How to structure this

[Paul j F]

Hi

We are currently looking at a house on a triplex size block. A builder friend is willing to fund 1/3 of the purchase price in return for what would be the rear 1/3 of land. We get 2/3 of the land and the house for 2/3 or the total purchase price. win win ...We go 50/50 in all development, planning and sub div costs. We then transfer the rear title to him.

We have discussed several different options around this and JV conditions/agreements including demolishing house and building 3 new T/H etc. but we want to live there for 12-24 months before demol and constuction begins. He is fine with that and happy to land bank.

How would one structure this.. eg. Unit trust or Company or even simply Tenants in common. Any structure must allow us to live there for 1-2 years while we go through the development process.

 

[Terry_w]

whats the longer term plan? Main residence, sale etc

 

[Paul j F]

Sale.. ideally we'd build 3 between us in the future but at this stage we can't afford to do this ourselves and or to rent in the area whilst we go through the DA process.

The house really suits our needs for now but not more than 2-3 years max.

 

[Terry_w]

Probably a corporate trustee with a fixed unit trust would be a good structure. Units split into 3rds.

There are a few tricks needed to this in this situation though. Think about how should the trustee company be set up - risk, control and financing.

 

[Aaron_C]

Unit trust first comes to mind.

 

[devank]

corporate trustee with a fixed unit trust

Is it harder to finance corporate trustee with a fixed unit trust than a personal trustee with a fixed unit trust.

 

[Aaron_C]

Is it harder to finance corporate trustee with a fixed unit trust than a personal trustee with a fixed unit trust.

It's harder to finance a unit trust, period.

 

[Terry_w]

Is it harder to finance corporate trustee with a fixed unit trust than a personal trustee with a fixed unit trust.

Yes. 2 degrees of difficulty depending how it is set up.

 

[Paul j F]

ok after talking to a conveyancing solicitor... we are leaning towards tenants in common. Share sub div costs etc and then transfer rear parcel to him and front to us.

Does this avoid SD if there is no gain or cash exchanging hands. Conveyancer said it was proportional distribution.

JV details etc will sort out the logistics we are just trying to avoid SD at the other end.

 

[Terry_w]

ok after talking to a conveyancing solicitor... we are leaning towards tenants in common. Share sub div costs etc and then transfer rear parcel to him and front to us.

Does this avoid SD if there is no gain or cash exchanging hands. Conveyancer said it was proportional distribution.

JV details etc will sort out the logistics we are just trying to avoid SD at the other end.

It would be a dutiable transaction I suspect so duty would be payable. There may be a way of avoiding stamp duty if you do a deed of partition and purchase the land in the exact proportions to the final split up. So if the whole parcel is 1000m2 and you get 300, 300 and 400 then you enter ownership with you owning 60% and him 40%.

Also consider
1. death
2. divorce
3. insolvency, and
4. incapacity

What would happen in one of these were to happen to either you or him?