gifts or honorariums.

The question whether it is appropriate for a charity to provide gifts or honorariums under certain circumstances should be determined on a case-by-case basis.  To discharge their duties to act in good faith in the charity’s best interest and to further its purposes, a charity’s Responsible Persons must properly consider the issues and concerns with providing gifts or honorariums and adopt a formal policy on their provision where necessary.

The ACNC has released a guide to explain its expectations on this issue, which also recommends 10 questions for charities to ask themselves before providing a gift or honorarium (please be aware that this does not constitute an exhaustive list of legal issues):

  1. Do the charity’s governing rules allow it to provide gifts or honorariums?
  2. Who receives a gift or honorarium and why?
  3. How should the charity determine the value of the gift or honorarium? It may be through a discussion among the Responsible Persons or at the management level. It may be by consulting with other similar charities.
  4. Will the payment of a gift or honorarium affect any current funding arrangements? For example, schools receiving funding from the Government are subject to legal obligations to ensure that funds must be used in a particular way.
  5. What will supporters or the public think of the charity providing a gift or honorarium? For example, it could pose a risk to the charity’s reputation and its donations especially if the gift or honorarium is of significant value?
  6. Is the gift or honorarium going to be a once-off occurrence? If not, it might not be a true gift or honorarium, especially if recipients are expected to do something in return, or if it is made in exchange for services. There may be implications for this under employment and tax law.
  7. Is the charity considering the gift or honorarium because its rules prevent it from offering remuneration? If so, the charity may not be taking reasonable steps to ensure that its Responsible Persons are acting in good faith and in the charity’s best interests, particularly if the person receiving the gift or honorarium is likely to be regarded as an employee or contractor.
  8.  Is the charity considering making a gift or honorarium to cover the out-of-pocket expenses incurred by individuals – for example, travel costs to attend a board meeting? If so, the charity should consider reimbursing those individuals for the actual costs incurred instead, if allowed by its governing rules.
  9. Is the charity providing a gift or honorarium on a regular basis to recognise an individual for their services? If so, the charity should consider if it is more appropriate to recognise them as an employee or contractor instead.
  10. Is the charity providing a gift or honorarium to a Responsible Person? If so, the charity should make sure there is a proper process for making a decision and determining a reasonable value. To avoid any conflict of interest, a Responsible Person should not participate in any decision about a gift or honorarium to themselves.  The charity should further consider: How will the charity’s Responsible Persons be accountable for and transparent about the gift or honorarium and will the charity consult with its members or put the decision to its members?

Please don’t hesitate to contact us if you require further information or specific advice in relation to your charity’s practice and policy for gifts and honorariums.

The holiday season is over, everyone’s back at their desks and we’ve already completed the first month of 2019. It can be scary how time flies.

As with all years in recent times 2018 was a busy year for charities and other not-for-profits and with the start of the new year we thought this was a good opportunity for us to look at what may be in store for charities and not-for-profits during 2019.

We have summarised some of the changes and issues that will confront the sector this year.

  • The ACNC review – we expect the Government to provide its response to the review in the first half of this year.
  • The “in Australia” draft ATO Ruling will be finalised.
  • The ACNC External Conduct Standards will commence on 1 July 2019 (unless disallowed by Parliament).
  • DGR reforms are slated to come into effect from 1 July 2019: with non-government organisations with DGR status to be registered as charities with the ACNC, and the ACNC to administer the registration of harm prevention charities, cultural organisations and overseas aid funds.
  • The federal election is likely to bring up a number of issues which may impact upon charities and not-for-profits. Already the Labor Party platform denying cash refunds for excess dividend imputation credits may have an impact upon tax exempt entities.
  • Will this be the year that there is some significant fundraising reform? Perhaps the Australian Consumer Law may be expanded to include charitable fundraising? This would provide consistency in approach throughout all jurisdictions in Australia and a welcome relief from administrative burdens to NFPs across the country.
  • Meanwhile the NSW Government is busy drafting new charitable fundraising guidelines for public consultation later this year.
  • The Royal Commission into Aged Care Quality & Safety is underway and it will no doubt impact significantly on a number of charity and not-for-profit aged care providers, (click here to read our Royal Commission into Aged Care Quality and Safety brochure).
  • The National Redress Scheme is well underway after a slow start. We can expect the number of claims to increase as more organisations agree to enter the Scheme.
  • The new FBT Ruling will come into effect.
  • The legislative package containing the Government’s response to the Ruddock Religious Freedom Review should be tabled in Parliament.
  • Hopefully there will be further state or territory take-up of ACNC reporting and further cutting of red tape.

These are just some of the things that may come across our desk in the next 12 months … and of course there’s always the unknown!

Please don’t hesitate to contact us if you need assistance in navigating your way through any of these changes in the coming year.

Two notable developments in the NSW retirement villages sector have recently taken place – the first being the passage of new retirement village amendment legislation in November 2018 and the second being the appointment of a retirement village ambassador in December 2018.

Retirement Village Reforms

The Retirement Villages Amendment Act 2018 was assented to on 28 November 2018 following the completion of the Inquiry into the NSW Retirement Village Sector in 2017.

