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Developer or Builder - Who is Responsible

Discussion in 'Development' started by MTR, 29th Sep, 2015.

  1. MTR

    MTR Well-Known Member Premium Member

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    Am currently developing interstate have a building inspector checking each stage.

    BI identified defect regarding "fire separation wall", this has currently being rectified.

    My concern is if the townhouses burnt down due to the defect who is responsible, builder/developer?

    Of course you take out insurance, but could the insurance company go for the developer?

    BTW, to date very happy with the builder, but I would always use a building inspector, at $400 per stage, full report, its worth its weight in gold.

    MTR:)
     
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  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Builder all the way. They are the licensed operator for all construction works and have indemnity insurance for this.
     
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  3. MTR

    MTR Well-Known Member Premium Member

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    Even after 7 years?
     
  4. Chomp

    Chomp Well-Known Member

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    Its a hard one but the courts would probably hold both builder and designer partly responsible.

    I don't think they could go the developer as that is not their expertise.
     
  5. Perthguy

    Perthguy Well-Known Member

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    That's a great deal. I want to do the same in Perth. Money well spent.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Technically it will be anyone still standing. First port of call will be builder, then certifier who signed off the wall, then designer, developer.

    Do what everyone else does, sell out and close the entity.

    Buy in a new entity for the next one.
     
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  7. MTR

    MTR Well-Known Member Premium Member

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    I did not realise this is what developers do.
    If you are holding development sites in same entity, this may not be possible.
    Sounds like it could be a messy process.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Build the lot, then run. Structure it correctly for the next lot.
     
  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yup, this is beginner tactics :)
     
  10. MTR

    MTR Well-Known Member Premium Member

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    Meeting accountant in November will be a question to ask

    MTR:)
     
  11. DanW

    DanW Well-Known Member

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    How does this work from a tax point of view though?

    One of the advantages of developing in a company is you only pay 30% tax on the profits, and then you can re-use the profits straight into the next project without paying your marginal tax rate. Since it's not a trust, you don't have to distribute to individual..

    Do you have to have a company inside a company, and then pay the profit as a franked dividend to the holding company, then start the next sub-company for the next development?
     
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  12. Thunder

    Thunder New Member

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    Hey MTR did you get an answer to this?

    I spoke to my accountant and if I want to keep one and sell the rest (all set up under a discretionary trust with Pty Ltd atf) there doesn't appear to be a way to empty the trust unless you sell to yourself and cop the tax's.

    I'm still puzzled how to empty the entity if you want to hold a portion...
     
  13. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Basically you can't. If you want to hold and sell (and empty trust) then you'd probably need to do a split ownership, ie for a triplex 33% owned by Holding Company and 66% owned by Selling Empty Trust Company.
    I'm no accountant but basically it's same as if you wanted to do a partnership or 2 owner scenario. Ask an accountant for real advice :)
     
  14. Thunder

    Thunder New Member

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    Thanks, that's confirmed what I've been advised. Cheers.
     
  15. thydzik

    thydzik Well-Known Member

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    It's all about shifting liability and minimising risk.
    As others mentioned, the more entities who have been a part of the design/build, the more the liability is able to shift to someone else.
     
  16. Xenia

    Xenia Adelaide Property Manager Business Member

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    If I purchased a defective property from a developer, I would sue the developer. They can then sue the builder who would take it up with their indemnity insurance.
     
  17. MTR

    MTR Well-Known Member Premium Member

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    I actually saw my accountant today but forgot about this one unfortunately.

    Its funny how things can change, we are actually looking at keeping structures simple. The more trusts/structures you have the more complicated, and more costs involved, if not necessary then why do it.

    MTR:)
     
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  18. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Note to self: Never sell stock to @Xenia ..:D:p
     
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  19. Xenia

    Xenia Adelaide Property Manager Business Member

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    Xenia builds her own :D
     
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  20. BigKahuna

    BigKahuna Well-Known Member

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    I now that that's what builders do, but isn't it unethical? It's happened a lot in Canberra where the buildings have been done so shoddily (windows falling out; water dripping in between apartment walls; basements flooding; no waterproofing in bathrooms and on verandahs; etc) but unit holders haven't been able to get any of the issues addressed because the building entity simply folded.