Commercial / Short-term Retail Shop* [incl. within Retail Shopping Centres] -> Licence to Occupy

Create this legal Document

Contact us to create this legal document.

Most Popular

Self Service

Create the document instantly yourself by entering the key details.

A$

Most Popular

Self Service

Create the document instantly yourself by entering the key details.

A$

Self Service

Self Service is not yet available for this document.

Lawyer Assisted

Create the document yourself with 30 mins help from a lawyer.

A$

Lawyer Assisted

Create the document yourself with 30 mins help from a lawyer.

A$

Lawyer Assisted

Lawyer Assisted is not yet available for this document.

Full Service

We create a bespoke document based on
your instructions.

From:

A$

Please turn your device to landscape mode to begin creating your document.

Please turn your device to landscape mode to begin creating your document.

Please turn your device to landscape mode to begin creating your document.

Please turn your device to landscape mode to begin creating your document.

Thank you! Your message has been received!
Oops! Please check your details and try again.

An alternative solution to Empty Buildings/Retail Shopping Centres

A "Licence to Occupy" is a way to increase utilisation and drive engagement with the growing oversupply of empty/vacant retail shops/shopping centres/offices across Australia.

This problem has been mainly caused by the COVID-19 pandemic's impact on "brick and mortar" businesses.

Have you ever seen or entered a "Pop-up" Shop?

If so, the "Pop-up" Shop arrangement will most likely have been documented using a "Licence to Occupy".

These short-term arrangements can be beneficial to:

➲ test a business idea;

➲ take advantage of a seasonal increase in demand; or

➲ sell an excess of stock which needs a temporary storefront.

In some cases, if it works extraordinarily well, a longer-term lease can result.

Renewing Cities

For examples of how 'Licences to Occupy" have assisted in the past (originating in Newcastle, NSW) please read the book by Marcus WestburyCreating Cities” or to simply gain an overview please watch his 2011 TEDx talk.

We have also started a new “Pop-up” Shop ➲ Smart List which will be updated over time with curated inks on this important topic.

Short-term Retail Shop* [incl. within Shopping Centres] ➲ Licence to Occupy

* Whether the Short-term Retail Shop ➲ Licence to Occupy is deemed a Retail Shop Lease by your local State or Territory legislation will depend on factors such as the following:

1️⃣ The length of the licence (including an options to renew or extend); and/or

2️⃣ The length of time the licensee has already occupied the premises prior to the commencement of the Licence to Occupy.

Quick Overview of Australian Retail Shop Lease legislation^:

In ACT + NSW the relevant Retail Shop Lease legislation does not apply* ➲ if the term is for less than 6 months (with no option to renew or extend) and the premises were vacant prior to the Licence to Occupy.

SA ➲ Retail Shop Lease legislation does not apply if the term is for 1 month or less.

VIC ➲ Retail Shop Lease legislation does not apply if both the term (including any option to renew or extend) and the period of continuous possession are for 1 year or less.

TAS, WANo exemption.

* In Qld + NT the relevant legislation only partially applies.

^ Note: The above provides a general overview and is no substitute for legal advice.

We recommend you obtain our legal assistance to ensure a Licence to Occupy will be valid in your jurisdiction and specific circumstances.

Social Share Image: Courtesy of Pop & Zebra on Unsplash

Test your knowledge and get a discount for this document: take the .

Enter the code WHen you pay full price to Purchase one of the following Self Service documents:

No items found.

Re-Enter the code at checkout each time you buy the following documents to get a discount:

No items found.

Resources

What clients say

swipe left or right to view more testimonials
Positive: Professionalism, Responsiveness. I'm one of those nightmare clients that know enough about the law to get themselves into trouble. The restraint and patience that they showed throughout the process; taking the time to explain things I overlooked or didn't understand is one of the best parts of the experience.

Stefan Kent | NSW Conveyancing Matter

,

Google

20

Jul 2021

I had called a few people to help me with conveyancing and every single one were either impatient, humourless, or uninterested. Speaking with James on the phone felt like I was catching up with a mate and served to calm the nerves that came with my first property purchase. Look forward to working with them again!

