. by Bob Lette basisfor such relief. Whether you are 20 or 55, Property Syndicate"shares" are usually having an investment portfolio "sold" by promoters who mayor may not has become increasingly be the managerbut who clearly have a important for planning your profit motive e.g.the sale of a property to future into retirement. Asset the Syndicateof Investors. allocation has an inlportant role in this Essential Elements planning process, determining in what A Property Syndicateis governed by a ratios your portfolio should be allocated Syndicatepeed entered into between the between cash, fixed interest, shares and Investors in the Syndicate,the Manager real estate. and a Representative (i.e an Independent One way of including real estate is by Trustee) whereby:- investing in Property Syndicates. This will give a return on your investment, security of title, the prospect of capital gain and taxation advantages on the way through. What Is a Pr.,tIJ 5IJdcate? A Property Syndicate is a scheme under which investors have legal title to real property as tenants in common and each investor holds a Certificate of Title document- ing his or her interest. Pr.,tIJ SI,1c1cates are Law any Company which Company is deemedto be subject to the Corporations Law and in particular, to the provisions relating to prescribedinterests.Genuine are Property SyndicateSchemes granted relief on application from the Prescribed Interest provisions of the Corporations .The Manager agreesto managethe Law. The rationale for granting suchrelief Syndicatefor the Investors,is is the security of title provided under the responsiblefor issuingthe Prospectus various systemsof land title operating in inviting subscriptionsand holds a Australia. Any person who owns land has Dealer's Licence issuedby the ASC. The the ultimate control over the sale,transfer the Manager for a fee assumes role of and mortgaging etc of that land. It is "Landlord" of the property and virtually impossiblefor clear title to land operatessubject to the Deed and the to be transferred without either the Corporations Law. permission of the legal owner or an Order .The Representativeis approved by the of a Court. In the view of the Australian ASC and acts as the Representativeof SecuritiesCommission (ASC) the security the Syndicatefor the Investors.The of title factor together with the direct Representativefor a fee acts as control exercisedby the legal owner is the Continuedpage 2. . by Elizabeth Sheehan Also, they were fairly inflexible; for example Powers of Attomelj Act lMd 1998 they did not provide for different Attorneys There may come a time for us all or for different purposes, allow you to give when, for a variety of reasonswe are specific instructions. unable to make decisionsfor ourselves. More generalproblemswith the law were a It is wise to be prepared and to have lack of supervisoryand investigatorypowers appointed someoneto make decisions to deal with suspected of cases abuse. Also, for you in that event.That person should there was no legislativedirection for the understandyour wishes and be legally guidanceof an Attorney when making bound to acceptthem. This can be decisions. Further, there hasbeen uncertainty achievedby a Power of Attorney which in Queenslandfor sometime asto who has is a formal instrument by which one authority to consentto health care or person appoints another to make treatment for a family member who lacksthe decisionson their behalf generally or for capacityto decidefor themselves. newThe certain limited purposes.On June 11998 Act appearsto overcomemany of these the Powersof Attorney Act (Qld) commenced. This Act clarifies and reforms the existing law and introduces new concepts.It changesthe focus of to financial matters are still available. Powersof Attorneys from just financial However, the new legislation extendsthe matters to also include personal matters. scopeof the Enduring Power of Attorney so TheIMdLaw that it: Previously,Powersof Attorney were .covers both personal and financial matters; regulated by the Property Law Act .allows you to appoint more (Qld) 1974.There were two types of than one Attorney; Powersof Attorney. The first was the .allows you to specify when the GeneralPower of Attorney which was power will begin and exactly what only valid while you were capable of areasit will cover; and managingyour own affairs.The second .gives clear guidanceto your Attorney was the Enduring Power of Attorney if you are unable to supervisethe which did not ceaseif you became decisionsyourself incapable of managingyour own affairs. Personalmatters include matters such as Both applied to financial matters only. where and with whom a person is to live, ti on . The one exception may be an investment by regulated superannuationfunds which are not allowed to borrow by law.A superannuationfund investment in a non- Continuedfrom page 1. the Prospectusand will not exceed12 years. borrowing Property Syndicatewould not "Trustee" and has all the powers and Syndicatesterminate at the completion of breach this rule. Investment in a Property rights as if it was the absolute owner the term or the earlier sale of the property. Syndicatewhich doesborrow may breach the of the property. ~ rule. A superannuationfund trustee should .A Prospectuscompiled by the Manager is The SyndicateProperty would normally be seekprof8ssional advice on any lodged, approved and registered under the unencumbered. The Prospectus may, investment proposalswhere the Corporations Law by the ASC. It must however,provide for the Syndicateto borrow superannuationfund might contain a