Frequently Asked Questions
PROPERTY DEVELOPERS BEWARE: WATCH YOUR ASSURANCES BEFORE SIGNING ON THE DOTTED LINE LETTERS OF INTENT AND PRELIMINARY AGREEMENTS
Letters of Intent and preliminary agreements
Sometimes property developers and construction contractors like to record (or think that they need to record) their intentions in writing before they sign a formal contract. This is known in the industry as a letter of intent or a preliminary agreement.
There are common mistakes and misunderstandings made in relation to letters of intent and preliminary agreements by both new and experienced players in property development. These range from simple misunderstandings and miscommunications as to what has been agreed or left for later agreement, bad drafting, or just a failure to understand their legal effect.
There is nothing about the fact of having legal or commercial negotiations for a construction project that automatically requires a letter of intent or a preliminary agreement. However, such documents can be beneficial, if prepared properly and they do allow time for negotiation to agree on the detail as to all contractual terms and conditions.
Letters of intent
A letter of intent is a document that indicates a developer’s intention to enter a contract with a preferred contractor in the future. This might be done because:
although all aspects of the legal arrangements have not been agreed, the developer wants to “keep the contactor on side” as well as the benefits of the contractor’s proposal or tender;
the developer might not be able to make the full commitment required by the contract at a particular point in time, but does not want the tender to be withdrawn;
the developer might want the contractor to make itself ready for, or even make a start on, the work. It is not usually advisable to start any work before a full construction contract is signed, but sometimes an effective letter of intent, say with a limited scope of early works contract, may be a suitable compromise until all negotiations are concluded;
the developer might be incurring costs with the contractor in relation to design development and the engagement of other consultants, while still otherwise preparing for. and negotiating the terms of, project delivery. Accordingly, the parties may want something in writing to regulate their current and (potentially) future relationship.
What can a letter of intent do?
Critically, a letter of intent:
normally does not constitute acceptance of a tender, nor obliges the developer to enter a formal contract;
still needs to be handled very carefully, as significant benefits can arise for a contractor from the issuing of a letter of intent; and
in some instances, can amount to a promise to the effect that, if the contractor does some work, the contractor will be paid even if no formal contract eventuates.
Depending on its wording, a letter of intent can provide a legally enforceable obligation requiring the developer to pay the contractor for work done before, or even without, a subsequently concluded formal contract. This can occur even just by the developer’s course of conduct or by the overall dealings with the contractor.
Generally, a letter of intent can be issued after there is agreement on the key terms of the proposed contract, with a requirement for further negotiation before they are agreed. Depending on its terms and the circumstances, the effect of a letter of intent can be one of the following:
a binding contract in which, pending the signing of a formal contract for the entire project, is defined by the terms of the letter;
an “if” contract, where one party offers to the other that, if it performs the defined services, then that other party will be paid for such services. However, no obligation to perform is created and the reciprocal obligation to make the payment is limited by the terms of the offer set out in the letter; or
no contract has come into existence.
A well drafted letter of intent will prevent a contract from coming into existence until the parties have agreed on its terms, regardless of whether the contractor starts work in anticipation of a contract being finalised. Given the consequences of a badly drafted letter of intent, developers should ensure that their intentions are made very clear.
A preliminary agreement can be used where a developer and a contractor need more certainty, or perhaps more detail, than what is offered by a letter of intent. Again, these documents may be used before finalising a formal contract. There is a lot of law that categorises different types of preliminary agreement, and the extent to which they can be enforced or not enforced, including:
where the parties have agreed on the final terms of their bargain and want to be bound immediately to perform those terms, while at the same time also wanting to restate the terms more fully (albeit not different in their effect);
where there is complete agreement on all terms without any proposed changes but the performance of which is made conditional on signing a formal document;
where the parties want to be bound immediately and only on current terms, while expecting to make a further contract in substitution for the first one, containing, by agreement, additional terms; or
where there is no intention to make a concluded bargain at all, unless and until a formal contract is signed i.e. merely “an agreement to agree”.
Like a letter of intent, careful drafting is required here in order to capture the parties’ intentions.
Help is on its way!
