When unit trusts are created, it is important to ensure that you have a supplement document called a Unitholder Agreement to manage the rights and responsibilities between the owners.
What Is A Unitholder Agreement?
A unitholder agreement is a supplement legal document to a unit trust. A unitholder agreement will set out the rights and responsibilities of the unit holders. It is strongly recommended for all unit trusts to have a unitholder agreement, as it is this agreement that sets out how unit holders may exit the unit trust, how deadlocked parties are resolved, and prevents conflicts of interest, confidentiality and competition.
Does My Unit Trust Need A Unitholder Agreement?
Even if your unit trust comprises of only your closest friends in the world, a unitholder agreement is a necessity for all unit trusts. A well-drafted unitholder agreement prevents disputes from getting ‘out of hand’ and reduces the delay, costs, and any interruptions to the unit trust business by clearly outlining how to deal with such disputes and unforeseeable events.
Unitholder agreements offer a level of certainty and security that are both often hard to come across in a volatile and unpredictable environment.
What Is Commonly Included In A Unitholder Agreement?
Depending on your unit trust and its circumstances, the provisions contained within your unitholder agreement will vary so it will be necessary to seek out advice from a lawyer to ensure that your unitholder agreement considers are contingencies relating to your unit trust.
Despite this, there are standard provisions that you will often come across in most unitholder agreements, these include the following:
Dispute Resolution
As the unitholder agreement primarily deals with how disputes will be resolved, a dispute resolution clause is often necessary to enforce the use of alternative dispute resolution processes prior to relying on court litigation.
Primacy
The primacy provision is one where it states that the unitholder agreement will prevail over the company’s constitution if there is such a conflict between each.
Right To Pre-Emption
The right to pre-emption is a provision that restricts the transfer of units. It requires a unit holder to offer their units to other unit holders in the trust before offering them to an outside buyer.
Mandatory Sale
It is necessary to obtain the value of a unit in a unit trust to be able to complete such things as a sale or a transfer. A unitholder agreement will often outline the preferred method of seeking and obtaining such valuation.
Drag Along And Tag Along Rights
This provision is often included to balance the rights between a majority and minority unit holder. It permits a majority unit holder to require the minority unit holder to join a sale in their units under the tag-along with option. Under the tag-along option, minority unit holders are able to join a majority unit holder in the sale of their units.
Deadlock Resolution
This provision will outline how unit holders are to deal with situations where unit holders cannot agree on something. There are different ways to draft a deadlock provision and a lawyer will assist you in selecting the most appropriate one for your unitholder agreement.
This list only comprises a few of the things that you will need to consider in drafting a unitholder agreement. There are often more contingencies that you will need to include depending on your relationship with the other unit holders and how big the unit trust is. Our lawyers at GLG Legal will be able to assist you in drafting a unitholder agreement that is appropriate for you, your business and its interests.
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Understanding the distinctions between commercial and retail leases is crucial for landlords and tenants to ensure compliance with applicable laws and regulations when entering into a proposed lease agreement for commercial business premises or retail shops. At GLG Legal, our commercial lease solicitors assist landlords and tenants in navigating these differences to ensure compliance, as well as making sure you are entering the correct lease type.
What to Do When Enterting Commercial Lease?
A GLG Legal commercial lease solicitor can negotiate on your behalf to make sure that you receive the most favourable terms and the best possible rates for your commercial lease agreement. We are also here to help with licence agreements, assigning leases or resolving any commercial disputes which may arise once your lease documents have been signed.
To ensure that you are protected in retail and commercial leases, contact our commercial lease lawyers in Brisbane for quality leasing advice.
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Commercial Leasing FAQ's
- Can I make changes to the leased property?Making changes or improvements to a leased property, often referred to as "tenant improvements" or "fit-outs," typically requires the landlord's permission. The lease agreement should outline the process for requesting and obtaining approval for any modifications. Additionally, it's important to clarify who will be responsible for the costs associated with these changes.
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- What are my options if I want to renew my lease?If you wish to renew your lease, it's important to review the lease agreement for any renewal clauses. These clauses typically outline the notice period required for renewal and any changes to the rent or lease terms. Negotiating renewal terms well in advance of the lease expiration can help ensure a smooth transition and potentially secure more favourable conditions for your business.
- What expenses are usually included in a commercial lease?Commercial leases can include various expenses beyond the base rent. Common additional expenses, often referred to as "operating expenses" or "common area maintenance (CAM) fees," may cover property taxes, insurance, maintenance, and utilities for common areas. It's crucial to review the lease agreement carefully to understand what expenses you'll be responsible for.
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