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Retirement Village

What Do You Need to Know About Retirement Village Agreements

By | Estate Planning

Advances in medicine, technology and lifestyle choices meaning Australians are living longer.

As a result, the proportion of the population aged 65 or over has increased and is forecast to continue to increase. In 2017 3.8 million Australians, or 15 per cent of the population, were aged 65 or over.

One of the implications of this trend is the growth in aged care facilities such as nursing homes, residential retirement villages and over-55 ‘lifestyle communities’.

There are different types of agreement covering these facilities, as well as different legislative rules. We’ll provide an outline of each below but if you need more information or guidance when considering an agreement, contact Felicio Law Firm. We have a proud track record advising our clients in this area.

Retirement village agreements

All retirement village contracts in NSW are regulated under the Retirement Villages Act (NSW) 1999 (‘the Act’).

Before a person can move into a retirement village, a written contract must exist with the village operator unless the prospective resident is moving in with an existing resident, or is signing a residential tenancy agreement under the residential tenancy laws.

A contract with a village can encompass a residence contract or a service contract, or a combination of both. Prospective residents must be given a copy of their proposed contract at least 14 days before signing it and a cooling-off period generally applies allowing a person time to back out of the contract.

The standard contract in the Retirement Village Regulation 2017 and applying to contracts agreed to after 1 October 2013 sets out the details of each party’s rights and obligations, including costs, services, facilities, alterations and additions, repairs and maintenance, and sharing of capital gains.

Additional terms can be added to the contract provided they do not contradict the standard terms, the legislation or any other law.

Certain documents must be attached to the contract including a copy of the disclosure statement provided to the resident; the residence condition report; details on the village’s services and facilities, and the village rules (if any).

A standard form is not required if the resident is signing a sale of land contract where the person buys a strata or community scheme unit, or an agreement to buy company title shares. A service contract, however, is still required.

Key types of retirement village contracts include:

Loan and licence arrangements: The resident pays an initial contribution in the form of an interest-free loan, or a non-refundable deposit that is deemed part of the loan.

This contract provides entitlement for the resident to reside at the village along with termination provisions. If the loan agreement is in combination with another type of contract such as a licence or a lease, it should make reference to the entitlement to reside in that document.

Under this agreement, recurrent charges will be payable on a fortnightly or monthly basis.

Leasehold arrangements: A resident enters into lease with the village operator/owner. The resident becomes a registered interest holder where they enter into a long-term lease that includes a provision that entitles the person to at least 50% of any capital gain.

Depending on its terms, the lease may provide for entitlement to the whole, or a share, of the capital gain to the lease-holder, as well as be liable for the whole (or a share) of the capital loss upon the sale of the interest.

Strata and community schemes: The resident becomes the registered proprietor of a lot within the strata or community scheme via a contract for sale.

In this situation the resident becomes a member of the owners’ corporation or association and so must pay strata/community levies.

The owners’ corporation is also responsible for maintenance of common property.

The resident will generally also sign a service contract with the retirement village operator, including detailing the Ingoing Contribution, the requirement to pay departure fees and whether a capital gain/loss on the lot is shared with the operator.

Rental arrangements: This arrangement looks like a normal tenancy arrangement, including payment of a bond, but with no Ingoing Contribution or departure fees.

Company title schemes: The prospective resident purchases shares in the company which is the registered proprietor of the retirement village. These shares provide the right to reside on one of the premises. A services contract is generally required providing for when departure fees are payable. A bond to the company may also be possible, refundable upon the sale of the shares.

Over-50s lifestyle communities

These types of communities are governed by similar provisions to retirement villages though more closely resemble tenancy agreements.

Covered by the Residential Parks Act 1988, there are applicable rules for the conduct of operators and residents, contractual cooling-off periods, maintenance of grounds and facilities, and terms about departures.

A key distinction with this type of establishment is that residents own the building and pay rent on the site hosting the building. This means they are stamp duty exempt and the resident may also be able to apply for rent assistance.

Nursing homes

Nursing home agreements apply to those who are reaching the stage where they need to live close to emergency and constant care.

There are a number of agreements related to nursing homes, and sometimes they are combined into one.

The resident agreement details the services and level of care to be provided as well as its cost. It also provides details on supporting the resident as needs change, as well as exit arrangements and how to move to another aged care home.

The accommodation agreement covers the type of room to be provided, any other conditions on the accommodation and the cost. This includes a means assessment to work out whether the resident may be eligible for government assistance with the costs of nursing home care. The agreement will also outline options for payment, from regular rent to lump sum payment.

Discuss your needs with us

In any of the agreements outlined above, independent legal advice should be sought before entering into one to ensure you are fully aware of your rights and responsibilities.

At Felicio Law Firm we regularly advice people on these important life decisions. Choosing the right residential option for your later years is not only a large financial commitment but a decision you want to make without stress or complication.

Estate Planning Lawyers Central Coast can help you achieve that outcome with considered, understanding legal guidance.

Importance of Making a Will

The Vital Importance of Making a Will

By | Estate Planning

The thought of making an important legal document such as a Will can be one of those ‘life tasks’ people like to put off, but there are many very compelling reasons for resisting that impulse.

In this article, we’ll provide some more detail on the most important reasons for making a Will. Perhaps the most important, when all is said and done, is that a Will is an expression of your final wishes. For your loved ones, it is usually relied on as a clear ‘guide’ for them to follow to ensure that your estate is distributed as you wished it to be.

Your Will generally provides guidance on what you wish to happen with: land, houses or commercial property that you own; money held in bank accounts and term deposits; shares; other investments; personal belongings; life insurance policies, and; employment entitlements (but not always superannuation).

If you fail to make a Will before your death, the state may become responsible for distributing your estate under the intestacy laws and any wishes you had for how this should be done during your lifetime are likely not to be honoured.

If you have questions about making a Will, call Felicio Law Firm today. We have experienced Wills and Estates lawyers who take a caring and compassionate approach to the queries and concerns of our clients.

The best reasons for making a Will

Perhaps the primary reason for making a Will during your lifetime is to ensure you do not die intestate (without a Will).

To do so means your worldly possessions will be distributed by an administrator under the state’s intestacy laws, and not take into account what you wished to happen with your estate.

When you make a Will, you appoint a trusted person as the executor of the document, entrusting them to distribute your assets to beneficiaries, resolve your debts and order your affairs according to the instructions you left in the Will.

One thing an administrator is likely to do is to distribute your assets equally between your children. But for a variety of reasons, many people do not wish this to be the case. One of their children may have personally cared for them in their later years and the Will-maker believes they deserve more from the estate. One child may have been professionally successful and less needy of an inheritance. One may be going through or has gone through, a divorce, where the ex-partner may have a claim on the inheritance as part of a property settlement.

Perhaps you would like to specifically look after your grandchildren in your Will. This may not occur if you die intestate because your estate will generally be distributed between a surviving spouse and your children, rather than the next generation.

Similarly, stepchildren are not generally recognised as beneficiaries under intestacy laws. They can become so under a valid Will.

Many people would like to leave something in their estate to a charity, or a lifelong friend. Again, without a Will, this is unlikely to happen under the laws of intestacy.

A further reason to make a Will even before you reach mature years is that the document allows you to name a guardian for minor children. No one knows what the future holds. In the event of your sudden death, or that of both you and your partner, it may be left to a court to decide which people are best placed to take responsibility for your infant children, and these may not be the people you preferred.

The importance of a Will in blended families

In modern society more and more people need their Will to address the fact they have had more than one family during their lifetime.

You may divorce and remarry. You may divorce and your ex-partner remarries or forms a new de facto relationship. There may be children from the original relationship but not the subsequent one, yet the surviving spouse may be able to bypass their children when they receive and pass on your assets to the new spouse (and their beneficiaries).

There are a number of ways a Will can deal with these situations but you should first consult an expert legal professional. There may be a ‘mutual Wills’ agreement whereby both spouses agree not to change their Will when one of them dies, allowing the children from the relationship to enforce the agreement in court should a surviving spouse decide to change his or her Will.

Another solution is to grant a right of residence to each other to live in their share of the family home for life, with each other’s share returning to the other once one of them dies.

Making a valid Will

In the digital age, there are many free and DIY will kits offered online. It’s very easy, however, for a legal document such as a Will to be adjudged invalid if it is not done correctly. An invalid Will means your wishes can, again, be overridden by intestacy laws.

In general, a Will must be in writing, whether handwritten, typed or printed, signed by the testator (the Will-maker) and witnessed by two other people who also sign the Will.

Ideally, a Will should be reviewed and, if necessary, updated every three to five years. This way it can best reflect any changes in your life circumstances, most particularly changing family arrangements. Once you start earning income, it’s never too early to consider making a Will.

If you have questions or concerns about making a Will, contact specialists Felicio Law firm today.

Pitfalls of Being a Guarantor

What are the Pitfalls of Being a Guarantor on a Home or Business Loan?

By | Property Law

Probably the most common situation where someone guarantees a loan taken by another person is that of parents doing so for adult children who wish to buy a house.

In other situations, a person may be guarantor for a business loan taken out by someone else.

In either situation being a guarantor for the loan – meaning you become legally responsible to the lender that you will pay back the loan if the person the money is lent to fails to make repayments – is an admirable thing to do, but also carries some pronounced risks.

Let’s take a more detailed look at some of the pros and cons of being a guarantor below. Before you agree to be a guarantor, however, or ask someone else to go guarantor on your loan, seeking professional advice from legal specialists with expertise in the rights and responsibilities of this role is essential.

What are the risks of going guarantor on a loan?

Before you agree to be a guarantor on a loan, you should ask yourself some searching questions. Becoming legally liable for someone else’s debt is a considerable burden, and could severely impact your own lifestyle and future.

Particularly in family situations, where a parent may take on the guarantor role to help an adult child take out their first home loan, emotion can sometimes cloud reason.

The key risks to be aware of are:

  • Being liable for the entire loan, plus interest and fees, if the borrower can’t make the repayments and defaults. If you are also unable to meet the terms of the loan, the lender may proceed to repossess the asset/s you nominated as security for the loan, including your house.
  • As a guarantor, your own ability to apply for a loan may be affected. You will be required to inform a lender of any other loans on which you are a guarantor.
  • Should you as guarantor, or the borrower, be unable to meet the terms of the loan, your credit report will be adversely affected and your ability to borrow in the future may be impaired.

A guarantor also needs to consider the possible effect of a family member defaulting on a loan for which they are guarantor. The relationship may be irretrievably broken if the trust implicit in the arrangement is breached.

Guarantor on business loans

Whereas a family member will generally be the guarantor on a home or personal loan, partners, investors or associates are also commonly guarantors when someone applies for a business loan.

With this type of loan, the lender will generally need to be convinced that the guarantor has a genuine relationship with the borrower, an interest in the business and sufficient assets to guarantee the loan.

A residential or a commercial property would usually be considered a sufficient asset to be offered as security for the loan.

Where the loan is for a new business, the guarantor will generally be guaranteeing 100 per cent of the loan because the new business has no assets to use as security. If the loan is to purchase commercial property, the guarantor will usually guarantee a 30 or 40 percent portion of the loan.