Sharrock Pitman Legal has a highly experienced team of lawyers dealing with all construction and property development matters. One of our senior lawyers is an Accredited Property Law Specialist with the Law Institute of Victoria. Another one of our senior lawyers has substantial experience in construction and engineering law, being accredited as a Chartered Building Professional by the Australian Institute of Building.
We deal with all major forms of project delivery ranging from the smaller project to mid-sized development up to multi-million dollar projects. Our approach is “whole of project”, from early conception through to completion. As a law firm, we are very keen indeed to contribute to the success and profitability of your construction project.
Sharrock Pitman Legal
©2011 Sharrock Pitman Legal asserts copyright in respect of this document. This document is not to be taken as legal advice and Sharrock Pitman Legal accepts no liability of whatsoever nature arising out of or in connection with any act, error or omission of any person seeking to refer to or rely on this document. Legal advice should be sought in respect of your specific circumstances. No part may be reproduced by any process or for any purpose without prior written permission whereby Sharrock Pitman Legal has expressly transferred or released its copyright. This document must not be altered in any manner or used for any purpose other than the specific purpose for which it has been produced, unless with the prior written permission of Sharrock Pitman Legal. Should there be any unauthorised alteration or use of this document, then such happens at the risk of the client or at the risk of the person doing so.
CONSTRUCTION CONTRACTING IN TOUGHER TIMES BEWARE OF VARIATIONS
Whether you are an owner or a builder in the residential, commercial or industrial sector, variations in construction contracts have a time and cost impact, and can lead to financial loss if:
the contract does not have clear variations provisions;
the contract is administered badly and the variations provisions are not followed;
the scope of work is not documented properly; or
the final contract conditions and documents have “gaps” requiring the parties to go back to the tender process and argue about what was agreed.
The above are just some examples of the potential pitfalls.
The expression "variation" commonly is used in contract documents and project administration to identify an alteration, whether an addition, omission or other change to the work that is to be done.
Variations and risk allocation
Before you sign a construction contract, think about the following:
if you are entering a residential construction contract in a standard form from one of the major trade associations, the contract incorporates a variations regime required by residential construction legislation. Both parties need to ensure that the contract does not cut across that regime;
for commercial, retail and industrial projects, or even large / multi-unit residential projects (provided the latter comply with residential construction legislation), there may be a superintendent or an architect the power to approve, value and certify variations. The numerous Australian Standards contracts, Australian Building Industry Contracts and Property Council of Australia contracts, among others, each have their own variations regime. Take care to ensure that any amendments to them are fair, reasonable and suit your project;
is the deal one-sided in relation to the contract conditions for claiming, scoping, pricing and certifying variations? Are there powers to direct variations even before a price is agreed (which some commercial and industrial contracts allow), with the price to be decided subsequently?
a contractor generally is bound to perform a variation only as long as it is within the general scope of the contract;
what is the process for notifying proposed variations and for managing adjustments to the construction program?
is there the power to direct variations even if the price has not yet been determined or agreed at the time of the direction (which some contracts allow) ?
is there the power of a superintendent or an architect unilaterally to decide a reasonable price?
can there be variations for the convenience of the contractor as well as the owner, principal or developer? How generous are these conditions?
what about the step-by-step processes for the fair valuation of variations? For example, specific rates or prices; rates or prices in a priced bill of quantities, or a schedule of rates;
if the contractor incurs delay or disruption costs as a result of a variation, will the valuation allow a reasonable amount for overheads , profit or loss of profit?
have you reviewed the contract to ensure consistency and workability with the variations regime? For example, latent site conditions, changes in legislative requirements, the impact of claim bars, time bars and the final claim / final certificate provisions;
are the tender documents and / or a bill of quantities used to generate the contract price to be incorporated as contract documents? What is their order of precedence or importance to be given to them in the case of ambiguity or discrepancies?
if a bill of quantities is incorporated, there should be provisions for consequential adjustment to the contract sum where the actual quantities differ from those specified in the bill.
The critical point is that courts and arbitrators generally are very reluctant to break free of a contractual variations regime.
