If there is one thing we know for certain, it is that the property market in Queensland is booming. As a result of this increase in Buyers, we have seen an increased election by Sellers to try their luck at auction. Whilst an auction can (and usually is) a thrilling event to attend, the process is very different to your standard property purchase process (inspection, offer, contract).

Below are 6 tips to help you navigate your way through buying real estate at an auction.

1. Do your Research

The most important thing to remember is once the hammer falls, you are locked into an unconditional contract (more about that below). You want to make sure that what you are buying is actually what you are getting.  Some big-ticket items worth considering are: zoning, similar property sales in the area, local government overlays and flooding and school districts. A lawyer will be critical at the pre-auction stage to assist with your due diligence investigations. 

2. Understanding your rights

The key point to remember when purchasing at auction is that the contract will be unconditional. This means that not only should you consider the financial implications of an auction purchase carefully, but you should conduct all your due diligence searches and building and pest inspections prior to attending on Auction day. Another critical point is that auction contracts do not offer the protection of a cooling-off period. This means you will have to settle even if you change your mind within 24 hours. You must also bear in mind that even if you enter a private treaty contract within 2 business days of an unsuccessful auction of that property, cooling off period still does not apply.

3. Obligations regarding deposit

Items of import to confirm prior to bidding would be the deposit amount (is it a percentage of the winning bid or a fixed amount) and the timing of payment. Non-payment of a deposit by the due date, is a breach of the contract and can have serious implications. You want to ensure before committing yourself at auction, that you can meet the financial obligation when it falls due. It would also be prudent if the deposit is a large sum whether your bank will allow the transfer by EFT in one sum, or whether you will need a few days to make the payment. The deposit is not deemed paid until the entire sum is received by the deposit holder.

4. Buying without a finance clause

As mentioned, the auction contracts are unconditional which means you do not have the benefit of a finance clause. We recommend obtaining a pre-approval with your bank and even sending them a copy of the draft auction contract prior to attending. Other steps you can take might include arranging a property valuation prior to attending so you have a better estimate of the funds the bank might be willing to lend. Short of these steps, you would want to ensure that you are comfortable with the amount you are able to spend prior to attending and to stick to that amount. All too often an over eagerness to “win” at auction, can mean you lose in the long run if you over commit financially, and can’t arrange the finance come settlement day.

5. Check the contract

At the inspection of the property, the agent will have a contract available that will become the Auction contract if the property sells. Prior to attending an auction, it is prudent to have a solicitor check over the contract which can be done by simply requesting a copy from the agent beforehand. There is limited scope to negotiate on an auction contract. You should also confirm with the auctioneer if any last-minute changes have been made to the contract prior to bidding (although they should announce this to you when the auction commences).

If you are attending an auction, contact tony.crilly@PerspectiveLaw.com  to assist with your pre-auction needs to help make sure you are ready and confident come the big day.

Have you been nominated as an executor or are the next of kin for someone who has died without a valid Will? Did you know that, during his or her lifetime, they had a significant amount of debt? Are you concerned whether there are enough assets to repay the debt?

Before you take any steps in the estate administration, it is important to understand the key parts to administering an insolvent estate. (In this blog, the role of the executor or administration is collectively referred to as “the legal personal representative”). 

What is an insolvent estate?

A deceased estate is insolvent when there are insufficient assets to pay the liabilities of the estate.

In Queensland, an insolvent estate can be administered either under s s57 of the Succession Act 1981 (Qld) (“Succession Act”) or Part XI of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”).

An insolvent estate will be administered under the Bankruptcy Act if there are debts of $10,000 or more (the current statutory minimum for petitioning bankruptcy) and the legal personal representative or a creditor seeks a sequestration order. In this case, the legal personal representative or the creditor can seek to have a trustee in bankruptcy appointed to administer the estate.

There are consequences for the legal personal representative failing to comply with the provisions of the Bankruptcy Act. For example, if the legal personal representative attends to payment or transfer of property of a deceased person after service of the petition for the sequestration order, he or she may be personally liable to the trustee in bankruptcy.

Further, it is an offence for the legal personal representative not to provide the Court and others with information regarding the personal affairs of the deceased and details of the estate administration.

Payment of debts in an insolvent estate

There are differences between administering an insolvent estate under the Bankruptcy Act or the Succession Act.