Important final questions

As we mentioned earlier, a potential guarantor needs to ask some important questions before signing on to guarantee a loan.

Does your financial situation allow you to take the risk of losing the asset you have offered as security? Are there are other ways you could help achieve the aim of the borrower, such as loaning the money to them directly? How strongly do you trust the borrower to make the necessary repayments?

It’s crucial that before agreeing to be a guarantor, you examine the loan contract, business plan or any other relevant documentation the borrower needs to provide to the lender. The best advice is to treat the loan you’re guaranteeing as if it were your own.

The process can be time-consuming and involved. Expert legal advice from experienced advisers such as Felicio Law Firm is essential. Whether it’s a home or business loan you’ve been asked to guarantee, we can provide understanding and relevant guidance on how to approach the question.

Resolving Building Contract Disputes

How to Resolve Building Contract Disputes in NSW & QLD

By | Litigation

Unfortunately disputes arising from domestic building contracts are a common story. Just ask anyone who has built or renovated a house.

While most disputes can be resolved amicably either before or during mediation on the areas of disagreement, this is not always the case. In both NSW and Queensland there are well-established dispute resolution processes managed initially through the NSW Department of Fair Trading and, in Queensland, the Queensland Building and Construction Commission (QBCC).

In both states the advice and guidance of Felicio Law Firm should be sought before you enter dispute resolution.

Of course, using a state-run dispute resolution services does not prevent either of the parties from seeking legal advice or taking independent legal action in a contractual dispute… but you should definitely seek expert legal advice if this is your preferred course of action.

Terminating a contract for breach requires a number of important procedural steps to be taken in order for it to take effect. There are potentially serious consequences for a party who wrongly terminates a building contract.

Common disputes in regard to domestic building contracts include disagreements about the contract price, the contract clauses relating to variations (of fixtures, or plans, for e.g.), extensions of time, implied warranties (defective work, non-completion, etc) and more.

Contract dispute resolution in NSW

In any dispute with a contractor, it is best to first raise the issue directly with them to see if the area of contention can be resolved to mutual satisfaction.

If that is not possible, NSW Fair Trading provides a dispute resolution service through its Home Building Service. This service aims to provide early intervention to avoid an escalation of the dispute. Statistics on the effectiveness of the service show that over 70 per cent of disputes over building contracts are resolved at the initial mediation or inspection stage.

This process can be commenced by the homeowner/consumer, or the contractor, by a formal request to Fair Trading. If the contractor initiates the request, the homeowner must agree to enter into dispute resolution but if the consumer lodges a complaint, the trader does not need to agree to resolving the dispute (though is strongly encouraged to do so).

Resolution of disputes relies on the work of experienced, trade-qualified building inspectors located throughout NSW who will provide an opinion on whether work performed under a contract is defective or incomplete.

This process may be conducted in the presence of the homeowner and contractor on site, or through inspection of material submitted by both parties combined with phone interviews. If the issue in contention can be resolved, the inspector will compile a complaint investigation report detailing what actions have been agreed upon and what each party has to do.

Where the inspector is satisfied the contractor bears responsibility for defective or incomplete work, a rectification order is issued directing the trader to rectify or complete the work by a due date. Should work not be fixed by the nominated date, the builder will be breach of the Home Building Act 1989.

If on the balance of probabilities the inspector is not satisfied that fault for the dispute solely resides with the contractor, a homeowner can choose to lodge an application with the NSW Civil and Administrative Tribunal (NCAT) to have the complaint heard and determined. Expert legal advice should be sought at this stage.

Statutory warranties under the Home Building Act apply for six years for major defects and two years for all other defects from the date of the completion of home building work. A claim must be lodged with the NCAT within these periods in order for it to deal with the issue.

Resolution of building disputes in Queensland

In Queensland the QBCC provides an Early Dispute Resolution (EDR) Service provided your building contract is not completed or has been terminated. A complaint before a contract has been completed may relate to defective or incomplete building work, or an issue about the contract itself. This service is only available for domestic building contracts worth $3,300 or more.

The aim of the EDR service is to facilitate a speedy resolution of the issue in dispute. Similar to the NSW process, the QBCC will rely on a building inspector to make a visual inspection of a property if work is alleged to be defective or incomplete under the terms of the contract, and make a decision as to what action is required. This may include issuing a Direction to Rectify to the contractor.

The QBCC can help parties reach agreements when contractual disputes arise (progress payments, delays, defective work, for e.g.) but it cannot make orders about a contract, nor force a party to pay or refund monies, or comply with any agreement the parties may reach.

Instead, for enforcement action or in the case of termination of the contract, parties need to take the dispute to the Queensland Civil and Administrative Tribunal (QCAT). In most cases, applications to QCAT need to demonstrate that the parties have tried to achieve a resolution through the QCCB EDR process.

QCAT exercises jurisdiction over most legal disputes involving domestic building contracts in Queensland, including commercial building disputes involving work of a value up to $50,000.

Before initiating legal action in QCAT, the parties to the contract are encouraged to seek advice from a legal representative with experience and expertise in Queensland building legislation, such as Felicio Law Firm.

The importance of good legal advice

Building contracts usually involve significant sums of money and for that reason, emotions can run high when there is disagreement between a homeowner and a building contractor.

But these emotions need to be kept in check. An owner’s inclination to terminate a contract and find new builders can have very detrimental consequences if the document is incorrectly terminated under the terms of the contract.

If you have questions or concerns about how to resolve a dispute about a building contract, contact the professionals with extensive experience in NSW and Queensland building contracts, Felicio Law Firm. Call us today on (02) 4365 4249.

Building Contracts

The Different Types of Building Contracts in NSW & QLD

By | Property Law

For the majority of people, contracts are not a fun thing to deal with in life. For most of us, they’re just small print.

Therein, however, is the danger. Many people entering into a contract find themselves in a difficult situation when a problem arises, such as one party not fulfilling their end of the deal or where there is some other dispute. If the issue is not dealt with in the contract, or not expressed to be in your favour, then you may be in a weak position with no recourse.

This situation can be particularly common in domestic building contracts. In their enthusiasm to have their renovation started, or their new house built, people often skim the details of the contract with the builder and are left in a vulnerable position if a dispute or disagreement emerges.

This article will look at the essentials of domestic (rather than commercial) building contracts in NSW and Queensland, where Felicio Law Firm has a proud track record advising clients over many years on what they need to know before putting pen to paper on this type of contract.

Essential things to know about building contracts

Unlike the old days, relevant statutory organisations such as Fair Trading NSW now provide ‘model’ plain English contracts which make it easier for consumers to access guidance on what a building contract should and should not include.

In any building contract, some key things to take note of include:

  • That the contract is written in clear English; states the names and addresses of the parties to the contract; includes the builder’s current registration and/or licence number.
  • The contract sets out all the terms relating to the building, including detailed descriptions of the work to be carried out, plans, specifications and any other relevant documents.
  • That special requirements and finishes used in the building are set out and specified. Ideally, fixtures and fittings are also detailed in the contract, including their costs, as ‘prime cost’ items. If their nature and price are not yet known, they should be included as ‘provisional sum’ items.
  • States the total price for the works, including the amount of the deposit and any schedule of progress payments (including ensuring progress payments relate to work completed and not time on the job).
  • That the date on which the contract becomes effective is stated, as well as a clause about the cooling-off period. It should also include state a start and a finish date for the work, with allowances for delays.
  • A section defining words and key phrases used in the document.
  • Details on any implied warranties, including their duration.

NSW building contracts

In NSW contracts relating to residential building are governed by the Home Building Act 1989, whether you’re building a new home, or altering or renovating an existing one.

Any such project valued at more than $5000 requires a contract. Even for building projects valued under that amount, you should consider a contract or written agreement.

Building projects valued between $5000-$20,000 can be covered by a ‘small jobs’ contract. These contracts contain most of the points covered above, including the details of both parties; the contractor’s licence number; detailed descriptions of the work, including plans and specifications; and a contract price, if known.

This type of contract in NSW should also have clauses relating to:

  • ‘Quality of construction’, which states that the proposed work will comply with the Building Code of Australia, as required under the Environmental Planning and Assessment Act 1979.
  • Other relevant codes, standards and specifications that the project must comply with.
  • The conditions of any relevant development consent or complying development certificate.
  • Limitation of the contractor’s liability for failure to comply with work compliance clauses because: a design or specification prepared by or on behalf of the home owner (but not the contractor); or a design or specification required by the home owner if the contractor has advised the home owner in writing it goes against the ‘work compliance clause’.

A more detailed written contract is required for work costing more than $20,000. It should include all the details included in a small jobs contract, as listed above, as well as:

  • Relevant statutory warranties required by the Home Building Act 1989 (such as that the work be done with ‘due care and skill’).
  • The contract price, including warning provisions where the price is subject to change or is not known.
  • A prominent clause about the cooling-off period of five clear business days for both parties once the contract has been received, for contracts valued over $20,000.
  • A checklist of essential matters to tick off, such as the contractor having a current licence, details of when variations can be made to the contract, the costs of insurance or another indemnity scheme, termination clauses, etc.
  • A progress payment schedule, covering fixed payments, interval payments or a combination of both.
  • A termination clause.
  • A note that the contractor must give you an insurance certificate under the Home Building Compensation (HBC) Scheme.
  • A clause that any variation to the contract or its plans and specifications must be in writing and signed by both parties.
  • A clause that the work will comply with the Building Code of Australia, and all other relevant codes, standards and specifications that the work is required to comply with under any law.
  • A clause limiting the liability of the contractor for failure to comply in certain circumstances.

A builder or tradesperson must give the owner a copy of the contract within five business days after it has been signed.

Queensland building contracts

In Queensland domestic building contracts are covered by the Queensland Building and Construction Commission Act 1991 (‘the QBCC Act’), which sets out contract requirements for the erection or construction of a detached dwelling (i.e. a single, free-standing home or duplex) or the renovation, alteration, extension, improvement or repair of a home, as well as for other domestic building work such as a driveway, fence or swimming pool.

QBCC provides standard form contracts, as do Queensland industry associations, or the parties can create their own, though if this latter course is taken, legal advice from experienced contract lawyers such as Felicio Law Firm should be sought.

Introduction of Schedule 1 B in the QBCC Act introduced two levels for domestic building contracts in Queensland – Level 1 contracts for jobs priced between $3301 and $19,999, and Level 2 contracts for those costed over $20,000.

Requirements in a Level 1 contract are similar to those for NSW contracts listed above. The contract must be in writing, dated and signed by or on behalf of the contractor and the owner; contain the names of the contracting parties including the name and licence number of the building contractor; a description of the contracted work; the contract price; the date for practical completion or how the date is to be determined; a copy of any plans and specifications; notice to the owner about cooling-off period rights; and clear identification of the site where the building work is to take place.

A fully signed copy of the whole contract must be given to the owner within five business days after the contractor enters the contract. Variations or changes to the contract after it is signed must be detailed in writing in a compliant variation document and approved in writing by the owner before the variation work commences.

