Buying land in joint venture to develop later

Hi,

Me and my friend are planning to buy two adjacent lands. We are planing to amalgamate these two lands in future for development purpose.

If we buy now as a separate entities and then few years later decide to amalgamate, will it cost extra money in stamp duty versus we buy 2 lands now as a single entity?

What is the best way to approach this?

If it makes no difference, we would prefer to buy lands individually because if in future the development doesn't go as planned we should still be able to retain lands individually as separate titles.

 

Yes potentially as title will change.

 

If you're buying now with a vague plan to develop together in the future, just buy as normal and then consider the development structure in the future.

If you're buying because of the future development and you wouldn't buy it otherwise, you should speak with a lawyer about properly documenting (development agreement/JV agreement) and structuring the purchase from day one.

Part of the development structure may be that you don't need to amalgamate the lots and you can develop them together under a development agreement.

 

This will depend on how it is structured.

 

This would be ideal if it doesn't cost extra money anywhere in any step of the process. Could you please tell more about it?
Let's say me and my mate own adjacent lands and we decide to build an apartment on combined land.

Does it not require land to be on one single title before DA can be lodged? If yes, this step would incur stamp duty as @Terry_w suggested.

 

stamp duty is triggered when there is a change of ownership.
Split Lot A into Lot A1 and LotA2 generally doesn't trigger duty if the ownership is the same.

When building units it may be possible to eliminate or reduce duty by putting 2 in one name and 2 in the other name. as each owner will be the original owner of the land on which the units sit.

But this will vary from state to state and will depend on the situation and require complex legal advice - but also advice on the income tax aspects too.

 

The nature of what you propose to build will affect all of this...Lending, duty, GST, income tax and land tax issues as well as legal and liability issues all require advice before commencing. And buying in own names may or may not even be sensible if you have capacity to each split any expected profits later.

One the key issues also may be whether interest to buy land in this instance is deductible at this time. Probably not.

 

Nice idea - but with a lot more downside than upside.

If you want to develop together - then go for it and set up the right structure.

If maybe some time in the future you might want to develop together ....... forget it for now.

Make you own investment decision and only buy a property if it stacks up on its own - or with plans that are completely within your control. Your friend should do likewise - if it turns out they are blocks of land next to each other, the maybe you will have something to discuss in the future (as you may with any other neighbour of a property you purchase).

 

Terry has hit the nail on the head with his post.

It will depend on the location of the development and the structure, however it may be possible to avoid the amalgamation and go straight to a subdivision from both lots. It will also depend on what you are building. For example, a combined land or townhouse subdivision where you each keep the lots created from your own property is much simpler than where there will be a mixing of the land.

Joint ventures like this are complex and require specific legal advice based on your individual circumstances...preferably before either of you buy the properties so that everything can be structured in the optimal way.

 

First problem I see is that a JV is not a legal entity. It cant buy land. Only the members (or a third party can ) What you have is a Partnership and both could become liable jointly and severally. Your land could secure the other property and vice versa. If you friend ceases to pay their loan for whatever reason it could impact you.