The time and expense that a party claiming a variation will have to bear in order to recover disputed variations, and especially where the contract is inadequate, usually is onerous and expensive.
A tighter and well prepared contract minimises the risk of disputes occurring down the track.
Help is on its way!
Sharrock Pitman Legal has a highly experienced team of lawyers dealing with all construction and property development matters. We also have a senior lawyer with substantial experience in construction, engineering and infrastructure law.
We deal with all major forms of project delivery ranging from the smaller project to mid-sized development up to multi-million dollar projects. Our approach is “whole of project”, from early conception through to completion.
As a law firm, we are very keen indeed to contribute to the success and profitability of your construction project.
Does it matter which Court I institute proceedings in?
The Magistrates', County and Supreme Courts each have different procedures and it is important to think about which Court will be best suited to deal with the particular type of claim you are making. Most claims for less than $100,000.00 should be brought in the Magistrates' Court.
It is important to remember that there are certain types of claims that can only be issued in a particular Court or Tribunal. For example, a claim relating to a domestic building problem must be issued in the Victorian Civil and Administrative Tribunal. If a claim is issued in the wrong place, it may be struck out, which would mean you would have to start again somewhere else. You would also commonly have to pay your opponent's costs.
If you are in a situation where you believe legal action is required to recover a debt, you should obtain professional legal advice.
What is "mediation"?
Prior to commencing court proceedings, a dispute should be mediated if at all possible, in order to save significant expense and worry. Even if you do commence legal proceedings, a Court will require you to attempt to resolve the dispute at mediation before proceeding to a final hearing.
For mediation, a professional mediator is appointed by the parties to assist them in reaching a mutually beneficial outcome. Usually, the parties and their lawyers will meet and have the opportunity to express their sides of the dispute. Sometimes, they will then enter separate rooms and use the mediator's assistance to negotiate with each other until a resolution is reached. The mediator will not make a decision about what the outcome should be. Their role is an impartial one, intended to assist the parties in their negotiations.
In our experience, mediation can be a highly useful, efficient and cost effective way of resolving a dispute. Our clients are often very satisfied with the results that can be achieved, as the process allows the parties to make their own decisions about the outcome, rather than relying on the decision of a judge or arbitrator.
Our firm has a nationally accredited Mediator who can conduct mediations.
Can the contracts I use in my business provide for a way of resolving disputes without going to Court?
Yes, it is possible for business contracts to include a clause which requires all disputes to be resolved by arbitration. This is becoming increasingly popular. You can save thousands of dollars, as well as many days of valuable time, by using arbitration instead of going to Court. Arbitration involves both parties to the dispute appointing an independent arbitrator to decide the outcome. The arbitrator will often be an expert in the type of business or industry involved.
It can be easy, however, for these types of clauses to cause further problems if they are not drafted properly. Before including a requirement for arbitration in your contract, you should speak to a lawyer to ensure that the clause does what you want it to do, without unwittingly causing undue delay and uncertainty.
A Company owes me $30,000.00 for goods it purchased from me. What can I do?
If the Company does not respond to a letter of demand, the next step can often be to serve a Creditor's Statutory Demand.
A Statutory Demand requires the Company to satisfy its debt to you within 21 days of service. If the Company fails to do so, you are entitled to apply to the Supreme Court for the Company to be wound up. For this reason, in our experience, a Statutory Demand can be a highly effective way of encouraging the Company to pay because most companies do not want to have a liquidator appointed.
There are very specific rules and requirements in relation to the format and content of a Statutory Demand. If you feel that this process could assist you and your business, please feel free to contact us for further advice.
My Retail Tenant is selling its business. What are my obligations?
In selling its Business, your Tenant will need to arrange for a Transfer of the Lease of the Premises from him/her/it to the Purchaser of the Business. As Landlord, your key consideration is whether to consent to such a transfer. Without consent, the Purchaser will have no right to use the Premises and, if the Tenant has already transferred the Business to the Purchaser, then the Tenant would be in breach of the Lease.