Stefan Kent | NSW Conveyancing Matter [Cont.]

20

Jul 2021

The self serve resources on the website that they offer also gave me a chance to do a bit of my own research and calm my nerves at 3am. The free legal health check was great! There`s a lot of things in my business that I didn`t realize needed attention. Saved me a bit of cash having to consult a commercial lawyer asking basic questions.

Stefan Kent | NSW Conveyancing Matter [More.]

,

FirmChecker

19

Jul 2021

An up and coming, innovative firm that does things differently. Blue Ocean takes an interdisciplinary approach to its personal + commercial law practice to ensure you’re getting what you + your company needs. It has a growing list of automated 24/7 legal documents with Embedded Lawyer-Logic™ …

Blue Ocean Law Group ➲ Best Law Firms in Sydney [2020 + 2021]

23

Jun 2021

James is very kind and helpful. He is also a very experienced and informative lawyer you can rely on.

T Z

25

May 2021

Client who “tried for free” our 1-page NDA: “I did James, thanks! I found it really easy and the document looks great. Melissa”

Client Feedback on our Free 1-page NDA

6

Nov 2020

Positive: Professionalism, Quality, Responsiveness, Value. "Best of the best service! James is so kind and really likes to help. Very professional and knowledgeable too!"

Yan Zheng

10

Jul 2020

Positive: Responsiveness. "Insightful and adaptive legal service. Exceptional communication and collaborative working style - highly recommended."

Emily Stevens

14

Jun 2020

Positive: Professionalism, Quality, Responsiveness, Value. "The service from James Ford at Blue Ocean Law Group has been excellent. Very reassuring."

John Terry

2

Jun 2020

What are the benefits of purchasing legal documents directly from Blue Ocean Law Group?

The majority of online Australian Legal Document providers are not law firms!

Whilst it is acknowledged that the legal document templates provided by the majority of [non law-firm] Australian legal document providers will generally have been prepared by lawyers and that the templates they sell are updated from time to time as required by legislative changes.

This does not change the fact that you are not dealing directly with a law firm.

In order to understand what this means from a practical perspective you need to ask the following questions …

What happens?

🧩 If and when you have a legal question?

🧩 If the other party wants to negotiate amendments to the legal document?

🧩 If the legal document does not meet all of the requirements of your specific facts and circumstances?

🧩 If there is a mistake in the legal document?

Lastly, what happens if you are not directly involved in the creation of the legal document?

🧩 What if your accountant, tax agent or financial advisor uses a [non-law firm] online legal document service on your behalf?

To help you answer this question, please read our FAQ: If I create a legal document for my client on your law firm’s website am I giving legal advice or am I a "mere scribe"?

General Answer

A general answer is that online [non-law firm] Australian Legal Document providers are unable to assist clients directly, as they are unable to provide legal advice.

Certain [non-law firm] providers have adopted a business model whereby they earn a substantial ongoing 12 months+ plus referral fee for directing a client to a large directory of law firms who can assist.

This referral fee is charged to the law firm, who may decide to expense it as a marketing cost.

We submit that one way or another, it is ultimately the client who pays for the cost of the referral fee as it increases the cost of doing business for the law firm providing the service to them.

Feedback obtained directly from businesses who have used certain [non-law firm] online services

The valuable feedback we have  obtained is that:

❌ The quality of the online legal documents are basic, non-adaptive templates; such that

❌ The client is more often than not, required to seek assistance from a law firm in order to ensure their legal requirements are met.

As lawyers are required to undertake client interviews and make manual amendments to the legal documents, the final cost ends up much higher than the client could have anticipated, especially when the original online legal document was given away for free or at a nominal cost.

These kinds of business models may not rise to the level of bait & switch, however they may be found to constitute misleading and deceptive conduct.

