Creative Enterprise Hubs transform empty spaces into arts precincts by facilitating short term access for creative, artistic and cultural projects to unused or abandoned spaces. Hubs operate in temporarily vacant and low cost or free premises, providing artists and arts groups with creative space and bringing life and energy back to the area with resulting benefits to local business and residents. Arts Law’s suite of documents is part of Arts NSW’s Creative Hub Toolkit designed as a blueprint for councils, local communities and local businesses interested in urban renewal. This information sheet provides an overview of the legal agreements used to set up a Creative Hub and issues participants should consider.
In this information sheet:Creative Enterprise Hubs transform empty spaces into arts precincts by facilitating short term access for creative, artistic and cultural projects to unused or abandoned spaces. Hubs operate in temporarily vacant and low cost or free premises, providing artists and arts groups with creative space and bringing life and energy back to the area with resulting benefits to local business and residents. Arts Law’s suite of documents is part of Arts NSW’s Creative Hub Toolkit designed as a blueprint for councils, local communities and local businesses interested in urban renewal. This information sheet provides an overview of the legal agreements used to set up a Creative Hub and issues participants should consider.
- Generating community benefits by reinvigorating culture and vitality into deteriorating urban centres;
- Maintaining and making more attractive buildings that are vacant, disused, or awaiting redevelopment and removing the eyesore of vandalised, boarded up, and dilapidated buildings;
- Creating incentives for property owners to invest in their vacant/disused properties;
- Providing artists and cultural organisations with a low-cost opportunity to pursue their art and exhibit their work.
- Government-run program: a local council could establish the Administering Body as a program or initiative of the local government.
- Not for Profit Company Limited by Guarantee: a company limited by guarantee is a type of company under the Corporations Act 2001 (Cth) (Corporations Act) which is formed on the principle that the liability of its members is limited to the respective amounts that the members undertake to contribute to the property of the company if it is wound up.
- Determine a name for the company after ensuring that the name you want is available. Generally, a company is required to indicate any limitation on the liability of its members in its name by including the word ‘Limited’ (eg. Creative Enterprise Hub Pty Limited). Upon request the Australian Securities and Investment Commission (ASIC) can, however, approve the deletion of the word ‘Limited’ in certain circumstances, in particular if the company is set up as a not for profit organisation;
- Register the company by lodging the relevant form with ASIC. Only one member is required to register a company limited by guarantee. The company must, however, have at least three directors, who have certain duties towards the company.
- Keep accounting records and issue annual financial reports and directors’ reports;
- Hold an general meeting at least once each calendar year;
- Use its company name and ACN on all of its public documents and negotiable instruments.
- There must be at least five members;
- The members must authorise a person to apply for incorporation on their behalf, approve the organisation’s objects and rules, and nominate at least two people to be committee members;
- The members or their representative must reserve a name by lodging an Application for Reservation of name with the department of Fair Trading;
- The members or their representative must lodge an Application for Incorporation.
- Adopt governing rules;
- Holding an annual general meeting and at least three other general meetings per year;
- Maintain solvency and keep financial and other records;
- Operate only within New South Wales. If it carries on business outside that State, it must register as an Australian registrable body with the ASIC. Similarly, an association incorporated in a State other than New South Wales must register as an Australian registrable body with the ASIC if its wants to carry on business in New South Wales.
- Properties should be vacant, disused or awaiting redevelopment: the Creative Enterprise Hub should not be designed to replace existing tenants. Accordingly, the Administrative Body should seek out the owners of empty (or partially empty) buildings;
- Partially occupied properties are suitable if the property owner can licence the use of a specific empty unit or space: buildings with some existing tenants, such as office buildings or malls, are suitable as long as the property owner is willing to designate a space for a project;
- Properties with storefront space or well-positioned signage are ideal: they allow Program Participants to display their projects to the public. Projects which are visible to passers-by are more likely to reinvigorate the disused area;
- Properties should be safe for immediate use and comply with applicable building, fire and safety codes: although some maintenance by the Administering Body and Program Participants (such as repainting and removing vandalism) may be appropriate, properties should not be in a condition such that they pose an undue hazard to individuals who use and visit the space;
- The property should have functioning utilities: the properties should have functioning water, electricity and (if necessary) gas. It is, however, not necessary for the property owner to bear the cost of utilities, which can be borne by the Administering Body and Program Participants. Given the essentially short term character of the licence, properties which require major maintenance or construction are not suitable;
- Properties can be made available for short term or long term use: when considering the licence term, the Administering Body should remember the following: One incentive for property owners for licensing a suitable property or building is that they retain control over the property by committing to a term which allows them to claim possession of their property in a quick and flexible manner. The Administering Body can be flexible in the length of the licence term it negotiates with property owners. Although anything under 30 days is probably too short to accomplish the program’s goals, various term lengths can be negotiated and accommodated depending on the nature of projects.