In seeking consent for the transfer, the Tenant should provide you with such information as a Landlord reasonably requires about the financial resources and business experience of the Purchaser of the Business. This would usually be a Statement of Assets and Liabilities (which may be prepared and certified by the Purchaser's accountant), two financial references (eg. from an accountant or banker) and two business references (eg. from other Landlords or suppliers).
In considering the information received, you should form an opinion as to whether or not you believe the Purchaser will have the financial resources and business experience necessary to allow him/her/it to meet the rent and other obligations of the Lease. Note that most Retail Leases require that you cannot unreasonably withhold consent to a transfer of Lease.
The Retail Leases Act 2003 limits the grounds on which you can validly refuse to consent to a transfer of Lease. If you are intending to withhold consent, you should ensure that you first receive proper legal advice to ensure that you are not exposing yourself to liability.
In any case, you should obtain proper legal advice when considering consent to ensure that your interests are protected in the transfer. Your costs of considering consent to the transfer would usually be paid by the Tenant under the terms of the Lease.
What should I look for when considering a new Retail Lease?
When you are looking at a new Lease for retail Premises, you should receive from the Landlord or Leasing Agent a draft Lease and a Disclosure Statement.
A Disclosure Statement is a document which sets out the details of the Premises, the rent, outgoings, your contributions to other costs and other matters which impact your use of the Premises. This will give you some idea of the costs that you would incur during the Lease.
You should read through the Lease carefully, noting any clauses which transfer obligations or costs to you (eg. outgoings, repairs, maintenance, etc). Be aware of clauses on matters such as rent reviews, your rights in transferring the lease or sub-leasing, the Landlord's installations, the security deposit and the default provisions. You should also ensure that no clause purports to limit the effect of the Retail Leases Act 2003 ('the Act'). The Act operates over retail Premises and for the most part acts to protect a Tenant by providing certain rights to the Tenant and obligations on the Landlord.
The Lease will govern your relationship with your Landlord through the life of your Business at the Premises and will impact the value of your Business. You should ensure that you obtain proper legal advice on it prior to signing.
I run my own business. Are there boundaries on the types of questions I can ask potential employees in their job interviews?
The short answer is 'yes'! When interviewing potential new employees, employers need to be careful about the questions they ask. Although you might have a legitimate reason for not giving the job to a particular applicant, you don't want them to begin wondering if they have been the victim of discrimination.
There is a range of Victorian and Federal legislation and case law which prohibits the unlawful discrimination of someone based on one or more of a series of factors. Even engaging in some friendly small talk during the job interview could potentially be used later against an unwitting employer.
When conducting your job interviews, we suggest that you avoid the following topics:
Especially if the job applicant is a mature person, you should avoid asking them about their age. In most workplaces, the age of the applicant will not be directly relevant to their ability to do the job.
This is a particularly sensitive subject when interviewing female applicants. You might be interested to know if they're planning to start a family in the near future and take 12 months of maternity leave, but it's illegal to refuse them the job on that basis. It's best that you just don't ask.
It might make nice small-talk to ask if an applicant is involved in a Church, for example, but discrimination on the basis of religion is a big issue. It isnt related to the job, so don't raise it.
Physical Impairments and Disabilities
You may think you're being considerate when asking a disabled or impaired applicant how they will manage walking up your front steps every day, but doing so could very easily leave an unsuccessful applicant wondering if that's why they didn't get the job. Unless you have a legitimate concern regarding the applicant's ability to do the job itself, you should avoid asking them about it.
As interesting as it may be to ask about an applicant's background, it can easily be misconstrued. It is firmly established that race is almost always irrelevant to a person's ability to perform in their job.
Discrimination on the basis of sexual orientation or gender identity is clearly prohibited. Asking an applicant about their background or relationships could land you in hot water.
Although you are entitled to enforce a reasonable dress standard at your workplace, you shouldn't comment on an applicant's weight, hairstyle or tattoos. All those factors have been the subject of unfair discrimination cases, and you don't want to be the next one!
Politics is often a good source of small-talk. However, discrimination against someone on the basis of their political beliefs is also illegal. Once again, it is best not to raise it with your potential employees. You don't want to leave them thinking that they didn't get the job because they have a different opinion to you.
What is a Trade Mark and how can I protect it?