In our submission, clients appear to be lead to believe that in the majority of cases they will be able to use the standard online documents without the need to engage a law firm to assist, when in actual fact this is not the case.

What are the benefits of purchasing legal documents directly from Blue Ocean Law Group?

When you purchase online legal documents directly from us, we have every incentive to ensure the quality of the online legal documents provided are as high as possible, and that you have all your questions answered.

List of Benefits:

✅ Our law firm already has a copy of your online responses so we can assist quickly and cost effectively.

✅ 1-stop shop. There is no need to wade through a directory of different law firms each time.

✅ Professional Indemnity Insurance (when you engage us for legal advice);

✅ Higher quality automatically tailored legal documents using Embedded Lawyer-Logic;

✅ Deal directly with a law firm, no need for middlemen;

✅ No referral fees built into the business model;

✅ Lower overall legal costs;

✅ Legal document delivered directly from our .law web domain so you know we created the legal document;

✅ Legal Professional Privilege; and

✅ Enhanced Confidentiality.

✅ Blue Ocean Law Group are the only Australian law firm providing you with the option to create Legal Documents online using ⚖️ [Self-Service] and/or [Lawyer-Assisted].

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

What is a Free Legal Health Check and why is this the best place to start?

What is a Free Legal Health Check? ✅

Our Legal Health Check is a process that helps you identify + prioritise your individual + business (if relevant) legal needs.

How does it work?

1️⃣ Complete our Intelligent Questionnaire:

You will be asked to provide information about your personal and/or business circumstances;

2️⃣ Automated Report:

The process uses inbuilt Embedded Lawyer-Logic™ to help you identify key legal risks + concerns and prioritise solutions.

A customised (jargon-free) report is generated in plain english with actionable recommendations.

3️⃣ Deliver Solutions:

You can then consider the information in your own time, and when convenient, select the most appropriate self-service legal documents from our online 24/7 portal or reach out to our legal team to discuss your options in more detail.

What does it cover?

🧩 Estate planning;

🧩 Marriage and de facto relationships;

🧩 Tax structuring;

🧩 Dispute avoidance/resolution;

🧩 Investment properties;

🧩 Business sale/purchase;

🧩 Business financing;

🧩 Co-ownership arrangements;

🧩 Managing staff;

🧩 Commercial terms;

🧩 Websites and intellectual property;

🧩 Regulatory compliance.

Why go through this process?

This is an amazing way to quickly + proactively identify legal risks + opportunities to get your legal affairs in order!

Achieve Zen-like “peace of mind” knowing your legal affairs are in order

Our Buccaneer Package is designed for individuals + includes our constantly expanding library of [Self-Service] personal legal documents.

It is compelling value with pricing at less than $1 per day which entitles you to access heavily discounted [members only] prices.

You could save thousands $$$ on your legal bills!

Our Yachtsman Package designed for business owners includes our constantly expanding library of [Self-Service] personal + business legal documents.

It is compelling value with pricing at circa $3.50 per day [equivalent to the price of a cup of tea or coffee!] which entitles you to access heavily discounted [members only] prices.

You could save thousands $$$ on your personal + business legal spend!

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

More than 1000+ Australian Lawyers use Embedded Lawyer-Logic. How does it work?

More than 1000+ Australian lawyers use this industry leading automated legal document generation solution. It uses Embedded Lawyer-Logic™ designed by leading lawyers in their respective fields.

Step 1️⃣: Information Gathering

Our intelligent online questionnaire adapts to your answers and only asks relevant questions.

Simply follow the guidance and enter the requested information about your matter.

Step 2️⃣: Document Assembly

The information is then sent to our back-end legal document generation engine, which follows a matrix of algorithms to make decisions about what should be in your legal document, just as an expert human lawyer would do.

The engine then draws from an enormous body of content to assemble a top-tier quality legal document that’s tailored to your situation + requirements.

Our Embedded Lawyer-Logic™ technology includes numerous quality control checks + automatic error-correction, massively reducing the risk of human error.

