The COVID-19 pandemic has hit businesses hard, with the fitness industry one of the most severely affected. The ever-changing rules and lockdowns are difficult to keep track of, so live by these rules to make sure you know your rights and obligations.
Charging Gym Fees During Government Closures
The short answer is that you cannot charge your customers if your gym or personal training sessions are closed due to government lockdowns. The simple reason behind it is that a person should not accept payment for services that have not been supplied. Continuing to charge customers when your gym or personal training sessions are cancelled would likely be a contractual breach and a breach of consumer law.
However, you are still allowed to charge a cancellation or suspension fee if your terms and conditions allow for it!
You should strictly not charge these fees during a government closure, but you may charge them if the client is pre-empting a closure or is electing not to continue with your services when you reopen. So, check what your terms and conditions allow for and get them updated if you need to. But be sure to keep customer satisfaction high and consider waiving or reducing these fees if it means gaining a long-term client.
Providing Different Services During Government Closures
If you can provide similar services to what you would normally deliver, you can continue to charge your usual fees to customers. The best example of this, is providing bodyweight fitness classes to clients via Zoom, rather than in the gym. However, where your services drastically change, you may be in trouble with the consumer law by continuing to receive your direct debits from customers.
To overcome this, change your terms and conditions to specifically allow for you to deliver your services remotely during government closures.
Continuing to Pay for Rent
Last year tenants and landlords of commercial leases were legally obliged to negotiate a reduction of rent. This applied to most commercial leases where the tenant was eligible for JobKeeper payments and had a decline in turnover. This relief has now ended and there is no current rent relief scheme.
If you are a tenant who is experiencing difficulty paying your rent, we recommend that you:
- Contact your landlord to negotiate a reduction or deferral of rent. Although your landlord is not legally obliged to reduce your rent, you don’t know unless you ask! Make sure that any agreement is properly documented;
- Check if your lease has a dispute resolution clause – you may be able to mediate the dispute with your landlord;
- You can contact the Victorian Small Business Commission and ask them to help you mediate with your landlord;
- If your lease is up for renewal soon, start negotiating cheaper rent for the upcoming term;
- Get advice from your accountant about your financial position.
Incorrectly Cancelled Direct Debits
If a client has cancelled your direct debits without paying your cancellation fee or with fees owing, be quick to recover these funds. During this time, you should focus on maximising the cashflow in your business.
To make sure recovering your debts isn’t too overwhelming, we recommend implementing an internal debt recovery procedure. We find our clients like to:
- Send an initial email following up on payment. This can be more friendly as there may be a reason or error for the missed payment. We often find that direct debits fail or payments lapse where a bank card has expired or a bank account has been closed;
- A week later, follow up with a telephone call to the client;
- If the debt is still outstanding the following week, send a harsher letter demanding payment be made within 7 days.
- If that doesn’t result in payment, get legal advice and engage a lawyer or debt recovery agent to pursue payment.
Before engaging a lawyer or debt recovery agent, look to see whether it will be commercial to pursue payment. You don’t want to pay more in fees than the total debt you are chasing. To maximise your chances of it being commercial, have a clause in your terms and conditions which allows you to recover all of your indemnity legal costs from the date of default until the date of payment. In simple terms, this means they will be required to pay all of your reasonably incurred legal costs. This is a big win for you!
If you don’t have this in your terms and conditions, your right to legal costs is severely limited. The general rule is that entitlement to legal costs only begins when legal proceedings are issued and only costs on the court scale are recoverable (generally about 50% of your out-of-pocket costs).
For further information, please contact an experienced member of the Taurus Legal Management team on (03) 9481 2000 or firstname.lastname@example.org.