Developer or Builder - Who is Responsible

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

 

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

 

Even after 7 years?

 

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.

 

That's a great deal. I want to do the same in Perth. Money well spent.

 

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.

 

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.

 

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

 

Yup, this is beginner tactics

 

Meeting accountant in November will be a question to ask

MTR

 

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?

 

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...

 

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

 

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

 

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.

 

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.

 

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

 

Note to self: Never sell stock to @Xenia ..

 

Xenia builds her own

 

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.