Step 3️⃣: Document Delivery

The finished document is then emailed to you in PDF format, ready to print and sign.

Optional: Lawyer Review/Assistance

Your answers to the online questionnaire and a copy of the finished document in both Word + PDF formats are automatically forwarded to our legal team.

If we notice anything out of-the-ordinary we will contact you to discuss.

If you are a subscribed member or opt for paid Lawyer-Assistance, we will use the allocated time to assist to clarify and resolve any questions you may have.

Optional: Full Service

If your matter is complex, high risk or you have never been involved in legal matters before, we highly recommend you opt for our Full Service.

Our legal team will contact you and assist you throughout the entire process.

If you are a subscribed member the cost for the time spent by our legal team to assist you is heavily discounted.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

When should I reach out to speak to your legal team?

Our [Self-Service] legal documents are designed to be completed "without the intervention of a lawyer".

This approach will be appropriate for the majority of routine legal matters, where you are experienced and have learnt what needs to be considered and have gained experience in using our 24/7 online document portal to generate your legal documents instantly.

Some routine matters maybe totally new to you (meaning that you will have questions and we recommend you select our [Lawyer-Assisted] service).

Other matters maybe unusually complex, or of such high-value or risk that involving our legal team is the prudent course to take.

For these matters we recommend you select our [Full Service] option.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Is the Legal Documents Portal Secure? Does it use encryption to protect my personal information?

Our website + back-end system use the best possible web-based security available.

It was once said:

It would take the combined processing power of every computer in the world thousands of years to crack 4096-bit encryption.

In a more general context (outside of encrypted secure website traffic/data) it has also been said:

Data with 4096-bit encryption (only protected by a password) could still be compromised within seconds.
How? Human error.
Easy pass-phrase, written down password, re-used password... etc. basically, always be on the lookout for the weakest link.
Trust the technology, but never trust the weak link - the user!

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

What extras does an upgrade to Lawyer-Assisted Service include?

Your upgrade to our [Lawyer-Assisted] Service includes …

⚖️ Professional Indemnity (Limited Liability) by a scheme approved under Professional Standards Legislation;

⚖️ Access to Professional Fee Funding* / Disbursement Fee Funding / Family Law Funding (subject to approval by QuickFee our external legal finance provider);

✅ Allocated Time included to understand your circumstances + objectives, answer your queries + provide legal advice & make recommendations regarding alternative/additional options; and

✅ Create your standardised Legal Document based on your instructions.

Plus [+] Where Appropriate (at no additional charge)

⚖️ Use of proprietary fonts to maximise fraud prevention;

⚖️ Use of our Law Firm Letterhead;

➲  Send your Legal Document for electronic signature/s using AdobeSign; and/or

🔒 Application of TraxPrint Legal Document Security Technology for Fraud + Litigation Prevention.

* More Information about Professional Fee Funding:

Our firm has partnered with QuickFee and Splitit to provide you with an interest free payment option. While we remain your service provider, the payment method is provided by QuickFee, a specialist payments provider for professional firms.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Why does Blue Ocean Law Group℠ use a *.law website domain?

What is a *.law web domain?

⚖️ *.law is a top-level-domain (TLD) that aims to:

Promote trust in the professional legal community by creating a:

✅ Verified;

✅ Exclusive; and

✅ Reserved online space in which only accredited lawyers and law firms can establish a comprehensive digital brand.

✅ Website users can have confidence they are dealing with an authorised and licensed lawyer/law firm.

✅ *.law offers effective branding to those in the legal community, with the ability to secure a domain name that clearly communicates who you are + the legal resources you provide.

All about *.law domain names

Source: join.law - Why *.law?

If I create a legal document for my client on your law firm’s website am I giving legal advice or am I a "mere scribe"?

Is your role that of a mere scribe?

If your role is merely that of a "scribe or scrivener" as outlined below it is unlikely you would be deemed to be providing legal advice or engaging in the practice of law.

Caution: Some Online Legal Documents have evolved!