Implied warranties in this contract include that materials must be new and suitable for purpose; work is carried out in accordance with all relevant laws, legal requirements and the plans and specifications; work is carried out with reasonable care, skill and diligence; and that a home will be suitable for occupation when the contracted work is finished. Breach of these warranties can result in legal action which must be commenced within the warranty period (i.e. within six years for a breach resulting in a structural defect, or one year in any other case).

A Level 2 contract for work valued above $20,000 includes all the same points for Level 1 contracts plus:

  • Provision of the QBCC Consumer Building Guide to the owner before the owner signs the building contract.
  • The start date (as well as a date for practical completion), or how it is to be determined, must be stated.
  • Relevant statutory/implied warranties must be stated in the contract.
  • The contract price (if fixed) and a price change warning (detailing provisions which could cause the contract price to increase or decrease) must be prominently featured on the first page of the contract schedule.
  • Where the contract price is not fixed, the method for calculating the price including any allowances (e.g. for Prime Cost Items or Provisional Sums) must be stated in the contract schedule.
  • Within 10 business days of work commencing on site, the contractor must provide a Commencement Notice to the owner stating the date work commenced on site and the date for practical completion.

The need for legal advice

While there is plenty of official guidance on domestic building contracts these days, it is always wise to ask for guidance from a law firm with many years’ experience advising clients on obtaining a contract that clearly establishes all of the responsibilities of both parties and also protects their rights.

Call Felicio Law Firm today for further guidance on your domestic building contract. (02) 4365 4249.

Costs Orders in Family Law Matters

How do Costs Orders in Family Law Matters differ from those in other Courts?

By | Family Law

Costs orders are issued by courts as a decision about which of the parties to a proceeding should meet the legal costs involved. Such orders are governed by a variety of statutes and a court’s procedural rules. They are usually made on the application of one or both parties, but can also be determined by the presiding judge or magistrate at other stages of the proceedings, prior to any application being made.

For most matters heard in the Supreme, District and Local courts of NSW, the awarding of costs is governed by the NSW Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005. By contrast, in family law matters, costs orders follow the provisions of the Family Law Act 1975.

We’ll look at how family law costs orders differ from other types of costs orders in this article but if you are uncertain about whether you will be liable to pay the other’s party’s legal costs, or whether you can apply to have your costs met, you should contact experienced family law practitioners Felicio Law Firm today.

Costs orders in family law matters

Under section 117 of the Family Law Act the starting point for costs in family law matters is that each party to the proceeding will be responsible for their own legal costs.

As always in law, there are exceptions to this general rule. Subsections within section 117 set out the factors the court may take into account in order to make an order as to costs which apportions them on a different basis to that of each party being responsible for their own legal costs.

Matters the court regards in determining whether it should make an order for costs in a family law matter include:

  • The financial circumstances of each of the parties to the proceedings.
  • Whether any party to the proceedings is receiving legal aid and, if so, how much that entails.
  • The conduct of the parties in relation to the proceedings, including pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters.
  • Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court.
  • Whether any party to the proceedings has been wholly unsuccessful in the proceedings.
  • Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer.
  • Such other matters as the court considers relevant.

Only one of the matters above need be present for the court to decide to make a costs order. It’s important to note that the court’s discretion applies both to parenting and property cases in family law matters. Also important is the principle that costs orders are not meant to be punitive or act as a penalty against one party. Instead, they are conceived as compensation for one party for the costs they have incurred in going to court.

Case example: In the Federal Circuit Court – the other court in Australia that hears family law matters – the case of Secco & Reid (No. 2) [2019] FCCA 2594 saw the father ordered to pay the mother the sum of $32,498.75 after the judge considered the parties’ differing financial circumstances; the fact the father was wholly unsuccessful in the proceedings; and the fact that the father failed to properly consider or respond to an offer made by the mother.

Costs orders are usually awarded on a party/party basis, in which one party is ordered to pay a proportion of the other party’s legal costs. This will usually not cover all of the successful party’s legal costs but may cover 75 per cent, as a guide.

In some cases both in family law matters and in other courts, costs may be awarded on an ‘indemnity’ basis in which one party is ordered to pay the actual legal costs of the unsuccessful party. An indemnity costs order may be made where one party makes false claims against the other party, such as fraud; where one party’s conduct has wasted the time of the court or the other party; where the litigation has been commenced for vexatious or ulterior purposes; where offers of compromises have been refused, and other similar reasons.

Costs orders in other courts

In non-family law courts, the court has an unfettered discretion to make cost orders unless a specific legislative restriction applies. As in family law matters, costs orders are not designed to be punitive and must be proportionate.

In making a costs order, the court has regard to the facts of the case, whether any specific legislative provisions apply, and the conduct of the parties to the proceedings (as it also does in family law matters).

In courts such as the District or Local Court, in general ‘costs follow the event’, meaning the successful party is awarded costs against the unsuccessful party. The party against whom costs are awarded can, however, apply to the Supreme Court to have the costs order re-assessed.

As in the Family or Federal Circuit Court, costs can be awarded on a party-party or indemnity (also known as solicitor-client) costs basis. It should be noted that there are restrictions on the amount of legal costs that can be awarded depending on the court division hearing your matter. Expert legal advice should be sought before you commence your action.

Speak with Felicio

The awarding of costs in legal actions can be a complicated area of the law, reliant on court discretions, statutory limits, the nature of the matter and the conduct of the parties.

While a family law case starts on the basis that each party will be responsible for their own legal costs, it’s not always the case, just as it’s not always the case that a winning party in the District or Local will automatically be awarded costs against the losing party.

If you need to know more about costs orders, it’s best to discuss the subject with experienced legal practitioners such as Felicio Law Firm as part of a wider discussion on the merits of your case, whether you’re involved in a family or civil matter. Call us Central Coast family lawyers today on (02) 4365 4249.

Debt Agreements Compare with Bankruptcy

How do Debt Agreements Compare with Bankruptcy?

By | Debt Recovery

There are a number of paths you can take when you’re facing bankruptcy and it’s important to consider each option carefully so that you can work your way out of this unfortunate situation where you can’t pay your debts.

The Bankruptcy Act 1966 (‘the Act’) sets out these options which we’ll look at below. One of the key things to consider is whether you are better off declaring bankruptcy, which may clear your slate of debts but has other serious consequences for your lifestyle, or you instead negotiate a legally enforceable debt agreement, which allows you to repay your debts on a schedule you can manage.

If you need more guidance on these options after reading this article contact Felicio Law Firm for a consultation. We will help clarify the best way forward with empathy and understanding.

The process and consequences of bankruptcy

When debts are mounting and a person has no way of meeting them, declaring bankruptcy under the Act often seems the best way forward.

Bankruptcy can be entered into voluntarily, or be forced on you by a creditor through a court order (what’s known as a sequestration order).

Once you are declared bankrupt, a trustee is appointed to manage your period of bankruptcy, which is usually three years and one day. The trustee can be appointed by the Australian Financial Security Authority (AFSA) or you can nominate your own registered trustee.

Once you are bankrupt and a trustee appointed, you have a series of ongoing obligations you agree to, including:

  • providing details of your debts, income and assets to your trustee;
  • facilitating the trustee notifying your creditors of your bankruptcy, which will stop them contacting you about repaying your debts;
  • facilitating the trustee selling certain of your assets to help pay debts;
  • making compulsory payments if your income exceeds a set amount.

Bankruptcy means you won’t have to pay unsecured debts, such as credit and store cards; unsecured personal loans and pay day loans; gas, electricity, phone and internet bills; overdrawn bank accounts; unpaid rent; and medical, legal & accounting fees.

But you will have to check with the creditor to see whether you are freed from certain other debts, such as Centrelink or ATO debts, victims of crime debts or toll fines.

Bankruptcy does not free you from certain other debts, such as court imposed penalties and fines; child support & maintenance; HECS and HELP debts; any debts you incur after your bankruptcy begins; and unliquidated debts.

It’s also important to note that being declared bankrupt can affect the way you live your life. During the period of bankruptcy your ability to work in certain trades and professions and be a director of a company will be restricted, while you’re also not able to travel overseas unless given permission by your bankruptcy trustee.

The record of your bankruptcy will also stay on your credit report for five years and your name will permanently remain on the National Personal Insolvency Index.

How are Part IX debt agreements different to bankruptcy?

A debt agreement is a legally binding contract between you and your creditors under which you make repayments of your debts on a payment schedule you can manage.

Such agreements are administered under the provisions of Part IX of the Act and hence are known as Part IX debt agreements.

There are conditions you must meet before being able to make such an agreement when you’re unable to pay debts that are due. Specifically you must:

  • not have been bankrupt, or had a debt agreement or personal insolvency agreement, within the last 10 years;
  • have unsecured debts and assets less than the set amount;
  • estimate your after-tax income for the next 12 months to be less than the set amount.

‘Set amount’ refers to indexed, threshold dollar amounts which are updated twice a year to reflect the Consumer Price Index or the base pension rate. As of September 2020, for instance, the unsecured debt amount was $118,063.

The process of creating a Part IX debt agreement involves:

  • negotiating to pay a percentage of your combined debt that you’re able to afford over a set period of time, and;
  • making repayments to a debt agreement administrator, instead of making individual payments to creditors.

Once you complete the payments under the debt agreement, creditors can’t recover the rest of the money you owe.

Is a Part IX debt agreement preferable to bankruptcy?

Like bankruptcy, there are a number of consequences as a result of entering a debt agreement and it will be up to your judgement – or that of your legal practitioner – as to which best suits your circumstances.

Firstly you should understand that by proposing a debt agreement  you are undertaking an ‘act of bankruptcy’, which  your creditors can potentially use to apply for a court order to declare you bankrupt.

Additionally, if you trade under a business name that isn’t your own, you must inform those with whom you conduct business that you are operating under a debt agreement.

Furthermore, while unsecured debt is dealt with in such an agreement, secured creditors may still seize and sell any of assets you’ve offered as security for credit, such as your house or car, if you are unable to meet your payments. Remember also that there are eligibility limits to the amount of debt you can have in order to propose an agreement.

Entering a debt agreement of this kind will also be marked on your credit file for up to five years or possibly longer, and your name will be listed on the National Personal Insolvency Index.

Your creditors are likely to be more positive about a proposed debt agreement, however, as they are a better chance to recover more money under the agreement than if you are declared bankrupt.

We’re here to help

As the details above show, there are options when you are unable to meet debt repayments either as an individual or a business.

Working out which option is best for you given your situation is often best identified by experts in insolvency matters such as Felicio Law Firm.

We bring a warm and understanding approach to our relationship with clients and can help you guide you through to a fresh start if you are facing the prospect of bankruptcy. Call us today for an initial consultation on (02) 4365 4249.

Google Review

How to Deal With an Unfavourable Google Review

By | General News

When you open your browser to search for the details of a local service, be it a restaurant, a dentist, a tradesperson or a shop, chances are you’ll use Google.

In a world with nearly 4.5 billion internet users, it’s estimated nearly four billion of them regularly use Google as their default search engine. ‘The power of Google’ has become a phrase revealing how influential the search engine started in 1998 by Larry Page and Sergey Brin has become.