A Trade Mark is a unique logo or name or image which distinguishes certain goods and services from those of another person.
There is a formal registration requirement and your registration of trade mark in Australia only affords you protection in Australia. It is important to consider registration in other jurisdictions if you are involved in business overseas.
If you have used your trade mark for a long time and have developed a reputation in the market, it may be possible to take action for infringement of your trade mark, even if your trade mark has not been registered. It is strongly advisable, however, to register your trade mark in order to avoid dispute as to who has the right to use the trade mark and to avoid going to court.
If you would like further information about how to register your trade mark, in what classes or jurisdictions should you register your trade mark or any other queries in relation to your trade mark, you should seek our legal advice.
How can I protect the computer software I create as part of my business?
Generally, there are two ways in which you can protect your rights of ownership with respect to computer software. They are copyright protection and patent protection.
Computer software including the source code and object code are protected as literary works under the Copyright Act 1968 and there is no requirement in Australia for any formal registration. You may wish to include a copyright notice on your software (e.g. © [Name] [Year]).
A formal registration process is required for patent protection of computer software. In order to be registered as a patent, the software has to be novel, involve an inventive step, be useful and most importantly, not been secretly used before in the relevant market place. If you believe that you have a patentable invention, it is important not to have disclosed it publicly or used it secretly. If you are unsure whether your software is patentable, you should seek our legal advice.
I don't want my former employees to steal my customers. What can I do?
It is common for employment contracts to include a 'restraint clause' which says that an employee who leaves will not work in the local area for a certain period of time. But what happens if a former employee ignores this?
The Courts start by assuming that the clause is void, unless you can convince a Court that the restriction is reasonable, taking into account your particular circumstances at the time when the contract was signed. If you succeed, your former employee can still try to convince the Court that the clause is against the public interest.
There have been a lot of cases about this, as what is 'reasonable' will vary dramatically depending on your circumstances, including the nature of your business and the size of your customer base. One thing that is clear from all those cases is that your chances of successfully enforcing a restraint clause are much higher when the clause is clearly and precisely drafted.
It is also important to remember that former employees have an ongoing duty not to misuse confidential information even after they leave, which means that they cannot take your customer list with them regardless of what the employment contract says.
If you believe that a former employee (or soon to be former employee) is likely to act in a way that will damage your business, it is important to seek legal advice as soon as possible. Hopefully, it will be possible to solve the problem before any damage is done.
I'm thinking about buying an existing business. Where should I start?
Before agreeing to purchase the business, or even making an offer, it is prudent to make some enquiries about the business and the entity selling it. This process is known as "due diligence".
The purpose of due diligence is to identify any potential issues in respect to matters such as the lease, intellectual property, employees, major contracts, suppliers and liabilities.
A purchaser of an established business can often make their own general due diligence enquiries. However, a lawyer and an accountant should be engaged by the purchaser to undertake due diligence enquiries on specialised financial and legal issues which may arise.
Depending upon the type of business being conducted, there may be other matters specific to that business which require examination.
We have a comprehensive due diligence checklist for vendors and purchasers of businesses. It will assist vendors to have their business made ready for sale and purchasers can make a thorough appraisal of a business prior to any purchase. We are happy to email this checklist to you, upon request.
My son-in-law wantes to move interstate with my grandchildren. The children presently spend equal time with my daughter and son-in-law. I'm heavily involved in their care and don't believe that it's in their best interests to move interstate. Does the
Yes, the interests of a child spending time with grandparents and other relatives is now better recognised under the new legislation. For example, explicit reference to grandparents and other relatives is made when the Court is considering the likely effect of any change to the child's circumstances.
I have Court Orders in place which require the children to live with me and spend time with their father on weekends. Their father has breached the Orders on numerous occasions, failing to return the children to me on time. Are there any remedies under
Yes, the existing enforcement regime has been strengthened by giving the Courts a wider range of powers (including "make up" time and compensation) to deal with people who breach parenting orders.
I've heard that it is compulsory to attend Family Dispute Resolution before taking a parenting matter to Court. Is that correct?
Yes, parents are now required to attend Family Dispute Resolution and make a genuine effort to resolve their dispute before taking a parenting matter to Court.
