Drop Dead Dates

Contributed by Col Myers, Partner, SMALL MYERS & HUGHES – 22 October 2018

Drop Dead Dates

It is critical that you exercise any option in your Caretaking and Letting Agreements strictly in accordance with the terms of the Agreements.

In recent years I have seen a husband and wife, in the later stages of their working life, walk away from what was a good business with next to nothing as a consequence of missing the first option exercise date by 2 days. It was distressing!

The Courts have held, on numerous occasions, that option exercise dates are “drop dead dates”. In other words, if you miss the exercise period even by a single day, you lose your right to extend the Agreements. If you have more than one option and miss the exercise date under the first option, the Agreements come to an end at the conclusion of the then current term and all subsequent options are lost.

Types of Options

There are 3 types of options that we regularly see in Agreements:

· Open Options: Where you must exercise the option by written notice to the Owners Corporation at least 3 months prior to expiry of the current term. If you have an Open Option, it is a good idea to exercise the option now, rather than risk forgetting later;

· Window Options: Where you must exercise the option by written notice to the Owners Corporation not more than 6 months and not less than 3 months prior to expiry of the current term. Window Options are a bit trickier and you must have a fail-safe reminder system to ensure you exercise the option within the window allowed under your Agreements;

· Automatic Options: The Agreements are automatically extended for the option period, unless you advise the Owners Corporation in writing of your intention not to extend the Agreements. These are foolproof!

Bullet-proofing yourself

When deciding how to remind yourself of your “drop dead dates”, always have a backup plan. You may not be sitting in the office at your computer when the date comes up, due to holidays, sickness or other commitments. Also ensure your reminders come up well beforehand so you have plenty of time to exercise your option.

Whichever type of option you have in your Agreements, it is important that you comply strictly with the wording contained in the Agreements in relation to the form of notice and its delivery. Your solicitor can assist you to exercise the option validly if you are in any doubt of what is required.

It is also advisable to document the extension of the term of your Agreements by way of a Deed of Extension, so down the track there cannot be any dispute that it was validly exercised. This is particularly important when the time comes to sell your management rights business.

Check your agreements now!

Take a moment now to look at your Agreements and check what kind of options you have and when the last date is for exercising the option. Then put in place a system to ensure you do not miss this “drop dead” date.

Drop Dead Dates

Contributed by Col Myers, Partner, SMALL MYERS & HUGHES – 22 October 2018

Drop Dead Dates

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