Commercial Law, Business Matters, Leasing Law

As a matter of law, a written lease is not required. However, without a signed lease in writing, you have no security of tenure and can be required to vacate premises on thirty days’ notice at any time. However, if you are the tenant or landlord of a retail premises, a lease must be in writing and signed by all parties. Any tenancy of twelve months or greater of retail premises constitutes a retail lease which must be in writing.

For security of tenure, it is always desirable to have a signed written lease. This is particularly important should any sale of business be contemplated.

Usually a Heads of Agreement is not intended to create a legally binding Contract until a subsequent Contract is signed by the parties. However, Heads of Agreement can set out an intention to be legally binding.

First, in most cases, the sale of a small business requires preparation of s.52 Statement by a practising accountant. Until the buyer has been provided with a copy of a s.52 Statement, a Contract of Sale will not be legally binding.

A list of plant and equipment and other assets comprised in the sale should be cornpiled. A Contract of Sale should then be prepared. Usually the Contract of Sale of Business is prepared by the vendor.

Where a business broker is appointed to negotiate a sale, a Heads of Agreement will often be prepared by the agent for signature by a proposing purchaser. Such Heads of Agreement is not usually binding until a formal Contract is exchanged.

Once a suitable business is identified, negotiations should be concluded with the vendor. However, a Contract of Sale should not be signed until legal advice has been received upon the Contract and an accountant has reviewed the vendor’s s.52 Statement. Any deposit should be paid to the trust account of the vendor’s lawyer or business agent and not directly to the vendor. A deposit will usually be required upon signing a Heads of Agreement (even if not legally binding). If paying a deposit to a business broker, you should first enquire of Consumer Affairs Victoria to ensure that the broker is a licensed real estate agent.

When setting up a business, matters to be considered include personal financial liability, tax implications, establishment costs, profit distributions and exposure to risk. It is important to consult with an accountant and/or solicitor to assist in making such a decision.

There are a number of business structures available, such as sole trader, partnerships and proprietary limited companies. Consideration should also be given to trust structures. Not all businesses are the same and each structure has varying advantages and disadvantages.