The exceptions to this are where there is family violence or abuse or circumstances of urgency. Staff at Family Relationship Centres will screen for instances of abuse.
A number of Family Relationship Centres and other new services to help families resolve parenting disputes have been introduced throughout Australia.
Does equal shared parental responsibility apply in all circumstances?
No, the presumption of equal shared parental responsibility will not apply if there are reasonable grounds for the Court to believe that a parent of a child, or a person who lives with the child, has engaged in child abuse or family violence.
I've heard that the new legislation makes it easier for fathers to obtain shared care of their children. Is that correct?
The legislation introduces a presumption of equal shared parental responsibility. This means that both parents have an equal role in making decisions about major long-term issues such as where a child goes to school, their religious and cultural upbringing, or major health issues.
There is a misconception that equal shared parental responsibility means "equal time". This is incorrect. However, the legislation now requires the Court to consider whether a child spending equal time with both parents is reasonably practical and in the child's best interests.
The Court will look at a number of factors in determining what is reasonably practical in terms of "equal time", including how far apart the parents live from each other, the parents' current and future capacity to implement such an arrangement and the impact that an arrangement of that kind would have on the child.
Changes to Family Law Proceedings
In 2006, Federal Parliament passed the Family Law (Amendment Shared Parental Responsibility) Act 2006, which makes a wide range of changes to the Family Law Act 1975. These changes represent the most significant reforms to the family law system in 30 years.
The purpose of the new legislation is to bring about a cultural shift in how family separation is managed, by shifting the focus away from litigation and towards co-operative parenting.
Can I change the person whom I have appointed to be my Attorney?
It is advisable to read over your Powers of Attorney from time to time to ensure that you are still satisfied with the person, or people, whom you have appointed. As your circumstances change, you might decide that there is someone else who would be more suitable. In this situation, you would need to execute new Powers of Attorney to appoint the new Attorney. If drafted correctly, the new document will automatically revoke any former Powers of Attorney that you have previously made.
When you become mentally incapable of managing your affairs, any person having concerns about decisions made by your Attorney on your behalf may make an application to the Guardianship List of the Victorian Civil and Administrative Tribunal which has the power to determine those concerns and to make the appropriate and necessary orders.
What are the different types of Powers of Attorney? Do I need all of them?
There are several types of Powers of Attorney available. Each type is a separate document designed to deal with different situations and events. To ensure that our clients plan for their future as effectively as possible, we generally recommend the following three types of Powers of Attorney:
A Financial Power of Attorney is essential should you ever become unable to manage your own business, property or financial affairs. You can make it operate for a limited period of time, for example if you are travelling overseas. However, we recommend that you make an "Enduring" Power of Attorney (as opposed to a "General" one), as an Enduring Power of Attorney will continue to have effect even if you are unable to continue managing your affairs because of illness or a lack of mental capacity.
A Medical Power of Attorney is effective only for any medical treatment when you might be incapable or otherwise unable to make your own decisions. The person entrusted with this type of Power of Attorney has very significant responsibilities in, say, operations, medical procedures, authorising the switching off of a life support machine, and medication (in consultation with medical practitioners).
He or she can refuse medical treatment but cannot make a pro-active decision to terminate your life. Any refusal of treatment must be based on medical advice and also based on his or her understanding that any proposed treatment would cause you unreasonable distress or you would have believed such treatment to be unwarranted.
This Power of Attorney does not include power to make any decisions about treatment which would relieve pain, suffering and discomfort or the provision of food or water. It does not include palliative care matters.
An Enduring Guardian can make decisions on your behalf on all health care and lifestyle matters as specified by you. This power is exercised only if you are unable by reason of a permanent or long-term disability to make reasonable judgements about your personal circumstances.
Importantly, if you give your Enduring Guardian power to make decisions about your health care, your Enduring Guardian will be able to consent or withhold consent to medical or dental treatment on your behalf. Your Enduring Guardian also has the right to make decisions about treatment which would relieve pain, suffering and discomfort or the provision of food or water. He or she can make decisions about palliative care matters.