That power has become so great it can make or break a business. Specifically, the capacity for users to post ‘reviews’ on the Google pages of businesses has become an increasingly contentious aspect of the search engine, with a growing list of legal cases brought by businesses who receive negative reviews.

These reviews are usually posted anonymously and can have a terrible and immediate effect on a business’ reputation and revenue, such is the reach of Google.

If your business receives a bad review like this, what can you do? Read on…

What action can you take?

The most common legal action taken by businesses adversely affected by a negative Google review lies in defamation. Where the bad review has, in the eyes of the business, damaged its reputation among the wider public and exposed it to hatred, contempt or ridicule, the publication of the review may be characterised as defamatory. Actions for defamation because of material published online is a growing phenomenon.

Not everyone is able to make a claim for defamation. If you are a company, you can only bring an action for defamation if you are a not-for-profit company or one with less than 10 employees. A director or officer of a company may also be able to take action for defamation if they are identified with sufficient certainty in the publication which allegedly carries the defamatory imputations.

A review can still be defamatory even where it does not specifically name a person or business. If the person or business is identifiable in the description in the review – ‘the burger place on Hayes Street’, for example – then the action can be maintained. Additionally, reference to a class of people such as ‘Everyone working at the takeaway shop on Hayes St…’ may also be defamatory.

Some examples…

Recent examples from the Australian courts are illustrative of the action a person or business can take if they receive a bad Google review.

Early in 2020 Adelaide lawyer Gordon Cheng was awarded $750,000 in a defamation payout after taking action against a woman, Isabel Lok, who posted a negative review about his firm on Google. Cheng estimated his firm had lost 80% of its clients after the bad review and his accountant said the dollar value damage to his practice was $296,146.

It emerged in court that Lok, who gave Cheng’s firm a one-star review accompanied by a negative description, had never been a client of Cheng’s and that she changed the name on the review a number of times. She even posted two more negative reviews after Google removed the original review.

Shortly after Melbourne dentist Matthew Kabbabe took Google to the Federal Court in order to force the company to identify a person who anonymously posted a bad review about his practice on his Google business page. Google had refused to either take down the review or reveal the identify of the poster, ‘CBsm 23’. Kabbabe wished to know their identity so he could potentially launch an action for defamation against the person.

The Federal Court justice made an order compelling Google to turn over any identifying information of  the reviewer, including names, phone numbers, IP addresses, location metadata, and any other information about the person’s Google accounts.

After the judgement, Kabbabe’s lawyer suggested a class action of small business owners against Google might be forthcoming to deal with the issue of potentially defamatory reviews which Google either does not monitor or does not remove once brought to its attention.

Is suing Google an option?

International social media platforms such as Google and Facebook have strenuously argued for a number of years now that they are not ‘publishers’ but merely platforms hosting other people’s content.

But a number of court cases have found this defence is not sustainable. Melbourne lawyer George Defteros won $40,000 in damages from Google in an April 2020 case after he successfully argued that Google was a publisher and had defamed him because it was responsible for the fact Google searches on his name linked it to that of Melbourne gangland figures. “The Google search engine … is not a passive tool,” wrote Justice Richards in her judgement.

Difficulties arise if the defamatory material has an international dimension given a review can be authored from anywhere in the world and hosted on a platform based in the USA or elsewhere. In this case the fact the review can be accessed and read in Australia may determine whether an Australian court has jurisdiction to find its imputations defamatory of an Australian person or company.

Changes to Australia’s defamation laws

The changing publishing landscape caused by the likes of Google and Facebook, among other reasons, has highlighted the need for Australia’s defamation laws to be updated.

This realisation led to the Model Defamation Law Working Party as part of the Australian Council of Attorneys-General, which took submissions from media companies, peak legal bodies, academics, digital platforms and the public.

The first stage of this process led to Model Defamation Amendment Provisions which NSW became the first state to enact into law when the Defamation Amendment Bill was passed in August 2020 to amend the Defamation Act 2005 and the Limitation Act 1969.

Among other changes, the amendments require an aggrieved person to issue a ‘Concerns Notice’ to a publisher before they can commence defamation proceedings against them. Once this notice is issued, the publisher now also has an extended period within which to make amends (previously capped at 28 days) if further particulars for the notice have been requested.

The changes also introduced a ‘serious harm’ provision, meaning a plaintiff must prove that the defamatory publication has caused, or is likely to cause, serious harm to the plaintiff’s reputation. Where the plaintiff is an excluded corporation, it must also show that the publication has caused, or is likely to cause, serious financial loss.

The reforms to Australia’s defamation laws have not concluded. A second stage is due in 2021 which is expected to provide more detail on the liability of digital platform providers such as Google for the material it publishes, including third-party comments on the platform.

Speak with Felicio

If you have been the subject of a negative comment or review of your business or yourself, whether anonymous or otherwise, give us a call today to discuss your options.

At Felicio Law Firm, it’s our job to be across the latest developments in the law so that we can provide timely and relevant advice on what you can do if you feel your reputation, and the revenue of your business, has been harmed by a review on a Google business page.

Contact our friendly team today on (02) 4365 4249.

Testamentary Trust

Who Should Consider a Testamentary Trust?

By | Estate Planning

Testamentary trusts are established through a person’s will and come into effect on the death of the testator (the will-maker). Such trusts give the deceased a larger degree of control over what happens to their estate, as well as offering both protection of assets and income tax advantages for the testator’s beneficiaries.

A testamentary trust may include only a portion of assets from the deceased’s estate or the entire estate. A person may also create multiple trusts through the testamentary document, with each making provision for different beneficiaries. The nominated trustee then distributes the assets to beneficiaries under the terms of the trust.

Here we’ll explain in some more detail about who a testamentary trust is most appropriate for, but if you have questions about whether one is advisable in your circumstances you should call wills and estates’ specialists Felicio Law Firm for an informal chat.

Why make a testamentary trust?

The key benefits of testamentary trusts are their suitability for protecting assets and their ability to reduce tax paid by beneficiaries from income earned on their inheritance.

Two common types of testamentary trust are ‘discretionary’ – in which the trustee has the discretion to distribute capital and/or income to beneficiaries nominated in the will – and ‘protective’, established in situations where the beneficiary/beneficiaries are unable to manage their own affairs due to age, disability, addiction or profligate ways.

Asset protection: Discretionary testamentary trusts are often created in situations where one or more of the beneficiaries are exposed to some sort of risk, such as bankruptcy. A testator may also create a trust to exercise control over a wayward beneficiary, such as one who is wasteful with money or has other problems requiring access to finance.

This is because assets and income held within a trust are not generally accessible by creditors who may be trying to recover funds from a nominated beneficiary.

To be specific, a testamentary trust offers asset protection in situations where a beneficiary:

  • is in a precarious financial situation, such as insolvency;
  • works in a high-risk environment such as trading in equities, or has other potential exposure to liability in their work;
  • is in the midst of a divorce or has a complicated family situation, including remarriage, step-children, etc.

Tax advantages: The other key benefit of a testamentary trust is that when a beneficiary inherits within a will, that inheritance will be taxed at their personal marginal tax rate. Through the trust structure, however, the income and or assets can be split and distributed to a partner on a lower tax rate, to adult children or grandchildren who may fall under the tax-free threshold, or to minor children or grandchildren to reduce overall tax liability.

It should be noted, however, that tax on undistributed income in the trust will be taxed at the highest marginal tax rate.

Capital gains tax: Where a property is part of an inheritance through a will, a testamentary trust is a means by which capital gains tax payable on the property can be minimised. When property is inherited through a will, capital gains tax is generally payable either two years after Probate of the will, if the deceased lived in that property, or when the property is sold, if it was an investment property.

Where the property is held within a testamentary trust, the capital gains tax payable can be spread out to minimise the overall liability similar to the method by which beneficiaries’ income tax can be dealt with through the trust.

Talk to the specialists

Felicio Law Firm are experts in wills and estates. Our friendly team can help guide you through the benefits and any drawbacks in the creation of a testamentary trust. We’ll listen to your story and make a judgement on whether the testamentary trust structure suits your circumstances or not, and provide clear, timely and relevant advice on your best course of action.

Call our team today on (02) 4365 4249.


First Home Buyer? What You Need to Know About Stamp Duty Changes in NSW and Qld

By | Conveyancing

Stamp duty is one of those imposts that can act as a real disincentive for a first home buyer. You scrimp and save to get a deposit together, find a property you like, go off to the bank for a loan, and then realise you may have to pay up to tens of thousands more to the government once you purchase the property.

Recognising this effect, the NSW government recently announced changes to stamp duty for first home buyers as part of its COVID-19 recovery plan, designed to stimulate both property investment and housing construction.

We’ll offer some more detail on the changes below and also look at stamp duty discounts for first home buyers in Queensland. At Felicio Law Firm, our property law specialists deal with both NSW and Queensland-based clients looking to buy their first property. We can advise you on what to expect in terms of your stamp duty obligation when you purchase property for the first time.

Changes in NSW

The NSW government has announced that between August 1, 2020 and 31 July 2021, stamp duty will no longer be charged on first home buyers who purchase a new home valued at $800,000 or less. Concessions (that is, discounts) on stamp duty apply on properties valued at up to $1 million.

The higher value is an increase from the $650,000 threshold that previously applied, which now only applies to first home buyers purchasing existing homes. First home buyers who purchase a home that is not newly built, therefore, are only exempt from stamp duty if the property is valued at $650,000 or less.

The effect of this change is that there is a distinction drawn between those first home buyers who purchase a brand new home and those who buying an existing home, and is primarily of benefit to those entrants to the market looking to buy off-the-plan. For a first home buyer purchasing an existing home valued at $800,000, you still have to pay stamp duty which will amount to more than $30,000. A concessional rate of stamp duty is available for homes valued at more than $800,000 but less than $1 million.

First home buyers who purchase vacant land on which to build are now exempt from stamp duty if the land is valued up to $400,000, up from $350,000. Stamp duty discounts remain for land valued more than $400,000 up to $500,000.

It should be noted these changes are temporary and expire at 31 July 2021. Also remember that even if you don’t qualify for stamp duty exemption or concession, there are other first home buyer schemes available in NSW, such as the $10,000 First Home Owner Grant for properties valued up to $600,000 (you will also be exempt from stamp duty, as per above). The federal HomeBuilder grant of $25,000 may also be available for newly built homes up to the value of $750,000, depending on eligibility.

Stamp duty in Queensland

In Queensland the First Home Buyers Stamp Duty Concession scheme is also dependent on the value of the property you purchase.

The maximum stamp duty concession available for properties valued up to $504,999.99 is $8,750. For properties valued between $505,000 to $550,000, the concession reduces in steps. If your first property is over $550,000, you’ll pay stamp duty (or transfer duty, as it is officially called in Queensland) at the rate of a normal owner occupier.

If your first entry into the market is to buy a block of vacant land to build on, concessions are available for land valued under $400,000 with a maximum rebate of up to $7,175 for land valued between $250,000 and $259,999.99. No transfer duty is payable on land valued under $250,000.