statement in a prominent money to complete the purchaseof the risk breaching the SIS position advising potential investors that: property. Borrowings are on a non-recourse legislation. -Investments in the Syndicate basis.Under the SyndicateDeed, borrowings... to kIvest? should be viewed as long term; of in excess an agreedpercentage(usually An investor should -Interests are likely to be illiquid 65% to 70%) of valuation are prohibited. The consult a financial becausethere is unlikely to be a lender to the Syndicatetakes security over advisor and his secondarymarket; and the SyndicateProperty,has recourseto the lawyer before -Investors have no right to require property and the SyndicateFund but does investment in a their interest to be bought by the not have any right of recourseto individual Syndicate. An Manager or any other person, or to investors.If the lender sellsthe property at a investor completes have their interests redeemed. value lessthan the outstandingloan, the application to PIwpose individual investorshave no liability to make invest and returns the Most Syndicatesare usually sole purpose up any short fall but will have a capital loss. (i.e. single property) Syndicateswith a WIK»Cat Invest kt a ~dcate? the Syndicatetogether minimum investment.The Manager usually Anyone can invest in a Syndicate. The with a chequemade out to enters into an option to purchasean income Manager usually reservesthe right to only the Representative. These producing property. The more attractive the accept a certain number of applications in monies must be depositedinto a rate of return, the more easily "saleable" the the Syndicateor to reduce the amount designatedtrust accountupon receipt investment.A prudent manager will offer a applied for as well as closethe Prospectusat and kept there until the purchaseof the property with definite capital growth any time. In practice,the Manager is likely to property. opportunities. allocate interests to investors on a first-come The ongoing costsof operating the Syndicatesare for a fixed term agreedin first-served basis. Syndicate,paying any interest on loans etc 2MM normal day-to-day issuesand also health selectedfrom a group of people nominated matters such as obtaining or consentingto by the legislation such as spouses(including health care or treatment. An Attorney has no de factos), parents,children and close friends power in relation to specialpersonal matters, who are able to assumethe role of a Health such as making a Will or marriage,nor Attorney in the absenceof an Advanced specialhealth matters,such as the removal of Health Directive or an Attorney appointed organsfor donation, sterilisation, or the under an Enduring Power.Such person is withdrawal of life-sustainingtreatment. An able to authorise medical treatment for the Enduring Power of Attorney for financial person who has lost capacity. matters may come into effect on a specified Adult guardian date or event, or otherwise on the date it is the Finally, the Act establishes Adult made.An Enduring Power of Attorney for Guardian who is an independent officer personal matters only comesinto effect when appointed by the Government to protect the the principal has lost the capacity to make interests of the people with decision making An decisions. Attorney's responsibilities are disabilities.The Adult Guardian has been clearly set out in the legislation.The law given appropriate powers to properly ensuresthat the principal's interests will be investigate and deal with inappropriate paramount and his/her wishesTespected. behaviour by anAtWmey.~~~ ~ Advanced Health Directive Condusion A new concept introduced by the Act is the This Act has made some positive advances '~dvanced Health Directive". This is a to the structure of Powersof Attorney. They document in which an individual gives have alwaysperformed a valuable function general direction about their future health and have become even more valuable under care if at some future time they do not have the new scheme.If you have a Power of decision making capacity.It can include Attorney made prior to 1 June,1998it still directions consentingin certain has legal force. However, it will be limited to to circumstances particular health care or financial matters only. It may be worth requiring particular life-sustainingmeasures considering making a new Power of to be withheld. The Act expresslystatesthat Attorney, as the new regime gives you new it does not authorise euthanasia. options.You could then appoint an Attorney StaMOI"IJ Health AttorneIJ (or Attorneys) for personal matters,and you The Act also introduces the concept of the could be more specific about the decisions "Statutory Health Attorney". This is a person you would like your Attorney/s to make. will be expenses payable from rental income interest in the SyndicateProperty as a long received from the tenants of the Syndicate term investment not as part of a profit Property.Any money subscribedby making undertaking or venture. unsuccessful applicantsmust be refunded. Tax deductionsmay be available to TaxatkNl Syndicateinvestors for travelling costsfor A Syndicateis regarded as a partnership for inspection visits and attendanceat AGMs A taxation purposes. Property SyndicateTax Risks Return, (similar to a Partnership Return) will .Failure of tenants to pay rent and/or be lodged with-theTaxation Office outgoings thus affecting the return eachyear disclosingany on the investment. assessable income or losses, .Failure of tenants to renew Leases capital gains or lossesor and a delay in finding new tenants. allowable