The Amendment Act will amend the Retirement Villages Act 1999 and its associated regulations. Below is a summary of the main changes:

  • Emergency plans and safety inspections – an operator of a retirement village must ensure that an emergency plan is prepared and maintained and that residents and staff are made familiar with the plan. Furthermore, the operator is required to undertake a safety inspection at least once a year and report on such findings to residents.
  • Annual emergency evacuation exercises – an operator of a retirement village must ensure that an evacuation exercise for residents is carried out at least once a year. Key safety information must also be displayed and provided to residents.
  • Meeting to explain village contract information to residents – a resident may request, once a year, a meeting with the operator for an explanation of certain information about the resident’s village contract. The operator must provide the resident with a written summary at the meeting of the explanation.
  • Rules of conduct for operators – the regulations associated with the Act may be amended to prescribe rules of conduct for operators with respect to professionalism, training, competencies, performance and behaviour of management.
  • Asset management plans – operators will be required to prepare and maintain an asset management plan for the items of capital within the village.
  • Other – other changes relate to the appointment of auditors and enabling the regulations to make provisions for mediations of disputes and what information about the retirement village might be required to be made available to the Office of Fair Trading and other government agencies.

The provisions of the Amendment Act are not yet in force at the date of this article and there is no current set date for when the changes will commence. However, the Office of Fair Trading has suggested that the changes will commence on 1 July 2019.

Many of the above mentioned provisions come with significant penalties should an operator fail to comply with them. We recommend that operators start preparing for the enactment of the changes sooner rather than later. The Amendment Act should be carefully reviewed and further advice may need to be obtained by operators to ensure that compliance can be achieved.

Retirement Village Ambassador

On 10 December 2018, the Department of Finance, Services & Innovation announced the appointment of Kathryn Greiner AO as the NSW Retirement Village Ambassador. Ms Greiner had led the Inquiry into the NSW Retirement Village Sector in 2017.

According to the Office of Fair Trading, the Ambassador role will involve informing residents about the changes to the retirement village laws, listening to and advocating for residents and monitoring and reporting on issues facing the sector. The terms of reference for the NSW Retirement Village Ambassador Program are now available for consideration.

Part of the Ambassador’s role is the conduct of a “Retirement Village Roadshow” that will involve visiting retirement villages and speaking to residents. The Roadshow will also involve talks and information sessions at retirement villages, RSL clubs and local centres around NSW. Members of the public can contact the Office of Fair Trading to request a visit from the Retirement Village Ambassador.

When Joanne joined Makinson d’Apice eight years ago, Bill d’Apice quickly recognised Joanne’s legal skills, positive attitude and impeccable client relationship skills.  Since that day the two of them have worked together and with the rest of the Charities and Not-For-Profit team they have built the practice it is today.

As Bill states:  Joanne’s appointment as a Partner is a fitting recognition of the leadership role she has grown into within our practice group. Her skills particularly in the property and the charities and not-for-profits areas and the strong relationships she has developed with clients within our practice group have played a vital role in the success of my team and the firm. I am delighted to announce the promotion and welcome Joanne to the Partnership.

Joanne is looking forward to joining the Partnership and continuing to grow her practice and reputation as a specialist in the property and Charities and Not-For-Profit areas together with Bill and their team.

Joanne’s promotion was effective from the 1st of January 2019.

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The Prime Minister released the terms of reference for the Royal Commission into Aged Care Quality and Safety on 9 October 2018.

The terms of reference are very broad and it is important that all those organisations involved in the provision of aged care either directly or indirectly consider what preparations they may need to make at this stage and into the future to be ready for the Royal Commission.

To assist you, we refer you to our short brochure summarising a number of preliminary legal and administrative issues which you may wish to consider at this stage.

Click on the image to download the brochure.

 

 

 

 

 

With effect from 1 October 2018, associations incorporated under the Associations Incorporation Act 2009 (NSW) which are registered charities will no longer have to submit annual financial reports to NSW Fair Trading as well as the Australian Charities & Not-for-profits Commission (ACNC).

The annual financial reports which these charities lodge with the ACNC will be securely shared with NSW Fair Trading and will be accepted for the purposes of complying with the NSW legislative requirements.

This new arrangement is welcomed as it will cut some more red tape for NSW charities who are also incorporated associations and it will bring NSW into line with Victoria, South Australia, Tasmania and the ACT.

It would be of even greater assistance for all State and Territory Governments to adopt the Federal definition of a charity under the Charities Act 2013 (Cwth) and to accept registration with the ACNC as evidence of charity status for the purposes of local legislation.

Should you require any advice in relation to this, please do not hesitate to contact our office.

Bill d’Apice, Partner | +61 2 9233 9013 | wdapice@makdap.com.au

Belinda Marsh, Senior Associate | +61 2 9233 9083 | bmarsh@makdap.com.au

The ACNC legislation passed in 2012 allowed for the creation of minimum external conduct standards that are required to be met by registered charities.

To date, this issue seems to have been in the government’s too hard tray but Treasury has now issued draft external conduct standards and is seeking submissions on them.

The draft regulations are intended to be a principles based set of minimum standards of conduct, governance and behaviour that ACNC-registered charities must comply with when operating outside Australia. There is no exception for basic religious charities (unlike the exception that exists for basic religious charities in respect of governance standards).

Details of the draft external conduct standards can be found at the Treasury website. And interested parties can submit responses up until 21 September 2018. In addition, Treasury is proposing to hold meetings with interested parties and should you wish to be involved you can express your interest via email to externalconductstandards@treasury.gov.au by 17 August 2018.

We expect that these external conduct standards may have some significant practical implications for charities operating outside Australia. We recommend that you carefully review these to see whether they will have any implications for your charity and, if so, whether it would be appropriate to lodge a submission.

Treasury seems to be focusing on the activities of charities and other NFPs operating or controlled outside Australia with the release of a draft ruling on the “In Australia” requirements in July 2018.

Should you have any questions or should we be able to assist please don’t hesitate to contact Bill d’Apice of our office.