To be eligible for a first home duty concession when you buy or acquire a property, you must:

  • have never previously claimed the first home vacant land concession;
  • have never held an interest in another residence anywhere in Australia or overseas;
  • be at least 18 years of age;
  • move into it with your personal belongings and live there on a daily basis within one year of settlement;
  • not dispose (sell, transfer, lease or otherwise grant exclusive possession) of all or part of the property before you move in;
  • be paying market value if the residence is valued between $500,001 and $549,999.

To keep the benefit of the first home concession in full after you move in, you must not dispose of all or part of the property within one year. A partial concession may apply if you do so.

As in NSW, you may also be eligible for a Queensland First Home Buyers Grant of $15,000 if you’re building a new home or buying a brand new home, or the Federal government’s First Home Loan Deposit Scheme and the HomeBuilder Grant of $25,000.

Get expert advice

At Felicio Law Firm, it’s our job to be across any changes to stamp duty which affect first home buyers. We have a proud track record of advising clients venturing into the property market for the first time on what exemptions, concessions and other assistance may be available to them.

Property conveyancing is an ever-changing area but we will make sure you have all the information you need to make the best choice when it comes time to purchase your first property. Call us for an initial consultation now on (02) 4365 4249.

Mortgage is in Arrears

What Happens When Your Mortgage is in Arrears and the Bank Threatens Repossession or Foreclosure

By | Property Law

An issue many people may be facing in these tough economic times – whether caused by the COVID-19 pandemic or other factors – is falling behind on their home mortgage.

Potentially losing your home is a frightening prospect for anyone and the situation is often exacerbated by the fact an individual is facing the power and resources of the major financial institution who lent them the money to buy the house.

This article is designed to give you the basics on what happens when your mortgage is in arrears and your financial lender takes action to possess or foreclose on the property so that they can satisfy your debt to it, including your rights and obligations.

You’re in arrears on your mortgage repayments – what next?

A borrower is in arrears as soon as they miss a mortgage repayment. Other than providing a reminder notice and perhaps offering a hardship variation of repayments so that the borrower can catch up on repayments, most lenders refrain from serious action on mortgages in arrears until 90 days have passed (usually equating to three months, or three mortgage payments missed).

At any stage once a borrower is in arrears, a lender may issue a default notice allowing the borrower 30 days to fix the default by making the missed repayments, or applying for a hardship variation. If the borrower takes no action within this time period, the lender has the right to seize and sell the mortgaged property in order to recover the whole debt.

The next steps will see the lender serve a statement of claim or summons on the borrower for the arrears, and/or the whole debt, and/or the possession of your home. You then have a set period to respond by filing a defence or lodging a complaint with the Australian Financial Complaints Authority (AFCA).

If you do not respond within the specified period, the lender receives a court judgment in its favour and may apply for a writ to take possession of the property. This is followed by a Notice to Vacate with details on when you will be evicted from the property.

Even if legal proceedings have been commenced by a lender to repossess a property, a person with a mortgage can enter into dispute resolution to try and achieve the best outcome in their circumstances, such as a good sale price for the home. This may constitute a financial hardship arrangement giving them time to sell the property. A negotiation on this basis may involve providing evidence to the lender that the home is on the market, such as a contract with a real estate agent, a marketing plan and ‘for sale’ ads for the home.

After a court judgment about repossession, the dispute resolution process is only available in very limited circumstances and expert legal advice should be sought.

The important difference between repossession and foreclosure

Many people are confused by the difference between repossession and foreclosure. While foreclosure is quite common in places like the United States, repossession is more common in Australia.

This is because foreclosure involves a court proceeding in which the lender applies to have the borrower removed as the title-holder of the property and itself substituted as the owner. With repossession, the lender obtains a court order to take over the property in order to sell it, but the title remains with the borrower.

Because foreclosure can be a lengthy and costly process, repossession of a property where the owner is in arrears is more common, particularly in Australia.

In order to repossess the property in NSW, the lender needs to obtain an order from the Supreme Court. If your property is tenanted, the tenant must be notified, however the court can still make the repossession order even though the tenant did not know about the proceedings.

Supreme Court orders for possession are enforced by the NSW Sheriff’s Office, who will serve the home owner or the tenant with a notice giving the tenant at least 30 days to vacate the property. If you do not move out within this period, the Sheriff can remove you from the property.

What are your options once the property is repossessed or foreclosed?

If your property is repossessed by the lender, it is possible to apply for the judgment to be set aside in some circumstances, provided you can provide a good reason for not stating a defence earlier and you have a cross-claim against the lender. The guidance of legal representatives with experience in mortgagee repossession is vital here.

You can also seek a stay of enforcement of the court order in order to gain more time to sell the house, refinance, or find alternative accommodation. It may even be possible to negotiate a hardship variation with the lender if you’re granted a stay, which are generally only granted for short periods.

Property sale and the place of mortgage insurance

The lender has certain obligations to the property owner in selling the repossessed property.

Specifically it must:

  • take reasonable steps to sell the property at market value;
  • act in good faith;
  • not recklessly sacrifice the interests of the title-holder.

While the lender must account for the sale of the property, it does not need to keep the title-holder informed about the progress of the sale, nor does it have an obligation to improve the property for sale. It may also charge you for its reasonable costs in taking possession of the home and the sale process. These costs can be challenged if they appear unreasonable.

After sale, any money in excess of the loan amount will be forwarded to you as the title-holder. But if the sale of the property results in a shortfall on the loan amount, you are still liable to the lender for the amount owed, including interest, costs and fees.

If you took out mortgage insurance with the lender when the home loan was negotiated, the insurer will pay this shortfall to the lender but also seek reimbursement from you as the policy-holder. Without insurance, you will be pursued by the lender for the outstanding amount on the loan.

In this situation you may need to apply for a release from the debt on compassionate grounds or by citing long-term financial hardship. A repayment plan or even filing for bankruptcy may be the most sensible options thereafter.

Seek expert legal advice

In real life, the steps outlined above are terrifying and stressful. For most people their home is likely their only major asset. To lose it is devastating.

At Felicio Law Firm we have years of experience helping people facing repossession or foreclosure when they fall behind on the mortgage. We can guide you through by providing realistic, workable solutions designed to achieve the best possible outcome in your situation.

Contact us today for an initial appointment on (02) 4365 4249.


Should I File for Bankruptcy?

By | Debt Recovery

Bankruptcy is a highly charged word. For many people it represents financial and personal failure, with an attendant loss of confidence and self-esteem.

But in some situations declaring yourself bankrupt is the most logical and sensible course of action, allowing you to extract yourself from a financial and legal quagmire and start afresh.

Below we’ll take a brief look at the advantages, as well as some of the disadvantages, of declaring bankruptcy. If you think this is an option you will require, you should consult a legal professional with experience in this area of the law such as Felicio Law Firm.

Why choose bankruptcy?

There are few things more stressful than falling behind on your debts. Doing so usually unleashes a cascade of unpleasant consequences – creditors chasing you for payment, threats of legal action to recover debts, and an inability to get yourself out of the debt hole.

When you declare bankruptcy, many of these consequences are stopped so that you can get your affairs in order. A registered trustee, who you are able to nominate, is appointed to manage the bankruptcy. The Australian Financial Security Authority (AFSA) will appoint a trustee if you don’t nominate one. The trustee’s role is to work with you and your creditors in order to find solutions which are fair and reasonable to all parties in the circumstances.

During bankruptcy you must provide necessary information to your trustee, including bank details, statements, pay slips and other documents which help clarify your current financial position.

This process helps prevent constant harassment by creditors, halts any legal proceedings against you to recover debt, and prevents the Sheriff from seizing any of your personal assets (except for new debts incurred after bankruptcy) in order to satisfy debts. If your wages or bank account are being garnished, this will also stop under bankruptcy (except in certain instances by the Australian Tax Office). In most cases, you are still able to earn an income, too.

Personal property protected under bankruptcy is indexed to maintain pace with the Consumer Price Index or the base pension rate. Property that cannot be taken and sold for the benefit of creditors includes your ordinary clothing; necessary household property (e.g. furniture and appliances, but not antiques or items of exceptional value); tools of trade up to the value of $3,800 and a car worth no more than $8,000 (as of October 2020); your superannuation  and life insurance policies, including payments from either policy received on or after the date of the bankruptcy; and any compensation received directly by you for personal injury.

There are also indexed limits over which you are not able to propose a debt agreement with creditors. These include $118,063 in unsecured debts, $236,126.80 in divisible assets and $88,547.55 in after-tax annual income (all correct amounts as of October 2020).

What happens to my debts?

When you file for bankruptcy you are generally freed from unsecured debts such as credit cards, unsecured personal loans and pay day loans; gas, electricity, phone and internet bills; overdrawn bank accounts; unpaid rent, and; medical, legal and accounting fees for the period of bankruptcy.

Other debts such as those owed to Centrelink or the ATO, or fines for parking infringements, tolls, etc, may not be ended by declaring bankruptcy. Other debts such as child maintenance and support, court-ordered fines or penalties, HECs, unliquidated debts or debts incurred after you filed for bankruptcy, cannot be avoided through bankruptcy. Legal advice should be sought.

Drawbacks of declaring bankruptcy

You must declare all your assets to the trustee once you become bankrupt. While some of your property and assets are protected, as outlined above, most will be sold to pay your debts, including your home. Cash in bank accounts over an amount considered necessary to live can also be taken.

If your income is over the indexed amount, this can also be used to make contributions towards your debts.

Some professions and licensed trades will restrict or prohibit your ability to work while you are in bankruptcy, and you will not be permitted to travel overseas without the permission of your trustee. In some cases you will be asked to surrender your passport.

During bankruptcy, you may experience difficulties accessing credit, renting a property or taking advantage of others services (such as taking out insurance) that most people take for granted. This is because your status as a bankrupt is listed on your credit report for a number of years after your discharge and is also permanently listed on the National Personal Insolvency Index.

The effects of these listings can be severe and long-lasting, preventing you from finding a place to live or to borrow money in order to start afresh. Furthermore you will not be able to hold a position as a company director, any money or assets received during bankruptcy will be taken by the trustee to satisfy your debts, and you are limited in your ability to commence legal proceedings against anyone without the permission of the trustee.

How long does bankruptcy last?

A person is usually discharged from bankruptcy after three years and a day, however a trustee can apply to have the period of bankruptcy extended for up to eight years.

If you are unsure whether bankruptcy is the right course to take, on the balance of the factors we’ve presented in this article, contact Felicio Law Firm today. We have considerable experience advising clients facing financial difficulties related to debts. We will work with you to understand both the advantages and the disadvantages of filing for bankruptcy so that you can make a decision that is right for your situation both now and into the future. Call us today on (02) 4365 4249.

Should I Set Up a Family Discretionary Trust? The Pros and Cons…

By | Property Law

Discretionary trusts are a legal instrument that offer control and flexibility in both holding and distributing property or other assets to beneficiaries of the trust.

There are also significant tax advantages for property and assets held in such a trust, which is one reason they are a popular structure for small businesses, particularly family businesses.

A discretionary trust – sometimes also referred to us a ‘family trust’ –invests in the trustee the power to determine the nominated beneficiaries of the trust and the discretion to distribute property and income to them in whichever amounts they choose. This means beneficiaries have no interest in the trust property unless the trustee exercises its discretion. The trustee is not held to predetermined arrangements or agreements about distributions, as in a fixed or unit trust.