- Projects should not compete with already existing businesses: the point driving Creative Enterprise Hubs should be to reinvigorate a disused area (often the city centre) without harming any existing party. Property owners who licence their space are not at a loss, as the program targets unused spaces which they do not want to lease or have not been able to lease on commercial terms. In addition, other local businesses should not be disadvantaged by projects that compete with them (without having to pay rent);
- Program Participants should be comfortable with the lack of secure, long-term arrangements: Program Participants can be asked to leave the property upon 30 days notice from the property owner and Administering Body. They must be willing to trade-off the very low rent against the lack of security;
- Ongoing uses are preferred to one-off or very short-term projects: continuous projects are more likely to contribute to the ongoing life of the disused area. For example, a Program Participant wishing to run a gallery or host a series of exhibitions is preferable to an artist who wants space for a single exhibition;
- Projects should be creative or cultural enterprises that inject vitality into the area: projects should be unique, original and should serve as a draw to bring people back to the disused area;
- Projects should have a high degree of professionalism and a clear vision: there will be a limited number of spaces available to house projects. Accordingly, program candidates should be eligible only if they are serious about what they are doing and have a clear idea of what they are trying to accomplish. In addition, projects should be ready to begin and not require months of development before the space is put to use;
- Projects should have the support of the property owner: property owners have the ultimate right to decide what uses the Administering Body and Program Participants may make of their property;
- Projects should be practicable in view of planning, local government and Building Code of Australia regulations: some projects, in particular in the area of performing arts, may not be possible to implement because of legal restrictions related to places of public entertainment.
- Establish an Administering Body; please refer to the above section on ’Setting Up an Administering Body‘ for more details;
- Obtain Insurance Coverage: the Administering Body should obtain a public liability insurance policy to cover any potential liability it may face. If possible, the insurance policy should include coverage for participating projects. However, this policy would only cover damage a Program Participant causes to a person (or their property) who visits a Program Participant’s project space. Accordingly, the Administering Body should strongly encourage Program Participants to take out their own insurance policies, including workers compensation insurance (if they have employees) and contents insurance. The Suite contains an information sheet that discusses insurance and liability issues;
- Seek out property owners and enter into the appropriate agreements with them:
- Occupancy Licence (creative hub): the Suite contains a template agreement between the Administering Body and property owners for use of buildings. The sample Occupancy Licence (Creative Hub) grants the Administering Body a right to use the property for agreed-upon purposes on a rolling 30-day basis. The property owner has the right to terminate the licence at any time so long as it provides the Administering Body with 30 days notice. The Administering Body is not allowed to make alterations to the property without the consent of the property owner unless included in the permitted uses, and the Administering Body must notify the property owner of any damage. The property owner retains the right to enter the premises at any time (after providing reasonable notice) to inspect the premises and make repairs.
- Outgoings/Utilities: the Administering Body should negotiate with individual property owners as to how to handle utility payments (gas, water, electricity). The templates in the Suite are drafted on the assumption that property owners pay utility bills directly and then invoice the Administering Body for the amount paid. The Administering Body in turns invoices the Program Participants for the same amount.
- Maintenance: the Administering Body should undertake basic maintenance of the property while it is under its care (removing graffiti, re-painting, etc.).
- Seek out Program Participants:
- Creative Hub Participation Agreement: the Suite contains a template participation agreement between the Administering Body and Program Participants namely the individuals and organisations whose creative project proposals are accepted for inclusion. The sample Creative Hub Participation Agreement transfers some of the obligations of the Administering Body under the Occupancy Licence (creative hub) to the Program Participant, and provides for reasonable conditions of use in connection with the properties. The Agreement grants the Program Participant a sub-licence to use the property (for specified permitted uses) on a rolling 30-day basis in exchange for a nominal participation fee, for example $20 per week.
