Lease and Hire Agreements

VicSport The Peak for Sport in Victoria Lease and Hire Agreements What did you sign up for? Advancing Sport In Victoria VicSport The Peak for Sport in Victoria VicSport is an independent member based organisation. We represent over 170 members including: •State Sports Associations •Regional Sports Assemblies •Local government authorities •University sports organisations •Other industry associated groups Advancing Sport In Victoria VicSport The Peak for Sport in Victoria As Victoria’s Peak body for sport our key roles are to: VicSport is an independent member based organisation. Advocate Facilitate policy development We represent over 170 members which includes: Communicate Investigate • State Sports Associations Educate • Regional Sports Assemblies Build a Stronger Industry • Local government authorities • University sports organisations • Other industry associated groups Lease and Hire Agreements: What’s going wrong? • We live in a more litigious society • Higher premiums • More complex contracts. Lease and Hire Agreements: What are Councils looking for? • The primary concern for Councils in regards to tenancy and lease agreements is negligence based liability. • Councils aim to decrease the risks associated with increased liability through the provision of sporting facilities. • Councils aim to separate out those risks arising intrinsically from the facility and those arising specifically from the sport or activity groups undertake. • Councils aim to balance benefits to the sporting community with the risk to the rate-paying community of being sued for activities beyond Council control. Lease and Hire Agreements: What are Sports looking for? • Access to safe and well maintained facilities • Accessible and affordable insurance cover • Fair lease agreements requiring both the sport as the lessee and the Council as the lessor, to accept appropriate responsibility • Sports’ major concern with Council lease agreements is the requirement for organisations to fully indemnify the Council for all claims arising out of use of the facility Lease and Hire Agreements: What did you sign up for? • You signed the agreement, you are responsible • When you sign an agreement it is legally binding • You will be expected to meet all the terms and conditions of the agreement you signed Lease and Hire Agreements: What did you sign up for? • The “Discovery by Accident” defence will not hold up in a court of law • Be absolutely sure you fully understand exactly what every clause, condition, inclusion, exclusion, waiver, indemnity, release, or any other term in your agreement, means for your organisation. Lease and Hire Agreements: What did you sign up for? 2002 Vic SSA Public Liability Questionnaire Q. “Does your public liability insurance cover?” Don’t Know 51% 59% 51% 90% 78% 78% 90% • • • • • • • Occupiers Liability Vicarious Liability Liability of Operators Medical Negligence Cross Liability Legal Costs (Defence) Legal Costs (Plaintiff) Lease and Hire Agreements: The Hidden Dangers Joint Naming • Requires the lessor be Joint Insured under the sporting clubs policy. • The aim of Joint Named insurance is to extend the club’s policy such that it agrees not only provide cover for claims arising as a result of negligence on the club’s part, but also for any claims arising as a result of negligence on the part of the Council. • Under such an agreement the club is agreeing to indemnify the Council should the Council be found to be legally liable. Lease and Hire Agreements: The Hidden Dangers Joint Named Policy Agreement The Club must take out a Public Liability Policy for a minimum of $10 million in joint names of Council and the Club. The insurance must have a cross liability clause and a waiver of subrogation clause. A certificate of currency must be provided to Council prior to the commencement of the use of the Reserve and the signing of the Agreement. THERE WILL BE NO ALLOCATION OF A SPORTING FACILITY BY COUNCIL UNTIL COUNCIL IS IN RECEIPT OF THIS EVIDENCE. Lease and Hire Agreements: The Hidden Dangers Hold Harmless • Requires the lessee to release or hold harmless the lessor from any liability arising out of the use of the facility. • In effect the sporting organisation is agreeing to indemnify the Council for any actions, claims, charges or damages bought against the Council in relation to the use of the facility, regardless of who is at fault. Lease and Hire Agreements: The Hidden Dangers Hold Harmless Policy Clause The club agrees to indemnify and keep indemnified and to hold harmless the council, its servants and agents and each of them from and against all actions, costs, claims, charges, expenses and damages whatsoever which may be brought or made or claimed against by any of them arising out of or in any way related to the granting of this agreement and/or the use of the reserve. Council is not responsible for any theft, loss, damage or injury suffered by the Club or any guest or invitee of the Club, or any person coming on the Reserve during the period of the Agreement, and the Club indemnifies the Council in respect of all claims for loss, damage or injury caused by any person or property during the period of the Agreement, or as a result of use by the club of the Reserve. Lease and Hire Agreements: The Hidden Dangers Hold Harmless Policy Clause The applicant/organisation agrees to indemnify and keep indemnified, and to hold harmless the Council, its servants and agents and each of them from and against all actions, costs, claims, charges, expenses, penalties, demands and damages whatsoever which may be brought or made or claimed against them, or any of them arising from the applicant’s/organisation’s performance or purported performance or its obligations under this agreement that may be directly related to the negligent acts, errors or omissions of the applicant. The applicant’s/organisation’s liability to indemnify the Council shall be reduced proportionally to the extent that any act or omission of the Council, its servants or agents, contributed to the loss in liability. Lease and Hire Agreements: The Hidden Dangers Principal Indemnity • The tenant agrees to provide cover to the Council under their own public liability policy indemnifying the Council as Principal from all actions, costs, claims, charges, expenses, penalties etc arising from the tenant’s activities where the tenant is negligent. • In effect this means where a Council is drawn into a claim where the tenant was negligent, and negligence on the part of the Council was not a contributing factor to an incident occurring, then the tenant, in this case the sport club, will indemnify the Council for any costs incurred. Lease and Hire Agreements: The Hidden Dangers Principal Indemnity Agreements • Positive: Principal Indemnity cover may be considered fair and may meet Council requirements • Negative: It is very difficult for all but the largest of sports who can afford the high premiums associated