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    • Total posts: 73

    Please let me begin by apologising for the long post. It wasn’t intended to be this long and I am probably venting a little more than I should.

    I will not be identifying anyone in this post, and hope that the information I provide here will remain anonymous enough that any corporation is not identified for fear of legal recourse. But I am at a cross-roads and unsure of which way to turn. I’m after any advice that anyone would care to offer.

    I know that the vast majority of responses are probably going to tell me to see a solicitor (we have an appointment for next week) but in order to reduce what is going to already be a high cost, I’d like to nip a few problems early in the piece:

    1) in an effort to reduce wasted time
    2) to reduce overall cost of to’ing and fro’ing mindless babble and
    3) to make things as clear as possible

    Our solicitor in this scenario is going to be expensive. He is the most recommended for us in our area and he charges a fixed rate plus a percentage of overall rent over the whole term. Considering this is in a shopping centre (not cheap rent) and over a long period (5 years) this is a relatively high setup cost for us.

    I do have experience in legal documentation and have a good grasp of legal concepts but I am no solicitor and I am coming up upon lie after lie and I am losing all faith in wanting to do any business with any shopping centre.

    I am left bemused as to why people would sign these documents in the first place.

    Down to the major discrepancies:

    Discrepancy #1: I made it clear from our first meeting that we wanted to be a six day a week business (closed on a weekday) to which we were told an un-resounding “no way”. We are a mum-and-dad business and don’t look to initially be hiring staff to help us run the store. We wavered and have settled on 7 days a week, but it was VERY clear from the very first meeting that we were NOT a breakfast service and would only provide lunch and dinner and as such, would not be opening our doors until later in the AM. We were consistently told “You’re a food service, we understand that. That’s not a problem.” Sentences like this were told to us so many times, but never ratified in documentation. Although what WAS ratified was that we could trade AFTER hours without fee (because the shopping centre’s core hours are not usually open for a dinner service AND we are located on the outside of the shopping centre).

    Discrepancy #2: I am concerned about some of the ownership of items within the shop that have been “left” by the prior owner. BIG TICKET items that when added together are well into the five figures. From our very second meeting I have raised “ownership” as a concern and have again been repeatedly told, and by various people assured, they are owned by the shopping centre and the previous tenant has no claim of ownership on the items. This has been expressed so many times and it even appears in scanned documents.

    Those are the big ones, I will raise others as part of my concerns below:

    item 1: We have received the lease from the corporation’s solicitors stating that we will operate at all times within core hours and that those hours are dictated in the rules which further indicate we will be open two hours earlier than we intend and have discussed. There is a substantial per hour or part there-of fine for not being open during the core hours. I realise now that on the invitation to lease, our intended start time does not actually appear, they were always met with verbal “she’ll be right” and a feigned “don’t you worry about it” hand gesture. ie, “it’s generally accepted”. My wife is happy with this answer, but I am not. The legal paperwork says WE WILL OPEN OR BE FINED. I want that resolved. I don’t care if they put it in the rules sections, the items section, the clauses, or as an attachment or in one of the annexes (seriously how can a single shop require so many different types of sections spread over almost 100 pages??? To me it is indicative they are hiding something which will become abundantly clear in the next item).

    item 2: Disregarding the fact we have been repeatedly told THEY OWN the property and the property becomes our responsibility when we take over the shop the lease contains an expressed condition that we accept the landlord DOES NOT OWN in any way the items already located in the shop. FURTHER, they put the onus on us to determine who owns the items and liaise with them or a third party directly to determine and make claim to ownership ourselves. This was buried in the very last clause of the 2nd to last page of 90 pages! (I suppose I did read the documents out of order, and you could say it was buried in the 2nd to last page of a 24 page document, and then I should have read the larger document, but I did it the other way around). I hear you say, “but haven’t you got documentation from them already stating ownership.” Well yes, and apparently no. Read on.

    item 3: In the lease there is a clause that specifically states that any and all information that I have received from anyone is null and void and only that information that is specifically in this document (the lease) is taken as binding. I’ve paraphrased, but you get the idea. The clause says that ANYTHING the L.E. has told us and even WRITTEN in an email or SMS is not legally binding, only this document. And in regards to item 2, they’re saying “we don’t own it and if the previous owner comes back wanting it, it’s up to you to sort out at your expense.”

    item 4a: because we are setup as a company (not trading on the stock exchange) there are several references to the landlord having control over company decisions such that no shareholder stake may change or change in directorship can be made without expressed approval of the landlord, AND
    item 4b: They require a guarantee personally from the company directors AND a guarantee in the form of a bank deposit. I understand they want some protection, but this seems overkill. Can they REALLY have this level of control a) over the company and b) asking for both a guarantee in both a personal form and as a bank cheque? Surely one would suffice, wouldn’t it?

    item 5: blank annexures in the documentation. c’mon, this can’t be legitimate! There are surveys missing from the documentation, “common seating area” plans missing and we are to accept these blank pages AND initial them? Who knows what get’s inserted later. I’m certainly not prepared to initial them.

    I am not about to set this up to cheat anyone. I am trying to start a legitimate business. I wouldn’t be considering this otherwise. But it seems to me that they are not only covering their collective butts, but trying to do the nasty to us in the process. I feel like they’re taking advantage of first timers here.