The Creative Hub Participation Agreement (creative project) makes the Program Participant responsible for paying for utilities and prohibits the Program Participant from using the space to create a nuisance or engage in illegal activities. Furthermore, it makes the Program Participant responsible for maintaining the property so it complies with fire safety and occupational health and safety requirements. The Program Participant is not allowed to make alterations to the property without the consent of the Administering Body unless included in the permitted uses, and the Program Participant must notify the Administering Body of any damage it causes. The Administering Body and the property owner retain the right to enter the premises at any time after providing reasonable notice. Although the Administering Body may have insurance which covers damage caused by the Program Participant, the Participation Agreement gives the Administering Body the right to require the Program Participant to take out insurance policies.
- Assess Applicability of the Retail Leases Act:
Some Participation Agreements may fall within the ambit of the Retail Leases Act 1994 (NSW) (Act). There will be a retail lease for the purposes of the Act if there is ‘any agreement under which a person grants or agrees to grant another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop.’ The term ‘retail shop’ covers an extremely wide range of businesses, including art galleries and the sale of art and craft from premises open to the public.
However the Act generally does not apply to agreements to occupy premises:
- for a lettable area of 1,000 m2 or more; or
- for less than 6 months (‘short term leases’ under the Act) provided there is no right for the lessee to extend the lease. However, the Act does apply to successive short term leases where the combined term of the lease is greater than one year. Therefore, even if an agreement is entered into for a term of less than 6 months, the Act may apply if a person remains in the premises for more than one year.
The significance of the Act applying is that the Act can operate to override the terms of any agreement reached between the parties and it imposes a number of obligations on those deemed to be a ‘lessor’ under the Act. Of particular potential concern is the fact that the Act can operate to create a lease with a minimum term of 5 years. Property owners are only likely to be willing to participate in Creative Enterprise Hubs if they can maintain control over their properties and are not required to commit to a long term lease. Under the Act, terms shorter than 5 years can be agreed if the lessee provides the lessor with a certificate under section 16(3) of the Act (section 16(3) certificate). The effect of the lessor receiving a section 16(3) certificate is that the minimum 5 year term does not apply.
If the Act applies, a lessor is also legally obligated to provide the lessee with a number of other documents. As there is potential for the Act to apply to a Participation Agreement, it would be prudent for the Administering Body to provide the following additional documentation to Program Participants with the Participation Agreement:
(1) Lessor’s Disclosure Statement and Annexure (including an estimate of outgoings/utilities);
(2) Lessee’s Disclosure Statement. The Program Participant must complete and return the Lessee’s Disclosure Statement to the Administering Body within 7 calendar days of receiving it;
(3) NSW Retail Tenancy Guide;
(4) section 16(3) certificate; and
(5) an estimate of utility expenses.
Templates for these documents can be downloaded from The Small Business Commissioner’s website. It is very important that the parties understand their rights and obligations under the Act. It is essential that Program Participants understand the meaning and effect of a section 16(3) certificate. Program Participants who need advice on these issues as well as a section 16(3) certificate can contact Arts Law for advice.
- Template agreements:
- Creative Hub Participation Letter and Participation Agreement (between the Administering Body and Program Participant); between the body administering the Creative Enterprise Hub and the operators of creative projects (Program Participant) setting out the terms and conditions on which they can participate in the Creative Enterprise Hub. It specifies the particular space assigned to the Program Participant, for how long the use is allowed, the fee and the Program Participant’s principal obligations.
- Occupancy Licence (Creative Hub): between the body administering the Creative Enterprise Hub and the participating owners of buildings (Licensors) for the use of premises as part of the Creative Enterprise Hub; and
- Information sheets:
- Commencement and Termination Dates (Items 3 and 4 of the Schedule): Those dates determine the initial period for which the Licence is intended to last. This is a general indication only, as the parties have the right to terminate the Licence Agreement at any time by giving a notice respecting the notice period in Item 5 of the Schedule.
- Notice Period (Item 5 of the Schedule): This is the time between the sending of a notice to terminate the licence and the moment the notice takes effect. If the licence is understood to operate on a 30 days rolling period, the Notice Period should be 30 days. It can be longer if the Licensor agrees to the licence operating on a longer rolling period.
