We have an SMSF for audit where a property (valuing $850,000) has been purchase under 2 LRBAs. One is a loan from financial institution (amounting $415,000). Another loan has been taken from the members (again 2 loans amounting $215,000 each). My questions are:
Can an SMSF acquire property like this under 2 LRBAs?
If yes, would the amount be an issue? Since in the given case the total loan amount is $845,000 for a property valuing $850,000.
In case 2 LRBAs are allowed, can the holding trustees be the same for both LTBAs?
Also, what should be the points to be checked in the Title Search report?
Thank you for the guidance in advance.
“Re the title search as per the safe harbour requirements the security for the member loan should be a registered mortgage over the property. I question if an arm's length lender would allow a second mortgage as in your example for such an amount.”
In the case where the mortgagor does not allow the second mortgage to be registered what would the implications be for the SMSF if any other than s109 and s67?
Would the SMSF be required to sell the property to rectify the breach of the LRBA provisions since they cant get the second mortgage registered?