Howdy all. Been lurking around here for a while and found some good advice along the way. My current dilemma is that I have a 3rd share in a commercial property in Perth bought about 5 years ago. It was with friends and we struck no deal in regards to an exit strategy. We were all financially secure at the time and we paid cash for the property. Now things have gone a little pear shaped for the other 2 and they are wanting to sell. I have no need or desire to sell the property. My question before I go and hand over money to my lawyer – is there are any laws requiring me to sell. I am happy for them to onsell there share in the property however I do not think this would be viable to most investors. I could arrange other potential investors who are friends. All of our names are on the title as seperate entities. I would love to know if anybody has had any similar experiences.
Cheers
WattypYes- you have 2 options really-
Pay out their shares and take them over
Find someone to take over their sharesThings like this can cause major problems in friendships and not worth ever loosing friends/ families over money or deals- sometimes maybe better to buy them out or sell and take your profit, move on and do deals by yourself, and probably take the lesson to do an exit strategy, and your all at fault for not sorting this out from the start.
Thanks BG. Is that from a legal aspect or from a dealing with friends aspect. If I stay put with my share and they are unable to make me sell then they may be a bit peeved at this time but will sort there own mess out other ways.
Hi Wallyp,
I have seen relatives in a similar situation, and basically all parties are at the mercy of one another if someone wants to
sell, with no control over the timing. I think trying to sell their shares would be problematic, as it would be difficult to get
agreement on their value. I think selling and being independent from now on is best, so you retain control. Alternatively, go in for
limited time-frame projects, i.e. developing a block into several titles (we just did this with a son) so you each get a portion to
do with what you want.Regards, G
How commerically viable is the property? Are you happy with the return, have you had good tenants or lots of vacancies?
How has the capital growth been?
Are you in a position to buy out your partners? if you own 33 1/3 % of the property then you already ahve enough equity to get a loan on your own to buy them out. This may also help to reduce your tax, as you can claim some of the expenses of buying the property.if you are able to buy them out, get some prices from a number of RE agents who specialise in commercial property. Go for the middle price and then discuss the possiblity of partners recieving slightly less than their 1/3rd share as you are not paying agent's commissions to 'sell' the property. I don't know the value of the property, but their commission could be quite substantial and therefore a big saving to both you and your friends.
Sonya
Thanks everyone for your replys. The property is doing well and that is why I am not interested in selling. I am cruising along at the moment so I wasn't interested in taking on the whole amount which I suppose I may have to. It's not a bad thing. I am not overly confident in todays economic environment so I preferred to hedge my bets. I made an effort to simplify my current lifestyle and investments. I will obviously get my lawyers involved at some time ( I just don't like to waste money on them). My question in general is, "do I have to sell my share"? I don't believe they can make me sell but I am not exactly sure of the laws in regards to land title shares.
Are you a 'tenant in common' or joint tenants? I know that you don't reside in the investment property, but these are the legal terms used when buying a property that has a mortgage. teh structure of which determines what happens if one of the partners die. Tenants in common means that the share goes into the person's estate. Joint tenants means that the share goes to the other owner. I would imagine that even though you didn't get a loan for the property, there would have to be something in your paperwork that relates to this. if not, perhaps majority rules and if the other two wnat to sell then you may have to sell.
Sonya
I have two properties which I own with my husband so I can't talk from the point of view of a three way split. However, from the point of view of a joint investor, if I were in the situation of one of the parties wanting to get out, it wouldn't bother me if you bought me out or the property was sold. Either way, I get my third share of the value so why not let you carry on with it as a whole. Perth is a fantastic market to be in, so I'd jump at the chance if you can afford to buy them out.
In fact, if you really didn't want to sell, it might make better financial sense to the other two to let you buy them out so you avoid having to pay a real estate agent and their associated fees cutting into the final payout. I know you'd still have legal fees, etc, but it might save something on the costs.
Cheers
MichelleThanks all.
Sonyasal – No agreement whatsover. We more or less turned up with the cash and bought the property. We were going to make an agreement in regards to if one of us died but we just never got around to it. Looks like I will just have to have a chat to my lawyers.Hi Wattp,
I see you already had some feedback, just one small thing – if you have a SMSF (if not you could get one),. then you could get the fund to buy out the other 2 partners and you can keep your friends. I would rather have 2 friends than a bill and a lawyer
).
Or you could get the SMSF to take over all of it, in both cases you could have the SMSF borrow some cash, either way you have legals and stamp duties to pay.
Regards
AK
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