File Note

From: Law & Co

To: Dr and Mrs Churchill

Subject: 31 Simpson Street, Applecross

Matter Number: CHUR:001

Date: 4 May 2024

Dear Dr and Mrs Churchill,

The purpose of this file note is to answer your questions raised about the mortgage and lease of 31 Simpson
Street Applecross (Property).

Questions on the Mortgage

1. The loan contract specifies at item 2 of the financial table that the standard rate is 4.00% per annum
and the Higher Rate is the Standard Rate plus 2.00% and the Schedule to Mortgage Form specifies
that the mortgagor will pay interest in the principal sum or on so much as remains unpaid at the rate of
four per centum per annum. However, clause 5 of the general terms and conditions states that the rate
of interest per annum shall be the Higher Rate unless the interest is paid on or before the due date it
will be paid at the standard rate. They mean exactly the same thing however, banks often express it in
this way to avoid the higher interest rate appearing as a penalty for late payment and instead you are
receiving a discount for paying on time to avoid the doctrine of penalties being imposed.

2. You are allowed to prepay any part or all of the balance at any time under clause 9 of the General
Terms and Conditions, however, this may come with fees and charges pursuant to the National Credit
Code. If you do pay out your loan earlier then the proposed end date, you will pay less interest overall
but you cannot pay interest alone in advance as it is determined by the amount of principle
outstanding at each due date for payment.

3. Firstly, If you do not make a repayment within 14 days of it being due you will be liable to pay an
Arrears fee of $50. Under clause 10 of the Loan Contract, you will be in default if you do not pay an
amount due under the contract by the date it is due. If you are in default the bank may give you a
default notice. If you do not remedy the default within the relevant period the balance and all other
amounts you owe under the contract will become immediately due and payable and any other rights
under the contract can be enforced by the bank. The mortgagee has the right under cl 33 of the
Memorandum of Common Provisions to exercise the power of sale in accordance with s 108-110 of
the Transfer of Land Act should payments not be made for a period greater than one month and notice
has been given to the mortgagor of the default.

4. Under cl 8 of the Memorandum of Common Provisions, you are required to keep the mortgaged
property clean and in good and substantial repair and condition and state of cleanliness. You are also
required to keep the fixtures and any improvements and gardens well maintained and not make any
alterations to the property without permission from the mortgagee.

5. Clause 47 of the Memorandum of Common Provisions provides that the Mortgagor covenants that
neither the Mortgagor nor any other person has prior to the date of the Mortgage grant or purported to
grant any lease or tenancy of the Mortgaged Property except as specified in the Loan Agreement.
However, clause 17 of the Memorandum provides that the mortgagor cannot lease the property
without prior written consent of the mortgagee. Therefore, as you have not already entered into a
lease with Churchill Services No 3 Pty Ltd (Churchill Services) you may be able to seek the
mortgagees consent even though it has not been included in the Loan Agreement.

6. The form ‘Authority to complete & undertaking’ is necessary to ensure that the bank can register the
mortgage with Landgate and enter the agreed dates for payment after settlement. This is required so
that the bank’s interest can be registered on the certificate of title.

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Questions on the Lease

7. The amount of rent will not remain the same over the course of the Lease. The rent is subject to a CPI
review every year. The CPI review is calculated on the following basis in accordance with clause 3.3:

“CPI Review” = A x B /C

where:-

A = Annual Rent payable for the Lease Year last concluded;

B = CPI for the last quarter immediately preceding the first day of the Lease Year under review;

C = CPI for the last quarter immediately preceding the first day of Lease Year last concluded.

8. If you exercise the option to renew the Lease, clause 5.2(c) states that the terms and conditions are to
be the same as the terms and conditions of the original Lease except for a few minor changes.
Pursuant to clause 16.5 if a tenant abandons the property, the Lessor is entitled to re-enter the
premises and take possession. The Lessor will then be entitled to any annual rent, Outgoings or other
money due at the Termination Date and other such costs including legal fees associated with the
breach of the Lease under clause 16.

9. The Property is located in the City of Melville. Properties zoned Residential, Centre or Mixed Use are
not required to get planning or development approval under the Planning Scheme. However, we would
recommend that you write to the City of Melville to confirm that no approval is required in any event.
You would also be required to seek approval under the mortgage to enter a lease over the property as
noted at paragraph 5 of this file note above.

10. The Premises of a lease may be part of a building or piece of land but they must always be accurately
described in the Lease. Where the lease relates only to a portion of a location, Landgate requires the
portion of the land to be defined by a sketch or an interest only deposited plan.

If you have any further questions or wish to discuss, please feel free to contact our office.

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