basis for such relief Property Syndicate shares are usually by alendar


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               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
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

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
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
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
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
  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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