Is an AFSL required to set-up, promote and manage Property Syndicates for private investors?

[Archived User]

Hi,

Currently I serve in a small company operating as a Buyer’s Agency for private investors looking to purchase investment grade property across all real estate sectors in Australia.

The company is looking to pool together funds from a small group of our investors into a syndicate to purchase property for the purpose of investment. The company is looking to manage the Syndicate, operate as the Trustee of the property, and utilise a seperate (but same owner) porperty management company to manage the property itself. The company will be charging fees to set-up and manage the investment scheme;

What we are unsure of is if we need an australia financial services license if we are promoting to private wholesale investors (our existing clients)? Are there any other legal requirements? the company already fulfills all current real estate legislation to operate as a buyer’s agent and property managers; any information on what the next steps are to expand into managing syndicates would be helpful!

Cheers,

[Archived User]

Hi Darren,

Thanks for your comment.

What you are describing is a “managed investment scheme” (MIS), as defined by s 9 of the Corporations Act 2001.

Broadly speaking, an MIS is a financial product. If this is the case you will probably need an Australian Financial Services Licence (AFSL) to manage and operate the MIS in the manner you describe.

Some regulatory relief may be available for you, but the relief is highly conditional in nature.  You should obtain legal advice in relation to what these conditions are and whether they apply to you.

Whether or not the regulatory relief applies, there are some important legal considerations.  For example, you will want to have a suitable trust deed/constitution/Syndicate Agreement.  You will also want to make suitable disclosure to potential investors in the syndicate.

It appears that you have given some thought in relation to this proposal.  The next step is to speak to a lawyer that can help you canvas these issues, and any others that may flow from your proposal. You are welcome to call Holley Nethercote on +613 9670 2800 to discuss, or contact us at law@hnlaw.com.au.

Author: Sonnie Bailey

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