Have a good flight Steph! Hope they show some good movies on the way over.

Cheers
M

Poor Sue,

I really feel for you.

Did you keep a journal of all the telephone conversations and discussions you had with your mortgage broker?

If you’re stuck in the wrong loan, and the bank is refusing to change the terms for you, I’d make some noise and do something about it.

Firstly, it seems like you may have some recourse against the mortgage broker for misleading and deceptive conduct. Only you know all the facts, but one example is her failure to inform you of the high break fees.

Secondly, the broker may be acting as the bank’s agent. This means that the bank may become liable for the broker’s conduct.

Thirdly, if the bank’s lawyer actually told you that you could simply sign and hand in the documents, and redocument the loan later, that is clearly a representation from the bank. I’d hang on to that like a rabid rottweiler and not let go. Threaten to go to the legal practice board. Threaten to take the bank to the ombudsman. Threaten to take it to a current affairs show – it’s currently the flavour of the month. (Richmond any interest?)

Good luck.

Cheers
M

PS The above is not meant to be legal advice, merely an objective, commonsense assessment of what could be done. You should also (and this is what the bank’s lawyer should have told you) go seek some legal advice from a decent lawyer.

The lease agreement is very important with commercial properties. It’s going to have to be part of your due diligence. It should deal with stuff like who’s responsible for maintaining which parts of the property, default procedures, etc.

There are also additional risk factors with commercial property, some of which may be unique to the particular use of that property.

For example, what are the potential problems with a truck depot? Excessive loading or wear and tear of vehicle driveways and parking/loading areas? Contamination of the ground by leaking/spilled oil and fuel? These things could cost a lot of money to fix up (or “make good”, in lease-speak). Part of your due diligence will need to involve checking whether these could be a problem in the future. Also, does the lease impose any responsibility on the tenant to fix any of these problems?

You also need to work out the GST issue. For example, if you’re registered for GST, you may be able to claim the going concern exemption when you buy the property, and don’t have to pay GST on the purchase price. If you’re not registered for GST, you’ll have to pay 10% GST on the purchase price – I don’t know if you can claim that as an expense – it may go towards the cost base of the property. Also, if you’re not registered for GST and collect GST on your rent payments, that’s illegal. Tricky eh?

What it boils down to is: Know what you’re getting into.

Cheers
M

Hey Petrovski,

Unfortunately, this is not something that you can simply get a quick and easy answer on an internet forum.

If you don’t personally have experience with this, and don’t know anyone else who does, I recommend that you go see a business advisor. Many smaller and medium-sized accounting firms usually provide such a service. It’ll cost you money, but isn’t it better to get it right up front, than wing it and lose your source of funding if you hit a hitch?

For starters, here are some of the things you will need to work out:

Vehicle – company, unit trust, unincorporated joint venture/partnership, or a combination.

Entry terms – what share of the project does each party get? For example – what share do YOU get? If you’re not putting in money, but only your time and effort, how is that quantified? ie do you get any equity at all, or merely a right to share in the profits? eg one way is for you to charge the venture a consultancy fee, rather than sharing in the profits.

Return on capital – Are you entitled to any return on capital, or merely a share of the profits? What happens if there are no profits? Do you still get anything for all the work you’ve put in?

Further contributions – Will these be debt or equity? If debt, what level of security will they get? If equity, on what basis? eg how much dilution of existing shareholders will occur?

Expenses – Will you be reimbursed for all your expenses?

Bank financing – is there a maximum gearing limit?

Control – who runs the operation? Sure, major decisions can be by consensus, but most day
to day decisions will stall if you need to get approval for every single thing.

Exit strategy – will each property be the subject of a separate venture, or will the venture be an ongoing one? What happens if things stuff-up and you’ll make a loss if you sell? Must the parties simply sell and cop the loss?

Dispute resolution – what kind of procedure needs to be followed when a dispute arises? Arbitration, mediation or expert/referee determination? Do the parties have the right to buy the other out (presumably at market valuation) if there is a deadlock that cannot be resolved?

Pre-emptive rights – Can either party sell their share in the venture to someone else? If yes, must they first offer their share to the other party? There are other variations, such as tag-along rights, drag-along rights and first rights of refusal.

You also need to think of the risk profile of your interest. For example, secured debt (ie bank debt) always gets repaid first, then unsecured (eg architects, contractors, suppliers, consultants, etc), and finally equity. Where do you sit in that range?

I think you’ll get the picture – it sounds easy until you actually sit down and try to cover the bases. It’s a bit of work, but it’s worthwhile getting some help.

Cheers
M

Onya Steve – that’s a very big response.

Tranby-on Swan rang a bell for me – there were some long running disputes among various owners, which ended up before the Strata Titles Referee. It was several years ago, and I can’t remember what exactly was the problem, but if you’re looking in that area, I think some research is in order.

Kelly – If that’s where you bought, I hope there’s no problem.

Also – if you can’t afford it, is the bank going to lend you the money?

Cheers
M

Hey Simon,

Don’t worry – you haven’t offended me mate.

My post, as with all my comments on this forum, are always intended to have general application. When I use “you”, I simply use it as a convenient label (I guess I could use “a person” or “someone” instead).

I agree with your sentiments, however my views are much stronger, in the sense that in my line of work, I have had many dealings with different State Revenue departments, and the honest truth (based on my experience) is that they will on occasion take an unreasonable and unjustifiably (ie no legislative support, and therefore incorrect) hardline, which causes the taxpayer to lose out, whether because the taxpayer decides that it’s not worth the trouble and expense to fight it, or because the taxpayer has to spend considerable sums of money on legal fees to fight it (and I’ve had a few wins too!).

You’re taking the practical approach, and there’s nothing wrong with that. I think it’s a sensible approach. You’re right of course – most homebuyers would not have the resources, time or inclination to fight the OSR, and even if they do, it becomes quite damaging emotionally and financially.

What I was trying to get at is that people should not simply be told that there is a minimum period of residence required. They should be given the choice to decide whether, based on their (legitimate) intentions with their intended PPOR, there may be difficulties in the future. For example, I’d hate to think that there’s someone out there who decided not to claim the FHOG because they were told that they had to live in it for 12 months, and they (for whatever personal reasons – eg work) could not commit to that requirement.

I myself should apologise for not writing my post in a way that made you think I was attacking you.

Please don’t stop posting your opinions – they are of course useful and valuable to us all.

Cheers
M

Hi guys,

I know I’m late, but thought I’d put in my 2 cetns’ worth (been working long hours lately – another reason why I need those positive cashflow properties).

There is absolutely NO legal requirement to live in the place for any minimum period in order to qualify for the FHOG. As long as you can prove that it’s your PPOR, you could stay there for only a week and still qualify for it. That said, it’s obviously going to be very hard for you to prove that if you moved in for a week and then moved out. That’s also probably the reason the FHOG auditors/investigators are asking for proof of 3 months’ residency. But I reckon it’s just a practical threshold, on the basis that if you’ve lived in the place for at least 3 months, it’s going to be quite hard to prove it wasn’t the PPOR, unless a rorter was stupid enough to admit that to them.

If you don’t believe me, read the FHOG Act (pick any State). If someone can prove me wrong and show me where in the Act (any of them!) it says you have to live in it for a minimum period of 12 months (or any minimum residential period, for that matter), I’ll send you a bottle of Goundrey Chardonnay (I have too many sitting in my place as it is). And I’ll pay the postage too.

Check out my other posts on this topic – I’ve done quite a few now.

Cheers
M