We have ended up owning 50% of 2 lots rather than 100% of 1 lot

[Sheryn]

In my mind this was a simple process but...


History

1. Purchase block of land with daughter, hubby & myself in 2007.
Hubby & I to own 50% & daughter to own 50%. We paid stamp duty for half the purchase cost, daughter did not as first home buyer.
Lender wanted joint loan in 3 names - so we opened a new joint account.

2. We built a duplex with a new joint construction loan.
- Unit 1 daughters 50%
- Unit 2 our 50%

3. We strata'd duplex into 2 lots thinking Unit 1 daughters and Unit 2 ours

4. What we have ended up with is we own 50% of Unit 1 & Unit 2 and Daughter owns 50% of Unit 1 & Unit 2

5. Unit 2 is rented out as IP and Unit 1 is daughters PPOR

6. Daughter cannot apply for FHOG unless Unit 1 in her name.

Where we are now is how do we do this without incurring costs greater than 7K FHOG?


Issue
All 3 of us may have to pay stamp duty on transferring ownership on both units to each other at improved value and setting up new loans + solicitor costs and lender costs.

Question?
Can I apply for a private ruling to OSR & ATO or does it have to go through Solicitor and Accountant?

I have been talking to our paralegal who has been talking to senior law consultant and lawyer and we will meet to discuss options within next 2 weeks.

We have asked lender to value property as one option is to sell our 50% to daughter [her equity is OK her serviceability will be a problem]


Nothing like a challenge..

Sheryn

 

[Propertunity]

3. We strata'd duplex into 2 lots thinking Unit 1 daughters and Unit 2 ours

I don't know how you ever thought that was going to be the outcome
but 20/20 hindsight vision hey?

I'm just not even a bush lawyer, but I don't think you're going to be able to unwind this with out paying stamp duty all over the place as you've identified and possibly some CGT too if prices have gone up during the build / strata'ing process ( a definite possibility).

My first thought was to leave it as an IP for you all and just go and buy something else individually - now or later. Then I realised that you are all jointly & severally liable for the whole debt. I'm given to understand that lenders will see your daughter liable (and you+hubby) for 100% of the debt but only entitled to 50% of the income. This could cripple you all with serviceability calculations going forward.

I'd be interested to see the outcome of your legal eagle's way forward. Only way I can see is sell to each other as you've said or just sell out and take your profits.

 

[Sheryn]

Rang our Accountant this morning to discuss / alert her to the issue of owning 50% of both lots rather than 100% of one lot and to ask if we should have rent for unit 2 paid into our account in 3 names.

She said not to worry as she thought we could partition. So I googled "law partition" and came up with the below link on Partitions on Land.

Now I don't understand all of the below link but maybe an answer to our problem.

Our paralegal had been talking about Deed of position so may be one and the same.

http://law.ato.gov.au/atolaw/view.htm?docid=DGS/GSTR2008D3/NAT/ATO/00001

This is also of help and interest
http://www.osr.nsw.gov.au/lib/doc/rulings/rrdut35.pdf


Cheers
Sheryn

 

[craigb]

could you not sell , your /her 50% to her for $1, and she in reverse,
then you both own the 100% share in each unit.

 

[Propertunity]

could you not sell , your /her 50% to her for $1, and she in reverse,
then you both own the 100% share in each unit.

Yes you can do that OK craigb BUT you still have to pay stamp duty as though it was transacted at market value and the same with GCT and you are still up for setting up new names on loans & legals.

 

[craigb]

its seems the financiers started it this way to cover themselves from all corners, ?
but i am happy to learn from the pro's

 

[Sheryn]

What a tangled web we weave...

Yes you can do that OK craigb BUT you still have to pay stamp duty as though it was transacted at market value and the same with GCT and you are still up for setting up new names on loans & legals.

Craigb
Propertunity is correct cost and fees are huge...

Email from Senior Loans Consultant

{If the joint loan is to go to 2 separate loans; one in daughter's name and one in yours and hubby's name.

The original mortgage on the property is in 3 names. That mortgage will need to be discharged and a new mortgage set up. If we do 2 separate loans then 2 new mortgages will need to be done plus the new valuations.

Depending on what loan types you go for depends on the fees. Premium home loans where loan balances are above $150k have a $380 annual fee and no monthly fees, where all other loans have a $800 establishment fee and $8 per month fee.

These fees would apply for each loan.

Interest only loans would have $800 establishment fee for each loan as new mortgages need to be done on each and as discussed new valuations as separate identities need to be done.

Talk to you soon}

Possible fees & costs

• Legal fees (ours and lender's solicitor)
• Stamp duty
• Mortgage duty
• Pay out fees
• Start up fees
• Valuation x 2
• CGT

We can't go guarantor for daughter due to her serviceability. Valuation of property is not the problem.

Our building plans & finance for the next 2 projects are under control.