What is the best way to protect my assets when I die?
There is a range of options available to you when considering how to protect your assets. Below, we explain what some of these options can involve. Each person's circumstances are unique, so if you feel that some of these options could be appropriate for you, please contact our Legal Team and we will be happy to provide you with professional advice and solutions to meet your individual requirements.
A Trust During Your Lifetime
Insulating your assets in a trust and giving yourself a life interest over those assets is one strategy. This means that you are able to use those assets during your lifetime but those assets are immune from any challenges, as you do not actually own those assets. The beneficiaries of the trust would be the persons to whom you wish to gift your assets. However, this can be expensive if you are transferring real estate and other investments which attract a transfer duty. There can be capital gains tax consequences as well. Great care must be taken.
A Testamentary Trust
After you die, your executor will hold your assets for distribution into various trusts for the benefit of each of your beneficiaries. Your assets do not actually pass into the hands of your beneficiaries. This protects the assets from creditors and provides tax benefits. However, this structure may not be suitable for everyone, as it may be expensive and cumbersome, where there is no real benefit to be gained. It is important that you seek proper legal and financial planning advice for a testamentary trust.
Having what are called mutual Wills can prevent a challenge, in accordance with this real life situation:
A couple wanted to leave their entire estate to their son to the exclusion of their daughter. They drafted Wills with the same terms and entered into a deed with their son, leaving their estate to each other and, upon the death of one of them, the survivor would leave the estate to the son. The agreement also included that the Wills could not be changed without their mutual agreement. Accordingly, once one of the couple dies, the survivor is no longer free to make a new Will and all challenges are defeated.
If you hold an asset jointly with another person when you die, that asset will automatically pass to the other person. Joint assets cannot be distributed by a Will. There can be no challenge concerning such an asset.
Can I prevent people from challenging my Will?
It is impossible to guarantee that your Will, no matter how cleverly drafted, will avert all challenges in the future. With proper instructions, a competent drafter can take into account the needs of your beneficiaries today. However, as circumstances change and unforeseen situations arise, the needs of your beneficiaries will also change, and a person who would not have a good claim today may have a successful claim tomorrow.
Any challenger to your Will must be able to show that you had a responsibility to provide for them but that you did not do so either adequately or at all. This challenge is based on your relationship with the challenger, as well as the financial and other circumstances of the challenger, your other beneficiaries and you.
A competent drafter should be able to make suggestions based on your individual circumstances as to how your Will can minimise the likelihood of a challenge.
Can anyone challenge my Will? If so, why should I bother making one?
In Victoria, a Will can be challenged by any person who believes that the deceased had a responsibility to make adequate provision for them in their Will. The claimant must also show the Court that they have a real need for further provision. If the Court is satisfied that the deceased did have such a duty to the claimant, it will then decide on the size of the provision that should be made.
Even though such a challenge is possible, you should still ensure that you have a valid Will. A Will sets out your wishes as to how you want your estate to be distributed. If properly drafted and executed, it can minimise the likelihood of such challenges, be tax effective and leave your beneficiaries with a less complicated estate to manage.
If you do not have a Will, you are allowing the parliament of the day to distribute your assets for you, which may not necessarily be what you want and may not take into account the needs of your beneficiaries.
What is the procedure to obtain a Grant of Representation?
The person who intends to apply for a Grant must advertise their intention to do so for a period of fourteen days. At the end of this fourteen day period, an application for a Grant can then be submitted to the Probate Office of the Supreme Court.
If the Probate Office is satisfied with the application, a Grant may be issued to the applicant as early as one week after the application has been made.
If the Probate Office is not satisfied with the application, a requisition will be sent to the applicant with further requirements required to satisfy the Probate Office. Once the Probate Office is satisfied, then a Grant will be issued.
Who is entitled to obtain a Grant of Representation?
Where there is a valid Will, the named executor is entitled to the Grant.
Where there is no valid Will, then the person with the greatest interest in the estate is entitled to the Grant.
When is a Grant of Representation necessary?