Beneficiaries will usually be close family members, other family companies or charities. Significantly not all beneficiaries need to be included at the establishment of the trust; they can be added later under the trust instrument.

Below we’ll briefly outline the key advantages and disadvantages of establishing a discretionary trust. If you are thinking this structure may suit your circumstances, you should seek the guidance of a legal practitioner with expertise in the area of trusts to ensure you are fully aware of both the benefits but also the drawbacks.

The advantages of a discretionary trust

Asset protection: Property and assets held within a discretionary trust are held beneficially for the beneficiaries by the trustee. This structure means trust assets cannot be taken by creditors in bankruptcy proceedings, unless the claim relates to a debt of the trust.

Some discretionary trusts use a corporate structure in which the directors of the company act as the trustees. This form is preferred by some people because companies are perpetual and on the death of a director, a new director can be appointed without affecting the company. Even in this situation, property held by a company as trustee is not accessible by creditors in a liquidation of the company, unless the debt is a debt of the trust.

Estate planning: Generally speaking, the ownership of assets held in a trust cannot be passed on through a person’s will. But by making a testamentary discretionary trust under a will, which only takes effect on death, the trustee can exercise discretion in the payment of income and capital of the trust to the beneficiaries.

This is a strength of a discretionary trust to protect against the situation where a beneficiary is or becomes bankrupt. Where a person inherits assets in their own name, these pass to the trustee in bankruptcy. In a testamentary discretionary trust, the beneficiary’s inheritance is protected, provided they have not transferred wealth to the trust with the intention of defeating creditors.

Likewise that inheritance is in general protected in the event the beneficiary experiences a marriage or de facto relationship break-up and the ex-partner seeks access to the assets or income via a Family Court order, though it should be noted the Court may still consider any assets owned by the discretionary trust as a form of financial resource which could become a factor in the split of assets.

Tax effectiveness: Discretionary trusts can be a tax effective structure as a holding entity for investing in real estate, other fixed assets, shares or units in trusts. Income derived from these assets is held in the trust, which distributes it at its discretion in any particular year.

Each beneficiary pays income tax on his or her allocated share of income, according to his or her normal tax rate. In a simple discretionary trust held by a husband and wife, for example, if she earns much more than he does in a year and is taxed at the top marginal tax rate, it makes sense to distribute a greater share of trust income to the husband, who will be taxed at a lower marginal rate.

There is a significant capital gains tax advantage, too. If the investment is held in the trust for more than 12 months, any gain on the value of the investment is eligible for a 50% capital gains tax discount when it is sold, but only if the capital gain is distributed to an individual beneficiary.  Expert tax guidance from a tax lawyer or accountant would be required.

Flexibility: Beneficiaries can accumulate assets within the trust structure. Unlike superannuation funds, there are no contribution limits or restrictions on where to invest, unless specified by the trust deed.

Trusts can also represent a simpler reporting structure when it comes to tax liabilities, debt deductions and dividends on investments.

And the disadvantages…

Beneficiaries lack legal or equitable interest in property: Since beneficiaries do not own the assets of the trust, they do not hold a legal or equitable interest in trust property, meaning the trustee or trustees can employ their discretion to change allocations from the trust on a whim.

There may also be a restriction on who can be distributed to if you need to make a family trust election (FTE). An FTE entitles the trust to certain tax concessions when claiming losses from prior years or imputation credits on franked dividends received. Making an FTE, however, means family trust distribution tax is imposed when distributions are made outside the family group.

Only profits are distributed: Losses are trapped in the trust and cannot be distributed to a beneficiary in order to reduce their taxable income.

Complexity and compliance: Depending on whether your discretionary trust is a close family trust or uses a corporate structure, and the number of beneficiaries, the trust instrument can be complicated. There can also be onerous compliance obligations, particularly when it comes to taxation, adding to the administrative costs of maintaining a trust.

Attracting investment: Investors can be more difficult to attract to a business where a trust structure is employed. Banks who are unfamiliar with the terms of the trust deed may express hesitation about lending for investment.

Ask us for guidance

Whether a discretionary trust is suitable for your situation based on the factors we’ve outlined above is a decision you should consider after expert legal advice.

At Felicio Law Firm, we have years of experience advising people on both the benefits and potential drawbacks of establishing a discretionary trust for protection of family and/or business assets.

Call us today on (02) 4365 4249 for an initial consultation in which we can fully discuss with you the implications of setting up a discretionary trust.

What You Need to Know About Foreign Surcharges and Discretionary Trusts

By | Property Law

Trusts are a complex area of the law, particularly when it comes to taxation.

In NSW, when a foreign person – defined as an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holding a substantial interest – acquires residential land in the state, ‘surcharge purchaser duty’ is payable by that foreign person. NSW residential land owned by foreign persons is also subject to ‘surcharge land tax’. Both these ‘foreign surcharges’ are payable in addition to any other duty or land tax payable.

Where a discretionary trust exists, the trustee may be liable for these foreign surcharges if any one of the potential beneficiaries of the trust is a foreign person. This applies to all potential beneficiaries under the various categories of beneficiaries provided for under the relevant trust deed, not just the named beneficiaries.

It’s a wise course of action to seek the advice of legal professionals experienced in the administration of trusts in order to avoid these foreign surcharges, which we’ll provide some more detail on in this article.

What a discretionary trust must do to avoid foreign surcharges

The NSW Commissioner of Revenue released a practice note in June 2020 on how surcharge purchaser duty and surcharge land tax is applied in situations where land is held by a discretionary trust, clarifying the application of section 104JA of the Duties Act 1997 and section 5D of the Land Tax Act 1956 to this situation.

The advice noted that potential beneficiaries of a discretionary trust are not limited to those named in the trust instrument and can include members of any class of persons to whom, or for whose benefit, trust property can be distributed or applied when the trustee exercises its discretion. This can include beneficiaries who are not included when the trust deed is executed, including foreign persons for the purposes of the foreign surcharges.

In this circumstance, the trustee of a discretionary trust will be designated a foreign person.

The note advised that to avoid being a foreign trustee, the discretionary trust must ensure:

  1. no potential beneficiary of the trust is a foreign person; and
  2. the terms of the trust must not be capable of amendment in a manner that would result in a foreign person being a potential beneficiary. This is known as the ‘no foreign beneficiary requirement’ and is usually satisfied when the terms of the trust prevent any property of the trust being distributed to or applied for the benefit of the person.

Some examples

The Commissioner’s note provided a number of examples applying the provisos around discretionary trusts and foreign persons.

A simple example is where a couple maintain a family trust and have children who are the primary beneficiaries. Potential beneficiaries of the trust include future spouses and children of those children who are primary beneficiaries. To remain exempt from foreign surcharges, therefore, the trust must be amended to exclude any foreign beneficiaries and this amendment must be irrevocable.

In a similar example, potential beneficiaries may include children but also their spouses, grandchildren, aunts and uncles, and an Australian charity operating in Australia for the benefit of residents in Australia.

Even though there may be no existing foreign beneficiaries, the trust must still be amended irrevocably to exclude any future foreign potential beneficiaries.

In another example where the trust owns no land in New South Wales, the trust does not need to contain a prohibition on foreign persons being beneficiaries. But if the trust purchases residential property in NSW it will be liable for surcharge purchaser duty in 2020 and surcharge land tax for the 2021 tax year. To escape liability for foreign surcharges, again it will need to amend the trust deed to explicitly exclude potential foreign beneficiaries.

In some cases, the trust instrument will already exclude a class of beneficiaries, including foreign persons, and is not capable of amendment. In this case the trustee will not be liable for foreign surcharges.

In the circumstance where an Australian corporation enters into a contract for the purchase of residential property in NSW and the corporation’s shares are held in a discretionary trust, the company will be liable to surcharge purchaser duty if the trust does not contain a provision to exclude foreign beneficiaries.

It should be noted that corporations are considered foreign persons if a shareholder who is a foreign person has a substantial interest in it, including where a discretionary trust is the shareholder of the company.

Further examples are available for us to discuss with you in cases where general beneficiaries of a discretionary trust will only benefit after the death of the principal beneficiary, or if the trustee is liable for surcharge purchaser duty on a transfer of dutiable property that occurred before 24 June 2020, or after that date but before midnight on 31 December 2020. In the second case, the trustee will still not be liable if the terms of the trust have been amended before midnight on 31 December 2020.

Seek our advice today

If any of the issues in this article relating to liability for foreign surcharges by a discretionary trust need further explanation, please contact us today on (02) 4365 4249 for an initial consultation. We are specialists in family trusts and can advise you in a prompt and relevant fashion on what you need to do to avoid foreign surcharges.

Power of Attorney

How to Defend an Application to Review a Power of Attorney or Guardianship Appointment at NCAT (NSW)

By | Estate Planning

Australians live longer than ever before. Hopefully this means we can enjoy full and satisfying lives, but it also means many of us continue to live to a time after we’ve lost the mental capacity to make decisions for ourselves due to dementia or other illnesses of old age.

This fact has made the apppointment of Enduring Power of Attorney (EPOA) and enduring guardianship more significant legal decisions. An EPOA authorises one or more persons, a licensed trustee company, or the NSW Trustee and Guardian (the attorney), to act on behalf of the principal – the person with impaired decision-making capacity – by managing their personal financial and legal affairs.

An enduring guardian can make personal and lifestyle decisions on behalf of the principal, such as where they live and what sort of medical treatment they receive, when the appointer lacks capacity to make these decisions for themselves.

The trust and responsibility involved in these roles means those holding such positions can be closely scrutinised by other family members and beneficiaries of the person with impaired decision-making capacity. The EPOA, in particular, is not only responsible for acting in the best interests of the principal, but also those people who rely on the principal during his or her lifetime, as well as their beneficiaries once they die. Where a financial loss to the principal or his or her estate is sustained as a result of a decision by the EPOA, their appointment can be challenged.

In NSW the Guardianship Division of the NSW Civil and Administrative Tribunal (NCAT) is empowered to resolve disputes or concerns in respect of an incapacitated person’s guardianship or financial matters, including determining applications for the appointment of guardians and/or enduring powers of attorney, as well as reviewing these appointments.

This article will focus on what you should do if your appointment as an EPOA or enduring guardian is the subject of an NCAT review application.

The NCAT review process

The role of NCAT’s Guardianship Division is to protect and promote the rights and welfare of adults with impaired decision making capacity.

EPOA: When someone believes an EPOA is not acting in the best interests of a person who has lost capacity, they can make an application to NCAT to review the appointment under the Powers of Attorney Act 2003. NCAT accepts the request for a review if it believes it’s in the best interests of the person who made the EPOA.

As a result of a review, NCAT can vary or revoke the EPOA. It can remove an attorney from office or appoint a substitute attorney. Under its power of review, NCAT can require an attorney to provide accounts and information.

One reason an EPOA may be declared invalid, in whole or part, is because a person did not have the mental capacity to make a valid EPOA at or during a specified time. NCAT has the power to make this declaration about a person.