Unfortunately this is not as easy as it once was … when online legal document templates were all static "fill in the blanks" one-size-fits-all templates.

Increasingly, the capabilities + complexities of legal document automation have evolved to cater to an ever widening range of facts and conditions.

Using the complex design + incorporation of what we call Embedded-Lawyer Logic it is no longer possible to avoid the automated tailoring of the online legal document to suit the client's circumstances + legal needs.

They are designed to produce a quality bespoke legal document just like a lawyer does.

The use of Embedded-Lawyer-Logic™ in the online process:

✅ Is now very similar to a client being interviewed by a lawyer;

✅ It drills down to ask the same questions and provide the same options a highly experienced + competent lawyer is required to do.

As a result the draft legal document created now has the potential to vary significantly based on the responses provided by the client.

We have now progressed to the point that the new normal online process is designed to cause your role to fall outside of the role of a "scribe or scrivener" alluded to below.

In the leading case on this issue Legal Practice Board v Computer Accounting and Tax Pty Ltd [2007] WASC 184; 35 WAR 59 (Simmonds J) noted at para. [152] that Brinsden J in Barristers Board v Palm Management Pty Ltd [1984] WAR 101 referred to Re Matthews (1938) 79 P 2d 535, apparently with approval, as follows at para. [108]*:

The court went on to say that where an instrument is to be shaped from a mass of facts and conditions, the legal effect of which must be carefully determined by a mind trained in the existing law in order to ensure a specific result and to guard against others, more than the knowledge of the layman is required and a charge for such services brings it definitely within the term 'practice of the law' [emphasis added].

How to limit your role to that of a "scribe or scrivener"?

Therefore, we strongly recommend that you advise your client to either:

✅ Create the draft legal document themselves + ensure independent legal advice is sought from our legal team prior to negotiation and execution; or

✅ Instruct you to create the legal documents using our Lawyer-Assisted option.

Doing this ensures your role is clearly limited to that of a "scribe or scrivener".

Our legal team will then take the responsibility for reviewing your client's individual circumstances together with the draft legal document in order to provide your client with the relevant legal advice, ensure your client understands their legal position and options, and to propose and make any required amendments to the legal document based on your client's instructions.

What is a "mere scribe or scrivener"?

In Legal Practice Board v Computer Accounting and Tax Pty Ltd [supra]*:

… the court held that work of the mere clerical kind, such as filling out of skeletal blanks or drawing instruments of generally recognised and stereotype forms effectuating the conveyance or encumbrance of property, such as a simple deed or mortgage not involving the determination of the legal effect of special facts and conditions, should be generally regarded as the legitimate right of any layman because it involves nothing more or less than the clerical operations of the now almost obsolete scrivener (emphasis added).
(The scrivener was eliminated in England by the 1804 Act.).

The view of the Institute of Chartered Accountants in Australia ... ^

Timely reminder

The 2007 case of the Legal Practice Board v. Computer Accounting and Tax Pty Ltd* serves as a timely reminder to members that there are legislative provisions in each state and territory which prohibit a person who is not a legal practitioner from engaging in legal practice.
This prohibition is mirrored in the Institute’s regulations relating to public practice (regulation 1207).
However, there are differences between the jurisdictions as to how the prohibition is framed.  

Even so, members who use the services of document providers are urged, as a minimum, to:
✅ Use only reputable document providers whose services are backed by competent legal practitioners;
✅ Ensure that they abide by the terms and conditions of the document providers as to the use of the documents and their supply to clients; and
✅ Avoid redrafting of documents to suit the circumstances of individual clients, unless appropriate legal advice is obtained by the relevant parties.

Seek legal advice

The Institute believes that the recent WA case does not require any change to a member's legitimate use of this type of service in accordance with their terms and conditions.
However, if you have any concerns or queries about the use of document providers, you should seek legal advice.

Sources:

* Legal Practice Board v Computer Accounting and Tax Pty Ltd [2007] WASC 184;

^ Extracted from the article: Court case raises issues about preparation of legal documents.

