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Ross Collier

Sep 24, 2023

Mortgage of Lease

in SMSF Technical Forum

I'm auditing a fund which owns and leases a number of commercial properties. There is no borrowing involved, they are all owned outright by the fund. On one of the title searches I have discovered the following:

---------------------------------

CAVEAT AV.............. 15/12/2021

Caveator

JUDO BANK PTY LTD ACN: 615995581

Grounds of Claim

MORTGAGE OF LEASE WITH THE FOLLOWING PARTIES AND DATE.

Parties

XXXXXXX PTY LTD ACN: XXXXX

Date

01/12/2021

Estate or Interest

INTEREST AS MORTGAGEE

Prohibition

ANY INSTRUMENT THAT AFFECTS MY/OUR INTEREST

Lodged by

GADENS LAWYERS

Notices to

GADENS LAWYERS of LEVEL 13 447 COLLINS STREET MELBOURNE VIC 3000

I haven't seen this before and am concerned that there is a registered encumberance that doesn't relate to a LRBA. Is this a reportable contravention and does it require a qualification in the audit report per regulation 13.14 where a fund must not give a charge over a fund asset?

4 comments

Comments (4)

Rajeev Dixit

Oct 13, 2023

Is the business in question a pharmacy? It is a very common clause which is essentially a "right to entry" clause on pharmacy loans. I personally dont think SMSF has anything to do with this. The asset being "mortgaged" is the lease on the shop owned by SMSF, NOT on the shop itself. I would agree with what Jason G has said.