In some circumstances, NCAT may treat the application for review as an application for financial management and make a financial management order which suspends the operation of an EPOA for the duration of the Tribunal’s order.

To apply to the Court or NCAT for a review of the operation of a person’s EPOA, you must have legal standing. Those with standing include the principal (if they have mental capacity), a guardian or enduring guardian of the principal, and any other person who, in the opinion of the Court or NCAT, has “a proper interest in the proceedings or a genuine concern for the welfare of the principal”.

Guardianship: An enduring guardian is different to an EPOA in that they are appointed with specific powers to make important medical decisions for the principal (such as whether they should undergo an operation, or receive a certain drug), as well as decisions about living arrangements (assisted living, nursing home, etc.).

As with EPOAs, NCAT has the power to review the appointment of a guardian on its own motion, or at the request of anyone with a genuine concern for the welfare of the person. NCAT can revoke the appointment or confirm it. It may also change the functions in the appointment or make a guardianship/financial management order.

It should be noted that NCAT requires evidence that the person for whom the guardian is appointed has a decision-making disability and that disability results in the person being partially or wholly, incapable of managing themselves.

How to defend an NCAT review of your appointment as EPOA or enduring guardian

Both EPOAs and enduring guardians have important responsibilities and need to be aware of the time, stress and weight of those responsibilities before they agree to the appointment.

An EPOA has fiduciary duties and obligations to the principal which they can become liable for should they breach. The document creating the EPOA will set out these duties and obligations, as well as when the power becomes operative. If the EPOA begins when the principal loses mental capacity, the attorney should obtain a letter from the principal’s doctor or an appropriate specialist confirming that the principal has lost mental capacity and is unable to manage their own financial and legal affairs. This can be invaluable if there is a later request to review your appointment by NCAT.

An EPOA should always obtain appropriate advice about difficult or complex issues regarding the principal’s affairs. If an attorney decides to sell an asset of the principal, for example, he or she should first check with the principal’s legal representative to make sure the asset was not the subject of a direct gift in the principal’s will. This is a common cause of applications to review an EPOA to NCAT by beneficiaries of the will.

An attorney should be aware that under section 38 of the Powers of Attorney Act 2003 (NSW), they may apply to the Court or NCAT for advice or direction “on any matter relating to the scope of the attorney’s appointment or the exercise of any function by the attorney”. By doing so they may prevent those with standing having grounds to request a review by NCAT of their appointment.

An enduring guardian must act within the bounds of the Guardianship Act 1987 (NSW) in order to avoid grounds for review of their role by NCAT. This requires the guardian to keep the welfare and interest of the person they are acting for paramount; ensure the person’s freedom to decide and act for themselves is restricted as little as possible; take into account their views and encourage them to be self-reliant and live a normal life.

NCAT does not supervise enduring guardians and only acts where a concerned person makes an application, or information is received which leads to a review of the appointment.

Other than the requirements mentioned above, to avoid grounds for review an enduring guardian should ensure their appointment is made in writing and signed by both the appointer and the intended guardian in front of a designated legal authority. In carrying out their duties, the guardian also needs to pay due regard to any specific guidance or Advance Care Directives (ACDs) made by the appointer.

How our legal advice can help

If you act as an EPOA or enduring guardian for someone and your appointment is the subject of a review by an NCAT, you should contact Felicio Law Firm today. We have wide experience advocating for people before government bodies such as NCAT.

Similarly, if you need more information on the right way to appoint an EPOA or an enduring guardian, give our friendly team a call.

We’ll provide guidance and keep you fully informed throughout the process of defending your performance in the role and protecting your rights. At Felicio we take a considerate and collaborative approach to our relationship with our clients. Contact us today on (02) 4365 4249.

Planning for the Future of Your Business

By | Business Law

The COVID-19 pandemic has affected every area of the way we live. And at the moment, we are not sure how long our changed circumstances will last, or what the legacy of this disease will be.

One group in society most obviously and directly affected has been those who operate businesses. Shut-downs, stand-downs, and the sudden disappearance or inactivity of customers and clients has had – and continues to have – a dramatic and damaging affect on business owners and operators.

As a law firm embedded in its community, with many long-term relationships with valued business clients, we at Felicio Law Firm are particularly aware of the challenges our friends are facing. We are here to help during this unprecedented time, which the subject of this article is addressed to.

How we can help

With many business clients facing severely reduced revenue and even insolvency, it’s important for them to know that there are legal options which are affordable, accessible and effective in helping protect and aid their business during this trying time. But these options do require placing your trust in us by providing necessary information we can utilise to assess your business position and what might be done to ensure it survives the pandemic.

Some of the records we might request in order to give you informed legal advice on your options might include:

  • Details on the business’ current operations, including active contracts, and any planned acquisitions or divestitures.
  • The company’s most recent financial statements. The most important details within these are:
  •  a depreciation schedule, if available;
  •  any recent valuations relating to plant, equipment and intellectual property owned by the business;
  • debtors’ and creditors’ ledger;
  •  details of related party creditors;
  •  current balances in all business-related bank accounts;
  •  details on employee entitlements.
  • Whether any payment arrangements have been entered into between the business and other agencies, such as the Australian Taxation Office (ATO).
  • ATO balance and income tax account details.

Provision of these details by your business’ financial adviser is certainly a great start in helping us understand the financial position of the enterprise and our capacity to suggest useful legal avenues for protecting your position.

What else could be provided?

In addition to those documents listed above, our legal help can be provided where a director of a business may have provided a personal guarantee in order to make sure the business meets its debt and financing obligations.

This process may require you to furnish us with the details of any insurance policies held by the company, particularly those that relate to the liabilities of directors and other company officers.

In these times of economic contraction, it’s advisable our business clients contact us as soon as possible if they receive any statements of claim, default judgement or applications to wind up as part of insolvency proceedings. Equally, if there are creditors of the business demanding payment, provide us with details of any payments made as soon as you’re able.

At Felicio we can help where the business has secured creditors. By providing us with information on the amounts owing to secured creditors, the extent of the charge they hold, and any details of repayment plans to meet obligations, we can help advise on cost effective ways to protect your business.

Likewise, where suppliers retain title over stock or goods of the business which are registered on the Personal Property Security Register (PPSR), or there are rental assets held by the business which may be subject to charges by the bailor under the PPSR, we can help you understand the legal position. This will require you providing details on current rental/lease agreements held by the business, including the lease period and the amount and frequency of repayments.

Why legal advice is crucial

These are trying times. Many experienced economic commentators have openly predicted many businesses won’t survive the effects of the global downturn caused by COVID-19.

Many businesses are also unaware of their legal rights and obligations, or what they can legally do to protect their interests. We understand all of these issues and are here to help our business clients through these difficult times.

Call us today (02) 4365 4249 for an initial consultation to discuss any of the issues raised in this article. Our firm is dedicated to long-term relationships with clients where we listen with compassion and understanding and then act in your best interest to ensure your business is protected.

Felicio Law

The Advantages and Disadvantages of Using Online Templates for Legal Documents

By | General News

Whether it’s making a will, signing a contract, a lease or a hire purchase document, or filling in employment documents, in this digital age a lot of essential legal paperwork is available as an online template.

It’s understandable why many formerly paper-based legal forms have moved to an online format. As much of the population gains internet access, legal documents available as an online template are easily accessible, time and money-saving, trackable and capable of being encrypted for additional security and privacy.

There has been significant growth in the number of websites and services offering legal forms, documents and templates for a flat or monthly fee. In return for answering some questions and providing other information – such as the names of the parties to a contract – the site creates a legally valid document for you.

But online legal forms also have some drawbacks which may impact on their validity if a legal issue or dispute arises. These include the possibility of outdated or incorrect forms being left online, the inability to customise the form for the user’s purposes, and security and privacy concerns.

This article outlines the various advantages and disadvantages in using an online template when making a legally enforceable document, but if in doubt you should consult experienced solicitors such as the team at Felicio Law Firm who can ensure that filling out an online template is done in a way that prevents the likelihood of it later being disputed, thereby protecting your essential interests.

The advantages of online templates…

The ease and speed of filling out a legal document at your laptop or home computer is obvious. It saves time and, in most cases, avoids the need of paying for professional advice. The portability of such documents means you can access them from multiple devices in any place.

Standard legal documents such as tenancy agreements, basic contracts, product warranties and hire purchase agreements are these days all made readily available as online templates.

For small businesses or sole traders, providing such forms regarding basic terms and conditions is a cheaper, simpler way to create official legal documents with clients and suppliers.

In some cases, online templates can also be customisable so that you can create a more bespoke legal document, such as in the case of a do-it-yourself will.

Encryption technology such as digital signatures ostensibly also provide the necessary security and privacy in a world where identity theft and cyber-crime are real and present threats.

…and the disadvantages

Many of the recognised benefits of online legal document templates also have an unfortunate downside.

Businesses and organisations who offer an online template for key legal documents may grow and evolve so that the digital form is no longer suitable or relevant for the purpose for which it was designed. In many situations, forms are uploaded and then forgotten about, so that their essential terms and conditions become out-of-date or invalid, despite users continuing to use the form.

Commonly, it’s the rigidity and inflexibility of an online template that becomes the problem. Legal documents often need to be made ‘bespoke’ – personalised to reflect the needs and conditions of both path parties to a contract. This is not always possible when using an online template.

Documents setting out contractual terms and conditions, shareholders’ agreements, employment agreements and data protection policies are often lengthy documents not suited to the format of an online template and also requiring sections that need to be customised to pre-empt and avoid the possibility of later disputes.

Subscription-type sites offering legal templates may also – usually in the small print – disclaim the idea that they are providing legally enforceable documents. This may mean the form you’re using may later be shown to be invalid or unenforceable. People also often accept overly restrictive or incorrect terms because they did not read disclaimers accompanying online forms, or could not find them via the site’s navigation.

Finally, the fear that the site hosting the online template is not secure is real. In many cases both the organisation providing the online form, and the user of the form, are not as technologically savvy as people acting nefariously to steal personal and other details from online transactions. Even sites that profess to be entirely secure, may not be.

Why legal advice is a smart option

While online templates are often a good option for simple, standard and straightforward legal forms, such as lease documents, you should still seek legal advice when it comes to more complex contractual forms.

Relying on a form filled out via an online template can be problematic if there’s a later dispute about whether the terms have been breached. In the worst-case scenario, you could lose money or be forced to pay damages if the document is not enforceable.

Experienced solicitors such as Felicio Law Firm take the time to understand you and the needs of your business so that we help you create personalised legal documents to meet your requirements both now and into the future. By taking on expert legal advice, you can also avoid accepting unsuitable terms when using online legal forms. There is no substitute for a properly drafted, enforceable legal document.

If this article raises any questions or concerns, contact Felicio Law Firm today on (02) 4365 4249.


How are NCAT Hearings Conducted?

By | Conveyancing

The NSW Civil and Administrative Tribunal (NCAT) was established in 2014 as a means of reducing the complexity involved where people need to interact with a government decision or legislation, or where they need an authority to decide a dispute.

