I think it is timely to share a conveyancer’s guide to hassle-free settlement for an SMSF because since 2010 we’ve seen a gradual increase in transactions involving Self-Managed Super Funds (SMSFs) borrowing to buy property and this has increased the risk for complications and delays.
I should state that SMSFs are not able to borrow money in their own right however there can be a Bare/Custodian Trust setup to hold the property and undertake the borrowing on behalf of the SMSF.
To explain the full technicalities of this structure would take me too long however this gives a basic outline.
SMSF and shades of grey
It is not all black and white when it comes to Self-Managed Super Funds and settlement; their involvement does not always mean complication, but it is prudent to study the landscape.
Where as SMSF is purchasing using cash with no borrowing, we see very few issues especially if the cash is in a Bank Account ready to go.
The only trouble we sometimes see is where the SMSF hasn’t been fully setup and there can be delays in the roll-over of funds out of the existing super fund.
It’s important that the purchaser makes their accountant aware of the likely settlement date of the property purchase so they can make sure they are ready to complete settlement as per the contract.
I suggest the purchaser should always seek advice from their accountant prior to committing to a settlement date in the contract.
The road is long for SMSFs borrowing funds to buy property
Where an SMSF is borrowing funds to purchase property, we unfortunately see numerous issues where the finance approval and settlement dates aren’t being met.
This can be stressful and time consuming for all involved.
This is largely due to the lender needing to go through a much more onerous process of documentation and legal checking where an SMSF is involved.
In my opinion, the lender usually needs up to four weeks to obtain finance approval and then needs three to four weeks to meet settlement after finance is approved.
While I understand this is not always palatable for the vendor, it is a more realistic timeline than the “normal” 30-45 days that most vendors and real estate agents aim for.
I believe it’s best to have a realistic date upfront rather than have issues with negotiating addendums for the change of dates if those dates can’t be met.
Attention to detail can win the day
Where an SMSF is purchasing it’s also important to make sure the details of the purchasing entity are correct on the contract as it can cause issues for the lenders.
I believe the best way to make sure this is correct, is for the purchaser to obtain advice from their accountant or their conveyancer/solicitor before signing the contract.
Naturally, I see this as common sense because as conveyancers, our lives revolve around paying attention to detail and to how each of the moving parts in a transaction relate to each other.
Please note, the above is general advice from the Eckermann Group and I would welcome your contact if you have any specific enquiries, via brad@eckermanngroup.com.
