Leasing SMSF IP

Go on then...

 

Actually another angle to consider the SMSF trustee may have been appointed power of attorney by the Custodian trustee. This may allow it to enter into contracts such as leases.. Check out the terms of the custodian trusts.

To the agents out there do you check to make sure the rent is going into the account of the owner of the property? If you pay the SMSF how do you know the authority has been given by the custodian for this?

 

This is a good thread.

Some points to note regarding how a PM would view it :

• A lease agreement must be with the owner of the property, which is the custodian (Hoges Pty Ltd).
• The PM will check up on the ownership entity (often using RPData I believe but some may do a title search) and write up the managing authority under this name which is the custodian (Hoges Pty Ltd). A PM is required to have a managing authority with the legal owner (in this case, the custodian Hoges Pty Ltd).
• If the property is being acquired, is yet to settle and the property management is being organised in anticipation of settlement, the PM will often request evidence of acquisition. This will be the contract of sale (which is in the name of the custodian Hoges Pty Ltd), and also the insurance policy, which the lender requires to be in the name of the owner which is the custodian (Hoges Pty Ltd). So again, the managing authority would be done up in the name of the custodian, Hoges Pty Ltd).
• So no matter which way you turn, it will be the custodian, Hoges Pty Ltd that is set up as owner on the managing authority, and accordingly it will be the custodian, Hoges Pty Ltd that appears on the PM statements.
• A PM with sharp trust accounting will record the legal owner (the custodian, Hoges Pty Ltd) and its ACN as well as also recording the details of the associated beneficial owner... Corp Trustee (including ACN) ATF SMSF (including ABN).
• If the legal owner has a long name it won't all print out on the property management statement anyway... it'll be truncated, as computer systems tend to have a wonderful thing called "field length". An auditor could use common sense to deduce that the investment property was indeed acquired under the custodians name, as proven by contract of sale and loan contract at time of acquisition and associated FY-end audit, and that it since has not been sold nor the loan paid out (as illustrated by ongoing mortgage statements provided at time of audit), and that accordingly it is still owned by the custodian (a point which could be proven if push came to shove by doing a basic title search). As such it could reasonably be deduced that the property is indeed still owned by the custodian, irrespective of what is written or truncated on the PM statement.
• A custodian is not necessarily obliged to have its own bank account and could accordingly utilise the bank account of the Corporate Trustee for the SMSF. As such rents can be paid to this account. To a degree, the PM doesn't care which bank account rent goes to, as long as the legal owner authorized it. Using the example of property held in someone's own name, a PM may allow the owner to be Joe Bloggs but have the rent paid into the bank account of his wife if that's what Joe wanted and authorized.

 

I'm not a PM, but on the owner instruction form and the managing authority form, the director of the legal owner (Hoges Pty Ltd) will have nominated the bank account for payment and signed the forms accordingly. A PM would be taking that as authority to pay rent to the nominated account....

 

excellent response