To this end, the NCAT replaced 22 former tribunals and now operates with four divisions: Administrative and Equal Opportunity, Consumer and Commercial, Guardianship, and Occupational. These divisions deal with a wide range of matters, including reviews of decisions made by a government agency, anti-discrimination, consumer complaints, home building disputes, conveyancing costs disputes, retail lease disputes, appointment of guardians or financial managers, and tenancy disputes between tenants and landlords, among many other matters.

The aim of the NCAT is to provide an accessible, economic and effective mechanism to resolve common disputes. To this end, there a number of methods employed to prevent a matter proceeding to the stage of a hearing before the NCAT, though this article will focus on what occurs during an NCAT hearing.

Dispute resolution ahead of a hearing

Once an application to the NCAT is made, the Tribunal will assist parties to try and resolve the matter before the need for a hearing. This may take the form of an informal discussion, preliminary conferences, planning meetings and case conferences (in the Administrative and Equal Opportunity Division), conciliation (in the Consumer and Commercial Division) and mediation (in some Divisions, where suitable).

What happens when a matter proceeds to a hearing

Where other means are not able to resolve an application, the NCAT will move it to the hearing process where you, as the applicant, have the opportunity to make submissions, give and present evidence, and provide supporting documentation. The opposing party can do likewise. Based on this process, the Tribunal can then make a decision on the matter.

You will need to be properly prepared for an NCAT hearing as Tribunal members will ask questions about the evidence you submit in support of your case. They may also ask that your evidence is sworn or affirmed.

The hearing process will generally involve the applicant first providing verbal evidence, followed by the respondent. Any supporting documents need to be provided before the hearing to the Tribunal and the other party. Documents might include character references, medical reports, contracts, letters, emails, invoices, phone logs, minutes of meetings, plans and drawings, and photographs and film.

An affidavit or written statement serving as written evidence can also be provided to the NCAT before the hearing. An affidavit is a written record of your view of the facts in the case and needs to be sworn or affirmed in front of a Justice of the Peace (JP) or a solicitor. By contrast, a statement only needs to be signed by the person who writes it and does not have to be sworn or affirmed.

You may also call on the evidence of witnesses to support your case at an NCAT hearing. Witnesses can provide a statement or affidavit as part of the hearing or, in some cases, give evidence in person. Depending on your matter, you may engage an expert witness to provide a report or give in-person evidence at the hearing.

Where a person or organisation won’t provide you with information you need to include as evidence for the NCAT hearing, you can request a summons in order to procure that information.

The Tribunal member hearing the case will often make a decision on the day of the hearing though may reserve their decision until a later time in more complex cases. The decision will usually be delivered verbally with a brief outline of the reasons for their decision and the orders that will be made.

Once the decision is made, you can ask the NCAT within 28 days of the decision for a written statement of reasons for the decision. This statement should explain NCAT’s decisions on the facts, the law and how the Tribunal member came to the decision. By asking for this statement, you can extend the time you have to appeal the decision if it is unfavourable to you.

The wisdom of legal assistance

The set-up of the NCAT as a low cost and accessible means of resolving common disputes is designed to allow people who make applications to the Tribunal to represent themselves, but that doesn’t mean you can’t have a legal representative present or engage them to help you prepare your application.

Because people are encouraged to represent themselves before the NCAT, you need to make a request if you wish to be represented by a lawyer in your matter. This request requires a letter in writing either before or at the time of the hearing that details:

  • The file number and parties’ names;
  • the reasons you would prefer to be represented;
  • the name and occupation of the proposed representative and whether or not that person is a lawyer/solicitor;
  • a statement that the proposed representative has your permission to make decisions in your absence that are binding on you.

Depending on the complexity of your application, it’s always advisable to seek the guidance and advice of a legal representative who has experience in representing clients before the NCAT.

Felicio Law Firm has conducted many matters before the NCAT and can help you expertly prepare your application so that if you need to appear before the Tribunal, the chances of success in your matter are much higher. Contact us today on (02) 4365 4249 if you have any questions about NCAT hearings.

Discretionary Trust

What are the Benefits of a Discretionary Trust?

By | Estate Planning

Whether as a business structure or as part of estate planning, there are a number of advantages to setting up a discretionary trust, sometimes also called a ‘family trust’.

This article will provide some detail on the benefits – as well as some of the things to be cautious of – in creating a discretionary trust. Trusts can be a complex area of the law so it’s a wise course of action to seek the advice of an experienced legal expert if you wish to establish a discretionary trust.

The key advantages for estate planning

The main reason a person will set up a discretionary trust as part of their estate planning is the control it provides them in determining who and how much the beneficiaries of the trust will receive from the trust’s property and assets.

A discretionary trust will often hold shares and other investments. Money earnt on these investments is held in the trust and you, as the trustee, has the discretion about how the money is distributed to beneficiaries such as your immediate family members.

It’s important to note that the beneficiaries are a defined class of people who do not have a right to the assets of the trust but merely a right to be considered when the trustee decides to exercise their discretionary power to distribute income from the trust.

The second key advantage of a discretionary or family trust is that it can provide tax advantages. If as trustee you are earning an income that places you in a high income tax bracket, but your beneficiaries in the trust are in lower tax brackets, or even under the tax-free threshold, you can minimise the tax burden on income from investments by distributing trust income to those beneficiaries, who will be taxed at the lower rate.

A further strength of a discretionary trust is asset protection. In estate planning this can prove important where, for example, a beneficiary of the trust becomes bankrupt. In normal circumstances where a person passes on assets in a will to their adult child and that child is bankrupt, the assets will become available in the bankruptcy proceedings. But in the case of a discretionary trust, assets within the trust will be protected from the proceedings and any other creditors. The trustee can distribute to the bankrupt beneficiary once the bankruptcy period has expired.

Capital gains tax

A further benefit of a discretionary trust is that if an asset of the trust is disposed after a year within the trust, a 50% discount applies to any capital gains tax owing. This discount also flows through to beneficiaries on distribution of the proceeds.

Discretionary trusts as a business structure

A discretionary or family trust is a particularly popular means to structure a small business in Australia. The key advantages outlined above, including control, asset protection and tax advantages, equally apply.

Additionally, so long as the trust deed is correctly structured, small business capital gains tax concessions are also available in this structure. The benefits of limited liability are also available if the trustee is a corporate entity. The trust structure also makes it easier to admit new beneficiaries without the trustee losing control.

It’s important to also note some common disadvantages of this structure. Investors can be harder to attract when a trust structure is used and a bank, for example, is uncertain of the terms of the trust deed. Losses from the business are trapped in the trust, as only profits can be distributed, and property held in a discretionary trust is not able to take advantage of the tax-free threshold for land tax. There can also be a restriction on who can be distributed to if you need to make a family trust election, required where the trust wishes to claim losses from prior years, or imputation credits on franked dividends received.

Speak with Felicio Law Firm

At Felicio Law Firm we have many years of experience advising clients on the benefits of setting up a discretionary trust. We can take you step-by-step through more detail on the general points raised in this article and put your mind at ease about whether this is the right structure for your circumstances.

Contact us today on (02) 4365 4249 for an initial consultation.

Property Law

Avoiding Pitfalls and Delays When Developing Residential and Commercial Land in NSW

By | Property Law

Developing land for either residential or commercial use in NSW can be a complicated and time-consuming process. From the purchase of the land through to all the issues posed by construction and the ultimate sale of the property, it can be a challenging path to a final profit.

One of the trickiest issues for any developer is dealing with local councils and other relevant authorities to not only gain consent for the project, but also remain compliant with the multitude of legislation, by-laws and other rules which govern property development in NSW.

This article provides a general overview of what’s required through that particular part of the process, but recommends any developer avail themselves of the guidance of expert legal professionals before interacting with government authorities during development, be it local, state or Federal.

What are the key things to know for a property developer

Once you’ve navigated finance and purchase issues to secure a property, the steps to get a development project off the ground have just begun.

It’s important to do your due diligence before securing the land you wish to develop. Different councils interpret NSW development laws in different ways in order to ensure a development is appropriate in its area. A good understanding of the local authority’s approach to town planning will help prevent costly delays in approval of your development project.

There are nine different planning approval pathways in NSW, determined by the size and scale of the development. While smaller development projects such as home renovations and even modest commercial or industrial constructions may be dealt with by the ‘exempt’ or ‘complying’ development pathways (where on application, the project already meets specific standards and land requirements) – and are therefore faster to approve and commence – most residential and commercial property development will fall under the ‘local development’ pathway.

A development is considered local development if a local environmental plan (LEP) or State environmental planning policy (SEPP) states that development consent is required before the development can take place; and it is not considered to be either regionally or ‘State significant’ development.

A developer can enter the address of the proposed development at NSW Planning Portal to see what planning constraints and zoning rules affect the property.

If your development needs consent, an application must be lodged with the local council and will need to include:

  • A description of the development;
  • the estimated cost of the development;
  • a plan of the land;
  • a sketch of development;
  • environmental assessment in the form of an environmental impact statement or statement of environment effects.

The ultimate aim, of course, is a development consent issued by the ‘consent authority’. This will usually be the local council unless the SEPP specifies the NSW Planning Minister as the consent authority.

The stages of gaining development consent are detailed at the NSW Department of Planning, Industry and Environment website here.

Under the Environment Planning and Assessment Act the council will assess the development application (DA) on the basis of:

  • All plans and policies that apply, such as SEPPs and LEPs.
  • Impacts of the proposal on the natural and built environment and the social and economic impacts in the locality.
  • The suitability of the site for the proposed development.
  • Any submissions from neighbours or other groups.
  • Any comments or agreements/approvals from any NSW Government agency.
  • The broader public interest.

Avoiding pitfalls and likely costs

Time is money and delays during the DA process can significantly impact the economic viability of a development, particularly if the obstacles are serious. Commonly delays arise because the developer has failed to prepare properly in terms of complying with some of the factors we’ve discussed above.

The best way to make sure your DA can proceed relatively smoothly through the process is to rely on the expertise of others in the preparation stage. An experienced architect or designer, builder, town planning specialist and legal expert are some of the key people who can help you avoid costly delays.

Detailed site analysis, research on other recent developments in the surrounding area and speaking with consultants who’ve advised on similar developments are all recommended before you get to the DA stage.

At this stage a thorough budget should also be put together. There are many potential costs facing any developer. Some of those in relation to approvals from government authorities include:

  • The DA fee, including the cost of referral to State Government agencies.
  • The construction certificate fee as well as fees incurred in the building process for official inspections, engineer’s certificates and more.
  • Development contributions payable for State and local services.
  • Conditions that may be imposed by council such as bonds to cover potential damage to surrounding infrastructure; environmental clean-up or rehabilitation; dilapidation surveys of attached properties, etc.
  • Water and other service connections.

It’s advisable to itemise the known outlays in terms of paying for government approvals and services at the outset of the development.

Discuss your development proposal with us

This article serves only as a brief overview of what’s involved in a progressing a residential or commercial development through the processes demanded by local councils and higher government authorities.

For more detailed advice and guidance, contact Felicio Law Firm. We have the background in all matters related to property development to offer clear, targeted advice that will save you time and money when dealing with the regulatory regime. Call us for an initial consultation today on (02) 4365 4249.