Loan for unit trust

We are 3 friends planning to buy a development site with rentable home which will be developed after 1-2 years and till that time it will be rented out. We want to buy in a structure in which we are not jointly and severally liable.

Buying in a unit trust is our preferred option. In this structure, there will be a company as managing trustee in unit trust. We all 3 will be directors in company. We all 3 will also buy units from trust. We know that banks will give us loan to buy units in trust. But we were told that bank will ask for guarantee as well from directors. That's the problem part because guarantee means we are jointly and severally liable.

Is there any way in which we are not jointly and severally liable? Is there any other ownership structure other than unit trust which makes this possible ?
 
best of luck in the real world

if you can get a no recourse facility with a low enough LVR you may be able to pull it off.

Another method that may work for your needs ss CBA property share product, though not aware if its available for unit trusts, and in reality i dont think its been well tested.

Put yourself in the place of the lender............ if one of you defaults, the capacity to recover the property is extremely limited.

ta

rolf
 
Ownership structure on its own is unlikely to achieve the outcome you're looking for. For example most lenders require full guarantees from all parties involved. If one doesn't pay, they expect the others will or they'll come after all of you.

The CBA does have a product that would separate lending liability from each other to a modest degree. They still require security guarantees from all parties, but you're not liable for each others loans. If they default the bank can take the property, but they're not coming after you for money owed by someone else.

Not a perfect solution, but it helps somewhat.
 
Are you aware that unit holders can be personally liable for the debts of the trust?

To avoid personal guarantees, except for 1, you could decide on a risk person. This person could be sole trustee. However lenders will usually want to take a guarantee from each substantial unit holder. To avoid this you could 3 separate discretionary trusts, appropriately drafted, with the risk person as trustee - but not beneficiary of 2 trusts, the beneficiaries of which would be the persons and families of the other 2.

But structuring like this brings up a whole new set of issues.

Seek specific legal advice.
 
bank guarantee

Thank you all for replying.

Can you elaborate further on bank guarantee ? If I have given bank guarantee of 500k doesnit reduces my borrowing capacity ? Does it show up in my credit check report ?
 
Thank you all for replying.

Can you elaborate further on bank guarantee ? If I have given bank guarantee of 500k doesnit reduces my borrowing capacity ? Does it show up in my credit check report ?

with some lenders a guarantee does not affect your personal borrowings even though in reality its a contingent liability.

Whether it shows up on the credit file or not, if its lender policy that you should declare same it would be sensible to do so

ta
rolf
 
The only real way to not be joint and severable would be to each borrow in own names against your own properties and use these funds to buy units in the trust and then the trust busy the site unencumbered.
 
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