    The “Leasing Executive” is a good looking young man who is not short of self confidence, but appears to be lying through his teeth and covered by a clause of the lease that specifically says any and all prior communications that we have relied upon in making our decision to accept the lease mean nothing. No wonder he’s so smug as he eats his apple and types away on his smart phone.

    I am expecting our solicitor to tell us to not touch this with a ten foot barge pole. Or, am I over reacting and these are just the norm?

    Will a solicitor get these things changed? (i.e. do big corporations bend to the little man?) or am I raising a fuss over nothing?

    In the aforementioned (right at the very top) vein of trying to be clear, concise and honest and to move this along expediently, should I make some representations to them prior to going to my solicitor? If they don’t budge and indicate they won’t then we save ourselves ~$1500. If I want to do some negotiations on this before hand, who should I speak to? My initial response to their solicitor indicated that I have received their documentation but there are glaring errors and missing documents. His response was: We’ll seek instructions.

    Since I see that as being all I’ll ever get form them, should I be speaking to the L.E. or someone higher in the food chain?

    Or RUN?

    My gut is telling me not to touch this.

    James Millar
    • Total posts: 1,739

    I get what your trying to do here so let me save you some time and money. Note this is not a substitute for legal advice so you should still see a lawyer before making any decisions.

    Big shopping complex’s (westfields etc) impose very strict lease terms on their tenants. These often include minimum trading hours, annual rent reviews with a seemingly arbitrary basis (in some cases they review the business financial statements each year to determine the appropriate increases), mandatory refits every few years, marketing fund contributions, regulations on changes in business control and ownership, large security bonds, personal guarantees etc. They do impose penalties for breach. If you are looking at going into a centre like this then you will probably not get a lot of movement on these major terms.

    Yes its ridiculous and in some cases probably unconscionable at law. Pre contract representations may be misleading but enforcement is not a cheap process. I suspect this is a simple application of the parol evidence rule which seeks to include all terms in one written agreement and excludes supplementary commentary. So you should probably assume that the content of lease document is final and all other supplementary comments, handshakes and opinions are irrelevant.

    So basically (a) disregard what any agent tells you and (b) shopping complex leases are often highly onerous to the point of being uncommercial and unviable unless you have a large multi store brand.that has other value to the centre.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    • Total posts: 4,485
    JamesMillar, post: 236572, member: 5318 wrote:
    (b) shopping complex leases are often highly onerous to the point of being uncommercial and unviable unless you have a large multi store brand.that has other value to the centre.

    I know absolutely nothing about law, so I will do no more than a lawyer would do, and say ”Note this is not a substitute for legal advice so you should still see a lawyer before making any decisions.”

    But, first James is most likely right in all he has said, but I happen to know a few small (one outlet) business’s which are trading in a large shopping centre, and making a commercial go of it. So to blatantly say that unless you are a large multi store its unviable, I would ignore this advise.

    Secondly, you can propose any amendments to any contract you like, than it is up to the other party to accept or reject any amendments, and if you are not happy with the acceptance or otherwise of any amendments it is your decision if you proceed or not.

    So what I am saying is send a list of proposed amendments to the centres legal people and see what their response is. If they say yes we will change the contract, good. If not than make a decision based on the contract as presented. Do this before you meet your solicitor, that way you have more information when paying the Mega dollars for advise. Just my opinion.

    Oh just to mention I happen to know that these one outlet small business’s have negotiated changes to the shopping centres base contract.

    • Total posts: 73

    Thanks for your opinion guys, it is much appreciated. Yes, all advice is taken at face value and is not taken as legal advice. No problems there.

    I do think we can make a good go of it otherwise I wouldn’t be considering it. It’s just that it seems like we take all the risk and they take all the money. In the end, we’re just working for them!

    We will be a niche for this shopping centre, and we know where the previous owner went wrong, we’ve had extensive conversations with them, even re ownership. But again, this is word-of-mouth.

    [USER=5318]@JamesMillar[/USER] you have hit the nail on the head with everything you’ve said in regards to what they’re asking for. To say “unconscionable” is an understatement to the extent that it scares the be-gee-bers out of me. And this isn’t even something as big as Westfields.

    All that said, I’ve already been able to negotiate timings to my liking (it looks like I’ve now got the late start that we initially wanted and managed to maintain our after hours trade as well at no cost, so far a win-win).

    We’ve had minor wins in other fronts, they’re completing a survey of the premises and will add it to the lease (at their cost). And we may be able to negate the personal guarantee but at the cost of a larger security bond. Something we have to consider.

    The L.E. is still saying they own the stuff but it’s ours the moment we walk in (ie, they wash their hands of reliability and maintenance—no problem, we know what’s wrong with it, we’ve already tested everything), their solicitor however, leaves it to us to find out who owns it (ie if it’s financed or subject to claim). The issue (obviously) we could be out $15-20K to replace everything.

    There’s a lot to consider, my wife really wants this location but has little understanding of law and finance. I’m more for a street location (for half the price and virtually no rules, much more flexible leasing options and none of the unreasonable mumbo-jumbo), but that location does need a lot of work and isn’t situated right at the front of a large card park. Damned if you do, damned if you don’t. lol

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