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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

The Issue

Hue v Dura has highlighted the importance of Landlords registering their interest in a Tenant's security deposit on the Personal Property Security Register (PPSR).

In the event a Tenant is placed into administration or wound up, a Landlord who has failed to register their interest in the security deposit on the PPSR may find themselves in a situation where the security deposit is paid to the Tenant's secured creditors before the Landlord, even though the secured creditors are not a party to the lease.

What does this mean for landlords?

In a lease, security deposits are funds provided by a Tenant (in one transaction or multiple transactions) and held by the Landlord or Landlord's agent, as security for performance of a number of Tenant obligations pursuant to the lease e.g. in the event the Tenant fails to pay rent or fails to comply with their "make good" obligations upon vacating the property, then the security deposit covers part of the loss a Landlord may suffer.

The Victorian Court of Appeal found that a security deposit paid by a Tenant pursuant to a lease ordinarily contain the core characteristics of a security interest that is capable of registration on the PPSR.

In brief, these core characteristics are:

  1. the payment (or transaction) of the security deposit by the Tenant to the Landlord (or third party) secures performance of an obligation under the Lease; and
  2. the payment (or transaction) has been fully consented to by the Landlord and the Tenant.

Since a security deposit paid by a Tenant pursuant to a Lease can be characterised as a security interest capable of registration on the PPSR, a Landlord must register their interest in the security deposit on the PPSR to ensure the Landlord is classified as a secured creditor. The Landlord cannot solely rely on the terms of the lease as their security.

Failure to properly register their interest on the PPSR may result in a Landlord being classified as an unsecured creditor. In the event a Tenant enters administration or is wound up, a Landlord who has failed to properly register their interest would rank behind the Tenant's secured creditors, potentially leaving the Tenant's security deposit out of reach of the Landlord.

What should landlords do now?

To help ensure that a security deposit is secure, it is important that the Lease contains the right clauses to show that payment of the security deposit is consented to and that the Landlord's interest in the security deposit can be registered on the PPSR immediately after the Lease is executed. Failure to register the security interest within 20 business days after the Lease comes into force may result in the Landlord being classified as an unsecured creditor, potentially losing any future access to the security deposit as a result.

If you have any questions regarding the registration of a security deposit, please contact Andre Ong on (03) 8561 3317.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by one of our lawyers

,

.

Mitchell Zadow

For further information contact

Andre Ong

Andre is a Principal of Sharrock Pitman Legal.

He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria).  He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.

More on

Property Law

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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