Legal Structures and Council Permits

This is the most complex part, but it’s really not as bad as you may think. Again, if you purchase land that doesn’t require you to have building permits, this resolves your biggest issue. But even in cases where building permits are required, an eco-friendly house is cheap and easy to obtain a permit for.

 

Land Ownership Structure

Although your investment may be as little as $2000, it is wise to have clear agreements governing who owns the land. The simplest division of land ownership involves an agreement that indicates:

  • The percentage of the purchase price you paid, is the percentage price you will receive (minus fees for the sale) if or when the property is sold.
  • The property must not be sold without unanimous approval of all owners
  • An owner’s share may be sold to other people, who also adhere to the original agreement. Existing shareholders must have the first right to purchase other shares.

 

The legal structure for ownership that we suggest is the “foundation and trust” as explained below:

 

Foundation and Trust

This is similar to a corporate structure, except you have fewer liabilities to the government. Basically you will own a share of the property, and have exclusive access to a particular section of the land.

Pros:

  • Relatively cheap and simple setup (only a bit more complicated than corporation setup)
  • You can sell your own share anytime you want.
  • Excellent asset protection. If any of the Participants was sued, the property and other Participants are not affected.

Cons:

  • You don’t own a separate land title (although you still own your “share”)
  • You can’t make major decisions without approval from other members. Such a decision may be who has access to particular parts of the property. But this would rarely be a problem because of the agreements.
  • Significant paperwork and financial reporting to the government. The Trust will need an accountant that may cost the group combined about $3000 per year. Although it may only be $300 per participant each year.

 

Other options for the legal structure of ownership are explained below:

 

Strata Title

The land is legally divided into sections called “Lots”, and each person holds their own title, and therefore legally own their own land. This is the structure we intend to use.

Pros:

  • You own your own land and receive the title from the government, and can do whatever you want with it subject to council approval. You don’t need to vote with other Participants.

Cons:

  • Expensive to set up
  • Time consuming. Can take years to receive approval from councils, although we will maintain close contact with council members to expedite the process.

 

Corporate Ownership

Corporations are legal “entities” like a “person”, where it can buy, sell and own assets. But a “corporation” itself is not a “living” thing. This is a popular legal structure because it’s relatively simple, but is not without issues.

A corporate structure involves the creation of a corporation of which you are a shareholder. You pay your funds to the corporation, and the corporation buys the property. Because you are a company shareholder, you are the beneficiary of the property. Put into simpler terms, you own a share of the entire property in a fancy way. But you do not own a specific “Lot” (area).

Pros:

  • Relatively cheap and simple setup

Cons:

  • You don’t have ownership in your name (the corporation owns it, but you own part of the corporation). In simpler terms, you own a share of the property, but not a specific “Lot”.
  • If the corporation is sued, there is a serious risk of property being seized.
  • You can’t make major decisions without approval from other members. Such a decision may be who has access to particular parts of the property. But this would rarely be a problem because of the agreements.
  • Significant paperwork and financial reporting to the government. The corporation will need an accountant that may cost the group combined about $3000 per year. This isn’t much when split between the group.
  • Disagreements between members can get messy. It would be like directors of a corporation arguing about how to run the company. And even if you aren’t arguing with anyone, you can be dragged into the dispute.

 

Summary

If you use the “foundation and trust” structure, then everyone will have a fair share of the land (based on what they paid). The land cannot be taken from you even if one of the owners is sued. And you want to sell your share, you can.