What Happens to a Bare Trust if a Property Purchase Does Not Proceed?
When a property purchase using a bare trust does not proceed, there are several possible outcomes for managing the bare trust. The following guide provides clarity on what happens to the bare trust, options for reusing or closing it, and any associated costs.
Key Outcomes for Bare Trusts
1. Deletion of the Bare Trust Deed
If you decide not to proceed with the property purchase, the bare trust deed that was created will simply be deleted. This ensures that no unnecessary documentation is retained for the unfinalised transaction.
2. Reuse of the Bare Trust for Another Property
In cases where the property purchase does not proceed but the bare trust remains valid, you may use the same trust for another property. This is common in Western Australia (WA) property purchases where multiple offers may be considered, and only one results in a contract. Notably, reusing the bare trust for a different property does not incur additional costs.
3. Closing the Bare Trust When Not Reused
If you opt not to reuse the bare trust for another property, you can choose to close it. The process typically involves deregistering the bare trustee company, which incurs a nominal fee with ASIC. Additionally, an annual trustee company fee is applicable starting 12 months from the company’s registration date. Users are advised to confirm up-to-date fees directly with their provider.
Handling Changes to Nominated Properties
When a property purchase falls through, Grow does not amend the original bare trust deed. Instead, the initial deed is treated as terminated for that failed transaction, and a new bare trust deed is created at no additional cost. While the new deed nominates the updated property, the same bare trustee company can often be reused.
Costs and Administrative Considerations
Deregistration Fee: Closing a bare trust involves a deregistration fee (e.g., $50). Ensure to confirm the specific amount with your provider.
Annual Trustee Company Fee: An annual maintenance fee (e.g., $329) becomes payable after the first 12 months of the trustee company’s existence if the trust is not immediately closed.
Free Re-creation: Creating a replacement bare trust deed for another property is typically free of charge, depending on the policies of your provider.
Summary
The completion status of a property purchase significantly impacts how a bare trust is managed. Depending on your needs and future plans, you may choose to:
Delete the original bare trust deed if it is no longer needed
Reuse the bare trust for another property
Close the bare trust and deregister the trustee company
Each of these actions entails specific processes and potential fees. It is recommended to consult your provider, such as Grow, for detailed guidance tailored to your circumstances.