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

How do I Verify the Authenticity of a TraxPrint Protected Legal Document?

You can use any of the following TraxPrint Document Verification Methods

1️⃣ Double-Click to Verify the Details of the Document

Note: You can find the TraxPrint QR Code on the bottom of the first, last or every page, depending upon the preference set by the author of the document.

✅ By way of example, Double-Click on the below sample TraxPrint QR Code within the PDF document:

➲ You will be taken to the TraxPrint.com website and a message similar to the following will appear:

2️⃣ Email to Verify the Contents of the Document

✅ Send an email with the PDF document attached to check@traxprint.com

❌ If there is no response the PDF document is not authentic.

➲ If the PDF document is authentic, you will receive (within approx. 2 minutes or less) a reply email with a Certificate of Authenticity and the Original PDF both attached.

3️⃣ Scan to Verify the Contents of the Document

✅ Download the free TraxPrint App from the iOS AppStore or Android GooglePlay

➲ Register + Sign-in to the App then ✅ Scan the TraxPrint QR Code to Verify.

4️⃣ Drag n' Drop to Verify the Contents of the Document

✅ Drag n' Drop the PDF Document File into the designated area.

➲ You will receive an instant response regarding the authenticity of the document.

💡 This feature is coming soon and will be available on a dedicated page on our website.

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

When you say I can create a Legal Document anywhere, do you mean even from my mobile phone, if necessary?

Yes, we have designed our Legal Documents Portal so that you can create a Legal Document from my mobile phone (if necessary)!

The below iPhone 12 screen shoots demonstrate what we mean by "^anywhere (even from your mobile phone, if necessary)".

iPhone 12: Portrait Mode
iPhone 12: Landscape Mode

Credits:

This FAQ was created by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

What is the difference between a Lease v. A Licence to Occupy?

Lease v. Licence to Occupy

Commercial Distinctions

A lease is quite often a significant obligation on the part of businesses. It is both a financial commitment, and a time commitment.

Traditionally, the majority of the time, a business would look for security of tenure, and a landlord for a long-term tenant.

The lease was an appropriate arrangement suiting the needs of both parties equally.

However, an insistence on occupancy by way of a lease on the part of landlord prevents businesses from engaging in more experimental ventures.

With smaller or newer businesses particularly, risks cannot be taken with their business model when they have rent to pay for the coming fortnight; and so rental obligations may push them into a certain conservatism with their business, a reluctance to try different things and be different, for fear of insolvency.

Such risks are often mitigated with a Licence to Occupy affords an occupant many of the same rights as a lessee or tenant under a Lease, though usually for the short-term.

There are other legal distinctions between a lease and a licence, a summary of which can be found below, though the primary difference of interest in a commercial sense is the greater scope of risk-taking a business may undertake with a licence to occupy.

Legal Distinctions

Summary of the Legal Distinctions between a Licence to Occupy v. Leases

For a more detailed discussion of the commercial and legal differences between these two types of property law agreements please refer to our blog article “Licences to Occupy - A viable Alternative to Leases?" by Suk Jae Chung | Virtual Intern at Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Is a Licence to Occupy a "Lease" for the purposes of AASB 16 Leases? Can it stay off-balance sheet?

The answer to this FAQ will ultimately be a question for your Accountant

Before you brainstorm the bricks n' mortar portion of your business plan, we strongly recommend you read + consider this FAQ to learn how adopting a more nimble business model which includes the use of a short-term Licence to Occupy (might be used to provide your business with a strategic advantage).

Other business benefits could also accrue, such as the opportunity to combine multiple + adaptive physical store presence with online eCommerce sales.

Why is this important?

If an agreement does not meet the definition of a "Lease" under AASB 16 Leases, then it is not accounted for on-balance sheet.

Why is this especially important for Commercial + Retail Property tenants?