Whether a Grant is necessary depends on the assets of the estate. A Grant will be necessary in the following circumstances:
where the deceased owned real estate (unless it is owned as joint proprietors, in which case an application must be submitted to Land Victoria to transfer the property into the names of the surviving proprietors with the appropriate fee)
where the institution with which the asset is invested requires a Grant prior to release of assets to the executor. Each institution has their own requirements as to whether a Grant is required. With some institutions, if the total assets held with that institution are more than $15,000.00 then a Grant is required. Other institutions may have a threshold of $50,000.00.
What is Probate? Do I need it?
A Grant of Probate is a certificate given by the Supreme Court of Victoria to the effect that the Will of a deceased person has been proved and administration of that person's estate has been granted to the executor proving the Will.
Where the deceased did not leave a Will, a Grant of Letters of Administration is the equivalent certificate given by the Supreme Court of Victoria.
A Grant of Probate and a Grant of Letters of Administration are the most common types of a Grant of Representation for a deceased person's estate.
Caveats - A Lesson for Purchasers
In a recent case before the High Court of Australia, the Purchasers of a property were left without the house which they thought they purchased, and were also handed an enormous legal bill!
The Purchasers signed a Contract to purchase the property in question. However, months earlier, creditors of the Vendors had successfully sued the Vendors in respect of a debt which they owed. On the morning of settlement, coincidentally, the creditors obtained a Writ to enforce the judgment against the Vendors. The Writ entitled the creditors to seize the Vendors' property interests. Unaware of this development, the Purchasers proceeded with settlement but later found themselves unable to register their interest in the property.
After a long and expensive legal battle, the High Court ruled in favour of the creditors. Not only were the Purchasers without their new home, but they were also ordered to pay some of the creditors' legal costs!
This unfortunate situation would have been avoided had the Purchasers taken the extra step of lodging a protective Caveat against the property after they signed the Contract of Sale. The Caveat would have prevented any other dealings with the property without their consent. At Sharrock Pitman Legal, it is our practice to always lodge a Caveat when acting in the interests of our Purchaser clients. It is an inexpensive, yet invaluable way of protecting your interests.
Why should I retain a lawyer to do the conveyancing when I sell my property, when I could use a conveyancing company?
In selling your Property, you are not only dealing with a substantial asset, but you are also going to enter into a very valuable Contract with a party you probably have never met or dealt with. Given this, your rights should be properly protected from the many risks and dangers not only from the nature of the transaction but also from any actions of the Purchaser or their solicitors/conveyancers.
A solicitor is best placed to give you this protection and peace of mind. We don't take short cuts. We ensure that the work is properly and legally completed in your best interests and in accordance with your instructions.
As part of this protection, we ensure that:
A proper Contract is prepared for the sale/auction of the Property. A Contract, as opposed to a standard real estate agent's Contract Note, provides greater protection for a Vendor's interests and allows the Vendor to cover him/her/itself from risks specific to the Property.
A set of rate and planning certificates, being certificates issued by council, water authority, planning authority, State Revenue Office and VicRoads, are disclosed in the Vendor's Statement to limit any possibility of the Purchaser being able to withdraw from a signed Contract due to any lack of legally required disclosures.
Why should I retain a lawyer to do the conveyancing for my new property, when I could use a conveyancing company?
Your purchase is a substantial commitment both financially and otherwise and your rights should be properly protected from the many risks and dangers in the transaction from the initial Contract through to settlement and beyond.
Clauses in the Contract, issues in the Vendor's Statement, the actions of Vendors, their real estate agents or solicitors/conveyancers can all negatively impact your rights as a Purchaser, unless you are properly protected. A solicitor is best placed to provide you with the legal advice to avoid risks where possible and, if difficulties do arise, to strongly protect your interests.
As part of this protection, we ensure that:
A Caveat is lodged over the title to the Property as soon as practicable after we receive the signed Contract. The Caveat protects your interests by preventing the Vendor from dealing with the title to the Property without your knowledge during the Contract period (Note: "Caveats - A Lesson for Purchasers" below).
Rate and planning certificates from government and other authorities are obtained and copies provided to you to ensure that the Vendor's disclosures are correct and that you know the circumstances of the Property prior to the paying the balance of purchase price.