with such cover, to actually attain public liability cover that includes Principal Indemnity. Lease and Hire Agreements: The Hidden Dangers Interested Party Clause Clubs must have Public Liability cover with Council noted as an interested party. The Club must be covered for a minimum of $5 million against all actions, costs, claims, charges, expenses and damages whatsoever which may be brought or made or claimed against the Club arising out of or in relation to allocation or use of a reserve or pavilion. Lease and Hire Agreements: The Hidden Dangers NSW Arabian Horse Assoc v Olympic Co-Ordination Authority • Under this agreement the Arabian Horse Assoc agreed to provide: - Public Liability insurance for no less than ten million dollars - To name the Authority on this policy as an interested party • The Agreement also included a number of provisions whereby the Association indemnified and released the Authority from all liability, except to the extent that such liability was due to the negligence of the Authority. Lease and Hire Agreements: The Hidden Dangers The Court of Appeal overturned the appeal on the basis that: • The Agreement specified the Association must have at least $10 million Public Liability insurance, and name the Authority as an interested party, and • The Judge did agree the definition of the interested party was not “expressed with any great precision” • However he also believed requiring the Authority to be named in the policy as an interested party meant the policy cover should have extended to the named interested party, which in this case was the Authority. • As the contract signed by the Association was a legally binding document the Judge dismissed the Appeal and the Authority recovered their costs from the Association. Lease and Hire Agreements: The Hidden Dangers Dangers of Joint Named, Hold Harmless & Interested Party Clauses • Council has abrogated their responsibilities to the club. • The Club is taking on responsibility for actions beyond their control. • Highly unlikely any insurance company would agree to provide such cover to any sporting club. • If insurers did provide such cover we would expect the premium to be so high most sports could not afford it. Lease and Hire Agreements: The Hidden Dangers Recommended Indemnity Clause The _______ club agrees to indemnify and keep indemnified the ____________ Council, its servants and agents and each of them from and against all actions, costs, claims, charges, expenses and damages which may be brought or made or claimed against them, or any of them, and which is due to, or arises from, or is caused by the sole negligence of the _________ club and which is related to the use of the _________ Council facility at the location described in the Agreement Lease and Hire Agreements: The Hidden Dangers Claims Made v Occurrence Policies Claims Made Policies: • means the policy will only cover claims actually made against the insured party during the period the policy was “live” only. • The policy will not honour any claims made after the policy expired, even if the incident in question occurred while the policy was live. Lease and Hire Agreements: The Hidden Dangers Claims Made v Occurrence Policies Occurrence worded policies: • Honour claims made for an incident that occurred while the policy was live, regardless of when the claim itself is made. • In this case, a claim can be made for an incident after an occurrence policy has expired, so long as the incident took place during the live period of the policy. Lease and Hire Agreements: The Hidden Dangers Offshore Policies • In some cases, particularly those where on-shore insurance is difficult to secure, an off-shore company may offer policies, often with greatly reduced premiums. • Groups should be wary of such policies because: – The insurer’s standards may not meet the standards required for cover in Australia – The policy holder may find it difficult to enforce their rights to make a claim against the policy in a country outside of Australia. – The company may not be genuinely solvent and may therefore be unable to meet financial obligations if a claim is made. Lease and Hire Agreements: The Hidden Dangers Further Term Clause • The council will grant the tenant a new lease for the further term if the tenant...pays the Council's reasonable costs (unspecified) for the preparation, negotiation and finalisation of the new lease and any guarantee and indemnity • The loose definition of “reasonable costs” may mean clubs are liable for exhaustive legal fees, and council insurance indemnities Lease and Hire Agreements: The Hidden Dangers End of Lease Obligations At the end of this Lease, the Tenant must: 1. vacate the land and give it back to Council in a condition consistent with the Tenant having complied with its obligations of this Lease. 2. remove the Tenant's property and if required by Council, remove any improvements made to the land by or for the tenant and make good any damage caused by such removal; and 3. give to the Council all keys and other security devices for the purposes of obtaining access to the Land. Lease and Hire Agreements: The Hidden Dangers Repairs, Alterations and Damage Clause The tenant must: 1. keep the Land clean, tidy and in good repair; 2. keep any gardens and grounds in the Land in good condition, free from weeds and well watered, and 3. remove any graffiti on the Land within seven (7) working days of such graffiti being discovered, save for any graffiti of an offensive or racist nature, which must be removed within one (1) day of such graffiti being discovered. Lease and Hire Agreements: Finding the Balance Lessee Responsibilities • Organisations should acknowledge and accept their responsibility to hold appropriate insurance for any incidents arising out of negligence in an area for which they could reasonably expect to be responsible. • As such it is reasonable for lessors to require organisations to hold appropriate public liability insurance. • The question is who draws the line of responsibility. Lease and Hire Agreements: Finding the Balance Lessor Responsibilities • Council’s should acknowledge and accept their liability responsibilities. • Council’s have a right to include clauses in agreements requiring lessee’s to hold appropriate insurance to cover incidents for which the lessee is fully liable. • Council’s do not have a right to pass on their liability responsibilities to lessee’s in an attempt to limit their own liability. Lease and Hire Agreements: Finding the Balance VicSport Aims for the future • To have Councils remove clauses from agreements which pass on unfair liability expectations to clubs, most of which are unattainable anyway. • To encourage all sport and recreation organisations to attain appropriate insurance cover • To work with Government and the Insurance industry to ensure groups have access to genuinely affordable and accessible insurance • To promote better risk management Risk Identification Report