For example, under the Succession Act, the payment of funeral, testamentary and administration expenses take priority. Whereas, under the Bankruptcy Act, there are numerous other payments that are prioritised before the payment of estate expenses. A spouse must be careful of incurring debt for the deceased for estate expenses, as the trustee in bankruptcy will review and may reject them.

There are also provisions within the Bankruptcy Act to ‘claw back’ some transactions which occurred up to six months before the petition was presented. The Succession Act does not afford the legal personal representative the benefits in these provisions.

The Succession Act otherwise provides that the rules of bankruptcy apply with respect to the administration of insolvent estates.

Life insurance proceeds

If the assets of the deceased estate include life insurance proceeds, superannuation benefits and damages for personal injury, these are not liable to be applied or made available in payment of the deceased person’s debts. However, cases suggest that these assets may be applied towards debts arising out of the administration of the estate or debts personal to the legal personal representative.

Key points

If you are the legal personal representative of a deceased estate, then it is important to seek legal advice before taking any steps in the estate administration.

It is often recommended that the legal personal representative seeks an order for the administration of a deceased insolvent estate to the Federal Circuit Court or the Federal Court.

The legal personal representative should refrain from obtaining a Grant of Probate or Letters of Administration with/without the Will, as they may incur personal liability in circumstances where the deceased died with tax debts.

If you would like to speak with us about the administration of an insolvent or solvent estate, please contact Tony Crilly or Elizabeth Ulrick of our office on 07 3839 7555 or email us at info@perspectivelaw.com.

Buying a business can be an overwhelming event for both the Buyer and the Seller and the opportunity to buy or sell at a price might seem simply too good to pass up. For this reason, many Seller or Buyer seek to jump into a contract too quickly, often without considering the fundamental aspects of the Business.

If issues are discovered after signing, it may lead to a substantial increase in legal fees to negotiate and to amend the contract. In a worse scenario, it may lead to a party being bound to complete a contract at a significant financial disadvantage.

Speaking to a lawyer before signing a business contract is always preferred, especially in Queensland where the agreement is not a REIQ contract. However, there are some key areas in which you should ensure mutual understanding with the other party, before signing a Contract.

1. Correct Entity Details

This is not always obvious, as either party may be unaware of the actual buying entity to begin with. Both parties will need to be sure that the correct entity is stated in the contract. For instance, is the Seller as owner of the business an individual, a trustee, an estate, a partnership, or a company? The Seller should be clear on the exact entity that owns the business name and assets, as the contract terms require the Seller to warrant that they have the ability to sell the assets.

Speaking to your accountant to ensure all entity details are correct is crucial.

2. Purchase Price

The Purchase Price is also not as obvious as it appears. If the Buyer and Seller agree about the Purchase Price (and the deposit), consider is the price to be paid at the Completion Date, or in instalments? Does the Purchase Price include the stock, or will that be assessed before completion and be added onto the price? Is there an earn out of pending contracts part of the sale price, meaning if they are not achieved is there an adjustment to the Price? All these issues should be clarified between the parties before the entering the agreement.

3. Key Dates and obligations leading up to Completion

The obligations between the parties in a Business Contract will differ on a case-to-case basis but can include negotiations on:

• a Buyer’s finance condition.
• a Buyer’s requirement to review the books and financial records of the business.
• a tuition period by the Seller prior to or after completion.
• due diligence searches to the buyer’s satisfaction of the business and assets.
• if there is a lease, the terms of the current lease.
• reviewing the list of business employees and their existing entitlements; and
• reviewing the list of plant & equipment to be included in the business sale (and what is being excluded).

The parties will need to agree on a reasonable date for confirming each condition, as well as the Completion Date.

4. Post Completion Obligations

The parties may also agree on further obligations after Completion, including the requirement by the Seller to assist in the Business (usually unpaid, but sometimes as a paid consultant) for a set period. The Seller should ensure that reasonable terms for the assistance (such as a maximum number of hours of assistance per day or week) whether by phone or in person are specified.

The Buyer and the Seller should also agree going into the Contract, the details of a restriction on the Seller after completion of competition, preferably by customers, suppliers, the area from the Business and the period.

These steps should be considered by both parties and discussed before a business contract is prepared or signed. If a contract is already prepared, to ensure that all terms between parties or the terms represented by the Seller or the agent are in included the contract, we recommend that you seek a review of the Contract by a qualified lawyer.

If you would like to speak with us about entering a business contract, please contract Tony or Jake our office on 07 3839 7555 or email us info@perstivelaw.com .