- Permitted Use (Item 6 of the Schedule): The Permitted Use should be described in general terms such as “use as a shop”, “use as a gallery”, “use as an artist studio”, etc. to encompass a wide range of possible specific projects. The Permitted Use must be one which is possible in the space made available under the Licence Agreement (Licensed Area) as defined in Annexure A, and allowed by planning, local government and Building Code of Australia (BCA) regulations.
□ Copy of the Program Participant’s project proposal (Project Proposal) as Annexure A. This is very important as the Project proposal determines the permitted use of the space made available under the Participation Agreement (Licensed Area).
□ Copy of the policy wording of the Administering Body’s public liability insurance policy as Annexure B.
□ A copy of the Creative Hub Participation Letter for the program participant to sign and return to the Administering Body;
□ Two signed copies of the Creative Hub Participation Agreement strictly speaking (see below).If the Retail Leases Act 1994 (NSW) (Act) applies to the Participation Agreement, the Administering Body should also send the necessary documents under the Act (see below).
- Commencement and Termination Dates (Items 3 and 4 of the Schedule): Those dates determine the initial period for which the Creative Hub Participation Agreement, including the sub-licence of the space made available to the Program Participant (Licensed Area) is intended to last. This is a general indication only, as the parties have the right to terminate the Agreement at any time by giving a notice respecting the Notice Period in Item 5 of the Schedule.
The Commencement Date in Item 3 of the Schedule must be a later date than the Commencement Date specified in Item 3 of the Schedule relating to the Occupancy Licence applying to the Licensed Area. For example, if the Occupancy Licence for the Licensed Area “Ground floor, 3 Little Street” begins on 1 July 2010, the Commencement Date of the Participation Agreement allowing the use of “Ground floor, 3 Little Street” by the program participant cannot be before 1 July 2010.
- Notice Period (Item 5 of the Schedule): This is the time between the sending of a notice to terminate the Creative Hub Participation Agreement and the moment the notice takes effect.
The Notice Period in Item 5 of the Schedule must be no longer than the notice period specified in Item 5 of the Occupancy Licence. It can be the same period or shorter. For example, if the Occupancy Licence can be terminated with 30 days’ notice, the Creative Hub Participation Agreement must operate with a maximum 30 days rolling period.
- Participation Fee (Item 6 of the Schedule): This is the fee the Program Participant pays to the Administering Body for the use of the Licensed Area.
As the Administering Body also pays a fee (Licence Fee) to the Licensor (the building owner), the Administering Body might want to ensure that the amount paid by the Program Participant at least covers the Licence Fee it has to pay to the Licensor to avoid any financial shortfall.The Administering Body should send two signed copies of the Participation Agreement to the Program Participant. One copy is for the Program Participant to keep, the other copy should be signed and returned by the Program Participant to the Administering Body. The Administering Body must attach a plan of the space made available to the Program Participant (Licensed Area) as Annexure A to the Participation Agreement. https://www.smallbusiness.nsw.gov.au/resources/forms) to Program Participants with the Participation Agreement:
□ Lessor’s Disclosure Statement and Annexure (including an estimate of outgoings/utilities);
□ Lessee’s Disclosure Statement. The program participant must complete and return the Lessee’s Disclosure Statement to the Administering Body within 7 calendar days of receiving it;
□ NSW Retail Tenancy Guide;
□ Certificate under section 16(3) of the Act; and
□ Estimate of utility expenses.For more information see the NSW government’s Small Business Info Kit https://www.smallbusiness.nsw.gov.au/solving-problems/retail-tenancy. It is very important that the parties understand their rights and obligations under the Act. It is essential that Program Participants understand the meaning and effect of a section 16(3) certificate. Program Participants who need advice on these issues as well as a section 16(3) certificate can contact Arts Law for advice.
□ Occupancy Licence (Creative Hub)Agreement between the Administering Body and the Program Participant The Administering Body should send the Program Participant the following documents: □ Creative Hub Participation Letter with:
□ A copy of the signed Participation Letter for the Program Participant to countersign and return to the Administering Body;
□ Annexure A: Project Proposal
□ Annexure B: Policy Wording□ 2 signed Creative Hub Participation Agreements with: □ Annexure A: Plan of Licensed Area If the Retail Leases Act1994 (NSW) (Act) applies: □ Lessor’s Disclosure Statement and Annexure (including an estimate of outgoings/utilities); □ Lessee’s Disclosure Statement; □ NSW Retail Tenancy Guide; □ Certificate under section 16(3) of the Act; and □ Estimate of utility expenses.