deductions .Increase in interest rate chargesthus (certain depreciation diminishing the rate of return. and building .Inability to withdraw from a Syndicate. allowancesand the .Inability to redeem your interest -An write-off of Investor is involved in the Syndicatefor borrowing costs the Syndicate'slife. over the loan term .Economic or government legislative or of the Syndicate policy changesmay causedetrimental borrowings). Each economic impacts on the Syndicate individual investor is Property, the tenants or the taxation required to include in treatment of returns. assessable income, CooOJSkwa their proportional share An investment in Property Syndicateshas of the Syndicate'snet an element of risk and no guaranteeof income. If the Syndicate return of capital. However, if the property incurs a tax loss in any year, has excellent tenants etc, the risk of the eachinvestor can clain1a share of return not being achievedis minimal. No the loss as an allowable deduction against guaranteesare given on return of all capital. their other assessable income in that year. It is an excellent investment for small Capital gains and lossesare treated similarly investors to "test the water" in real estate as eachinvestor will be acquiring their investment. by Rebecca Gray Additional seller's statements While the Body Corporate and The tenus of the new contract have Community Management Act clarified and extended the seller's warranties. 1997 ("the BCCMA") has been For example, the seller warrants that:- in force for almost a year, new .at settlement, there will be no valid notices developments in property law or orders requiring work to be done or continue as a result of its introduction. money to be spent in relation to the lot or One such development is the new REIQ the common property for the scheme Contract for Lots in a Community1itle (previously, this warranty also related to Scheme.The Contract is still with the REIQ the building of which the lot formed part); printers but it is anticipated that it will be in circulation with real estate agents by the end of June 1998. The new contract replaces the existing REIQ Contract for Home Units and Town Houses and incorporates the following key changes:- 1.The new contract is to be used for residential or commercial property in a community title scheme.This is logical since the BCCMA applies to both residential and commercial property; 2. The new contract remedies some inconsistencies of the old contract with the BCCMA revealed during the last 11 months of its operation. New commercial provisions The commercial provisions of the new contract will operate only when the "Present Use" nominated in the Schedule is other than "Residential". Leases and service agreements If the property is commercial, any leases or service agreements to be transferred must be detailed in the Commercial Tenancy Schedule and the Service Agreement Schedule respectively; .at the contract date, there is no proposal to The new Contract assignsnot only the record a new community management benefits of any tenancy agreement but also statement ("CMS"), there is no notice of a the burdens. This means that a tenant will be meeting to consent to the recording of a able to enforce any obligations of the new CMS and the CMS recorded for the landlord against the new owner. The right to scheme contains details of all allocations sue for rent arrears for a period before effecting the lot or the registered owner. settlement remains with the seller. [So, if there is an allocation of common The seller must produce to the buyer within property not recorded in the CMs, it must seven days of the contract copies of all be separately disclosed.] tenancy and service agreements.The contract The buyer's rights in the event that any of is subject to the buyer being satisfied with the the seller's statements are not correct will be terms of the documents within seven days termination of the contract, compensation or after receipt. If the seller fails to produce the both, depending on which statement is documents or the buyer is not satisfied with the inaccurate. In some cases, right of the temls, the buyer can terminate by notice in termination must be exercised within a writing within seven days after the documents specified time. are (or should have been) delivered. Some of the Seller's Statements which Sellers warranties previously were included in the old contract A seller should be aware of warranties have been deleted because the implied included in the standard terms of the warranties in the BCCMA already covered contract. For example, the seller warrants them. The deletion of these statements does that as at the date of the contract:- not remove the obligation of the seller to .the details in the tenancy schedule are comply with the warranties in the BCCMA. correct and the tenancies are valid; Conclusion .there is no breach of the tenancy; It is important to be aware of the ability .the seller has no knowledge of of the buyer to terminate where the seller correspondence relating to a has not fully or accurately disclosed matters review or an option; or has provided inaccurate warranties. .the tenant has not received an incentive or Before signing a contract, it is essential that inducement to enter into the lease. you consult a solicitor to ensure that the If any of these warranties are inaccurate standard warranties contained in the and the buyer is materially prejudiced, the contract are amended to suit the particular buyer may terminate the contract. circumstances.
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