“Buying, Selling and Developing Property –Structuring and Liability Issues”

Sonja Daly – PartnerPeter Rusbourne – Partner

Disclaimer

This presentation is for information only and is not advice. Each situation is different and

must be looked at on its particular circumstances.

• Residential building works:― Home Owners Warranty Insurance

Policy for work valued at over $20,000

• Residential Building Work: Builders at risk:• 6 years for structural defects.• 2 years for non-structural defects.

• For commercial builders – while you cannot be sued for breach of warranty under the Home Building Act you can still be sued for:– Breach of contract = 6 years; or

– Negligence = 6 years; or

– Misrepresentation under the Australian Consumer Law = 6 years.

– Case of Brookfield but watch this space

• In order to protect your assets you need to examine your current way of doing business and structure. You need to properly consider whether you should operate as a:– Sole trader; or– Partnership; or– Company; or– Family Trust Structure.

• Sole Trader– Advantages– Set up costs– Ongoing costs– Disadvantages– Assets at risk– Taxation– Transfer of interest

Structuring your business to protect assets and minimise tax.

•Partnership–Advantages–Set up costs–Ongoing costs–Disadvantages–Asset risk–Taxation–Transfer of interest

Structuring your business to protect assets and minimise tax.

•Company–Advantages–Set up costs are “one off insurance - premium”–Disadvantages–Ongoing costs–Asset protection–Taxation –Transfer of interest

Structuring your business to protect assets and minimise tax.

• Family Trust Structure–Advantages–Company trustee so same - advantages as with a company–Taxation and income splitting–Disadvantages–Ongoing costs

Structuring your business to protect assets and minimise tax.

Structure Limited Liability

Liable for partner’s/director’s actions

Personal assets at risk

Sole Trader No Not relevant Yes

Partnership No Yes, in full Yes, in full

Company Yes Company may not be liable

Not generally

Trust Companytrustee: Yes

Company may not be liable

Not generally

You purchased the land.

You are a builder who completed a combined residential and commercial project on that land.

You have sold the residential and commercial properties and there are now owners and tenants occupying all of the premises.

A number of owners of both the commercial space and the residential space are now complaining of water penetration on the balconies and cracked tiling in the units.

Proceedings are commenced against you for the cost to rectify and it is in excess of $50,000.

Case Study

Questions?