One owns the house, another owns the land?

I want to know if it's easy for one person to own the land and someone else to own the house on that land. How do you set it up and has anyone here done similar? What about if someone dies, can it be all legally written up in a will so one person doesn't loose out?

We have a relative approaching 60 and still renting. She has a block of land (1 acre) that she is paying off. She hopes to use her super to pay out the block upon retirement (in about 6 yrs). Then that's it. No house, no money. I think she thought she could possible sell the block eventually and then go and buy a unit somewhere but to be honest I don't think she will get enough money to re-buy with costs etc.

We have tossed up the idea of building a house on the block and renting it out. This of course would be great cash flow as we would only be borrowing for the house and not the land. I don't even know if a bank will do this. We thought this could then give us a great rental and when she is ready to retire and we have the rental house working well for us, we could then purchase the block off her. So we own the house and land. With the money she gets for the block, she could fence off the back half of the block and build a livable shed/small home for her to reside in.

I think this would cause a bun fight between family because we would be the owners of the house she builds at the back and pays for. Can the house at the back just be valued upon her death and we pay out the people in her will. My thought is that we have allowed her to live on the land rent free and been the instigators and vehicle for her to be able to remain independent and in her own place, rather than live with a family member (which I can't see happening) or end up in govt housing.

Just wondering what your ideas or thoughts are?
 
I say dont do it.

All it takes is for someone to recommend her setup a reverse mortgage and you'll be in for a fun rude.

Also if she uses her super to pay it off, what is she going to retire on?

I'd say its best you come to some kind of formal arrangement whereby you buy the land off her and give her the money.

If its not enough for to retire on or doesnt work out financially well for her, perhaps you can the build a house on it and let her live in it rent free until she passes away in exchange for a slightly lower price.
 
There's only one title for a block of land, regardless of what is on it. The best you could do is have your name on the title as part owner. The only way you can sell a house without the land is if the house is removable or it is an apartment and the land is all common, but that is just a different kind of title.

Also, how old are you? 60 certainly isn't old. 80 is 'old', as in if you're going to start falling apart from wear and tear, it happens in your 80s not your 60s (yeah yeah, everyone knows exceptions either way). I wouldn't be sitting around thinking about wills unless she is 60 and has major health conditions.
 
Separate Ownership of Land & Buildings

Having separate ownership of land & buildings is not that uncommon. It’s especially big in the US & it also happens in Australia. Usually its done via a ground lease, where the owner of the land leases the right to use it to someone else.

Most of Canberra is on this sort of arrangement with 99 year leases. The Catholic Church has a lot of this sort of property, though usually on shorter leases. There are CBD properties on this sort of arrangement as well.

The bottom line is to have a competent property solicitor draft the lease agreement. It would then get registered with the Titles Office & would be shown on the Land Title.

When you come to borrow for the building, you would need to look into the collateral situation. What would the bank use for security for the construction component????

The key thing here is to work out very clearly what each party’s goal, interests, roles, responsibilities, contributions & benefits are here with this sort of arrangement. Then ensure they are well documented & protected with an appropriate written contract.

Even though it’s family, having a writing agreement prevents any future misunderstanding!!!

Philip
 
Having separate ownership of land & buildings is not that uncommon. It’s especially big in the US & it also happens in Australia. Usually its done via a ground lease, where the owner of the land leases the right to use it to someone else.

Most of Canberra is on this sort of arrangement with 99 year leases. The Catholic Church has a lot of this sort of property, though usually on shorter leases. There are CBD properties on this sort of arrangement as well.

The bottom line is to have a competent property solicitor draft the lease agreement. It would then get registered with the Titles Office & would be shown on the Land Title.

When you come to borrow for the building, you would need to look into the collateral situation. What would the bank use for security for the construction component????

The key thing here is to work out very clearly what each party’s goal, interests, roles, responsibilities, contributions & benefits are here with this sort of arrangement. Then ensure they are well documented & protected with an appropriate written contract.

Even though it’s family, having a writing agreement prevents any future misunderstanding!!!

Philip



Agreed.

I work with several commercial properties and two residential properties with ground leases and it works fine.
 
She's only 54. I work with people that are well into their 70's.

Could she sell the land now and use the money as a deposit on a modest unit. She could rent this out or live in it. By the time she retires the amount left to pay should be small and covered by super and/or the pension?

By putting her super into the land and selling it to you while only affording to build a shed or small home means she also has no super and you technically own everything.

Centerlink may not be happy with this arrangement either as it could be seen as gifting or if you pay her under the true value of the property her pension may be reduced.

Also if you go down the road of half ownership she will technically be recieving rent according to the ATO and centerlink even if she isn't.

It sounds very messy to me and unless this woman is well aware of what she's agreeing to it may be best coming up with another option to help her into her own home.

If she's happy with living in a shed behind a rental then she'd probably be even happier buying a modest one bedroom unit that is in her name.

Remember while considering how this could benefit you the chances are your judgement on how to best help her could be compromised.
 
Thanks for all your replies. Weg very good idea. I will try and see how much her land is valued at now, so if it would make a deposit or not. For peace of mind I would prefer her to be in a unit closer to facilities but I think she has warmed to the idea of living her retirement on land in a shed growing veggies. She also wants to retire shortly and while we tell her that she cannot financially afford to retire yet she seems to think she will :rolleyes:

Thanks for the advice everyone.
 
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