{"id":10340,"date":"2020-02-28T19:18:03","date_gmt":"2020-02-28T08:18:03","guid":{"rendered":"http:\/\/www.dbalawyers.com.au\/?p=10340"},"modified":"2023-02-09T14:47:37","modified_gmt":"2023-02-09T03:47:37","slug":"should-an-smsf-have-a-tenants-in-common-agreement","status":"publish","type":"post","link":"https:\/\/www.dbalawyers.com.au\/investments\/should-an-smsf-have-a-tenants-in-common-agreement\/","title":{"rendered":"Should an SMSF have a tenants in common agreement?"},"content":{"rendered":"
<\/p>\n
Real estate is a common and popular investment for SMSFs. Indeed, the ATO’s SMSF statistical report for the quarter ended 30 September 2019 shows that SMSFs held around $35 billion in residential real property and around $64.6 billion in non-residential property, ie, around $99.6 billion worth of real property.<\/p>\n
It is also reasonably popular for SMSF trustees to hold property with others to increase the funds available to invest and to minimise risk. However, it is important that each SMSF trustee is aware of the pros and cons of co-investment and the consequences that may arise when things don\u2019t go as planned or if a disposal or exit from a jointly held investment is needed.<\/p>\n
An SMSF trustee will usually hold a part interest in real estate as tenants in common with the other co\u2011owners and as such a tenants in common agreement (\u2018TIC Agreement\u2019) is recommended to place the relationship at arm\u2019s length. A TIC Agreement also provides greater certainty and can minimise the risk of costly and protracted disputes.<\/p>\n
This article explains some key considerations that should be reflected in a TIC Agreement.<\/p>\n
Many things can happen to a person, company or trustee of a trust (or the persons controlling such an entity) that could cause problems for other co-owners. This can include the co-owner or their controllers:<\/p>\n
Investments with other co-owners often commence with parties communicating and agreeing on the above issues. However, the sort of events outlined above may arise when different persons or entities hold an interest in the property compared to the original investment. Accordingly, a dispute may arise between the parties, and without a TIC Agreement, there would be no agreed way to resolve disputes.<\/p>\n
A TIC Agreement could address some of the following issues or provide the following mechanisms:<\/p>\n
A TIC Agreement is a prudent way to ensure that each owners\u2019 rights and obligations in respect of various events are considered and clearly set out from the commencement of the investment.<\/p>\n
Indeed, before an SMSF trustee invests in real estate with another person or entity, whether that be a related or unrelated party, a TIC Agreement should be considered. Advisers should notify their SMSF clients of the pros and cons of having a TIC Agreement without holding themslevs out as providing legal advice.<\/p>\n
A TIC Agreement can also assist the SMSF trustee in maintaining compliance with superannuation legislation and formulating an appropriate exit strategy for a co-owner.<\/p>\n
DBA Lawyers are regularly engaged to prepare or review TIC Agreements where SMSFs are involved. Please contact us if you would like to discuss these agreements and how we might assist you.<\/p>\n
Related articles and links below:<\/p>\n
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.<\/p>\n
Note: DBA Lawyers hold SMSF CPD training at venues all around Australia and online. For more details or to register, visit www.dbanetwork.com.au<\/a> or call DBA Lawyers on 03 9092 9400.<\/p>\n By Shaun Backhaus (<\/em>sbackhaus@dbalawyers.com.au<\/em><\/a>), Lawyer and Daniel Butler (<\/em>dbutler@dbalawyers.com.au<\/em><\/a>), Director, DBA Lawyers.<\/em><\/p>\n Introduction Real estate is a common and popular investment for SMSFs. Indeed, the ATO’s SMSF statistical report for the quarter ended 30 September 2019 shows that SMSFs held around $35 billion in residential real property and around $64.6 billion in non-residential property, ie, around $99.6 billion worth of real property. It is also reasonably popular [read more<\/a>]<\/p>\n","protected":false},"author":35,"featured_media":10341,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29,33,35,37,38],"tags":[],"ppma_author":[140],"yoast_head":"\n