The following observations have been extracted (emphasis added) from the PWC report entitled: Why the new standard matters to the Retail and consumer industry

The retail industry is likely to be one of the most affected by the new standard, given the significant use of rented premises for their stores. The PwC Global Lease Capitalisation study indicated that there would be a median debt increase of 98% for retailers, and 41% median increase in EBITDA.
Most of such leases are in the form of medium term leases (generally 3-5/9 years),whether in premium locations (flagship stores), shopping centres or ordinary outlets …
Historically such leases have been considered as operating leases, and have not therefore had any impact on the balance sheet.
The amount recorded in the income statement was typically on a straight line basis and entirely included in operating expenses. The new lease standard will not only have an impact on the balance sheet, but also on the operating costs, with a split of the expense between operating and finance costs.
The exemption for short-term leases and small assets is unlikely to provide any significant relief to retailers.

A Licence to Occupy is prima facie caught by the definition of "Lease" under AASB 16?

Under AASB 16, a "Lease" is defined as an agreement, or part of an agreement, that conveys the right to control the use of an identified asset.

The definition does not refer to an agreement labelled as a Lease.

Agreements not labelled as a Lease may meet the definition of a lease under AASB 16; conversely, an agreement labelled as a Lease may not meet the accounting definition of a Lease.

In assessing whether an arrangement is, or contains, a Lease, 3 key assessments need to be made.
These are presented diagrammatically below …
Source: AASB 16 Leases - A Guide published by HLB Mann Judd

Where the lawyer's role becomes clear The exemption for short-term leases!

In the majority of cases, the use of a Licence to Occupy (typically being a short-term arrangement) will qualify for the short-term lease exemption, meaning that it represents an alternative method to circumvent the application of AASB 16 which means that such arrangements can potentially (subject to confirmation from your accountant!) remain off-balance sheet.

The use of a Licence to Occupy is therefore an increasingly important proactive strategic legal tool to consider when your business plans for the control or use of any property.

The technical details of the exemption

The following summary (in technical speak) has been extracted (emphasis added) from the KPMG article AASB 16 Check: Short-term and low value exemptions

The low value and short-term lease exemptions are available to lessees (tenants) only.
*A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less.
A lease that contains a purchase option is not a short-term lease.
The election for short-term leases shall be made by class of underlying asset to which the right of use relates [AASB 16: 8].
***The following lease expenses are not required to be disclosed:
Expenses relating to leases with a term of one month or less; and
Expenses relating to leases which are both low-value and short-term [AASB 16:53(c-d)].

Accounting Humour

I stumbled upon the following quote in conducting research for this FAQ and thought it worthy of further dissemination.

Extracted (emphasis added) from the article by David H. from the Queensland Audit Office: Do you have any ‘lease agreements’ that are not leases, or any hidden leases?

When discussing leases, it is useful to refer to the quote by Sir David Tweedie, the then Chairman of the International Accounting Standards Board (IASB) on April 25, 2008 when he said:
"One of my great ambitions before I die is to fly in an aircraft that is on an airline’s balance sheet."

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

What is a Force Majeure clause?

What is a Force Majeure clause?

A force majeure clause is a method of allocating the risk of a disruptive event. It is a broad catch-all provision whereby the parties list categories or specific instances of otherwise frustrating events, together with the party or parties to bear the risk of the event occurring.

The clause can also grant options to vary, suspend or terminate the contract to one or more of the parties. [1]

Force majeure clauses form part of a contract’s express terms, subject to the conventional methods of construction.

Absent a force majeure clause, it is unlikely a contract’s commercial purpose would suggest that such a provision is so apparent that it goes without saying [2], meaning a court is likely to refuse to imply it.

Further Reading:

For a more detailed discussion please refer to our blog article “Force Majeure Clauses & Frustration: Why the COVID-19 Pandemic is a Wake-Up Call" by Shakvaan Wijetunga | Virtual Intern at Blue Ocean Law Group℠.

Footnotes:

[1] Eg., Yara Nipro P/L v Interfert Australia P/L [2010] QCA 128, [26].

[2] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.