By Shaun Briffa, Senior Associate Argon Law
Property development can be a profitable opportunity. However, it’s important to establish the right legal structure effectively from the beginning and to ensure the right consultants are engaged for advice prior to purchase of the development site.
Selecting the right legal structure approach can significantly influence risk, financing opportunities and tax outcomes. There is no one-size-fits-all approach when it comes to legal structures and each development should be considered on its merits and the overall circumstances at the time.
Many developers focus their early efforts on securing the land or finalising the design, but the legal structure behind the project is just as important. Setting up the right structure early can help protect your assets and support a smoother process, regardless of whether it’s a small project or a large-scale development.
I’ve put together some practical tips to consider when structuring a property development to follow.
A property development structure determines who owns the land, who carries the risk, and how profits are distributed. Drawing on our experience with local Sunshine Coast and broader Queensland projects, our team has seen first-hand how the right legal structure can significantly limit unintended exposures.
If a project runs into issues – such as construction delays, funding challenges, or disputes – the structure can influence who is exposed to liability and what can be done to keep the project moving forward.
A carefully considered development structure can help to:
Because every development and every developer is different, selecting the right legal structure will depend on a variety of factors. These include the size of the project, whether there are investors involved, and whether the development is intended as a one-off project or part of an ongoing development business.
Some smaller developments are undertaken in an individual’s name.
While this can be a simple structure to establish, it can expose personal assets to risk if something goes wrong with the project. It can also make it more difficult to bring in investors or partners. There is also tax consequences as the profits will all be taxed on the individual’s tax rate, with no ability to share the profits amongst members of the family.
Many developers carry out projects through a company.
A company structure can help limit personal liability, meaning the company is responsible for the project’s obligations rather than the individual developer. Companies can also make it easier to involve investors by allocating shares.
However, the tax treatment of profits and the way funds are distributed needs to be carefully considered.
A unit trust is commonly used for property developments involving multiple investors.
Investors hold units in the trust, similar to shares in a company, and profits are distributed according to the number of units held.
This structure can provide flexibility when managing investor contributions and distributions, but it requires a well-drafted trust deed and clear agreements between the parties.
In some developments, two or more parties collaborate through a joint venture.
For example, one party may contribute the land while another contributes development expertise or funding. Joint ventures can be structured through multiple companies and/or trusts working together, with an appropriately documented contractual arrangement.
The key is ensuring that responsibilities, decision-making processes, and profit-sharing arrangements are clearly negotiated, explicitly outlined, and documented from the start to avoid conflicts or misunderstandings.
In addition to the legal structure used, developers should also consider how the land itself will be structured or divided during the project.
Strata titling is commonly used when developing duplexes, townhouses, or larger multi-storey residential projects, with each residence being its own lot.
By creating separate strata lots, each lot can be sold individually while still forming part of a broader development.
This approach can increase flexibility for sales and financing, but it requires careful planning to ensure compliance with local council requirements and body corporate obligations.
A common development strategy is subdividing one block of land into two separate lots.
This approach is often used in established residential areas where block sizes allow for subdivision.
While this type of development may appear straightforward, developers still need to consider planning approvals, services connections, access requirements, and subdivision costs.
Larger land parcels in rural or semi-rural areas may be suitable for rural residential subdivision.
These projects typically involve dividing a larger parcel into multiple residential lots while complying with zoning regulations, infrastructure requirements, and environmental considerations.
Because rural subdivisions often involve longer planning timeframes, early advice can be particularly valuable.
More substantial land subdivisions may involve multiple stages, infrastructure works, and coordination with local councils and service providers.
Developers undertaking larger subdivisions often use structured entities and detailed agreements with investors and consultants to manage the complexity of the project.
Planning the structure early can help manage funding, risk, and long-term project delivery.
Development projects involve a range of risks including construction delays, cost overruns, market changes, and approval issues.
A well-structured development should clearly allocate risk between developers, investors, builders, and consultants.
One of the main reasons developers use companies or trusts is to separate personal assets from development risk.
If legal claims arise during the project, the structure may help reduce exposure to personal liability.
Lenders often have specific requirements about how a development must be structured before funding is approved.
Banks may require the development to be held in a particular entity and often request personal guarantees or additional security.
Understanding these requirements early can help avoid delays during the funding process.
The structure of a development can affect how profits are taxed and distributed.
For example, tax treatment may differ depending on whether the development is treated as an investment, a business activity, or a profit-making venture.
Legal and accounting advice at the planning stage can help ensure the structure aligns with broader financial objectives.
A key part of structuring any development is understanding the intended exit strategy.
Developers should consider:
Addressing these issues in the development agreements can help avoid disputes later.
The best time to structure a property development is before purchasing the land or entering into development agreements.
Early planning allows developers to establish the appropriate entity, prepare agreements between investors, and ensure financing arrangements align with the proposed structure.
Taking the time to structure a project properly at the beginning can reduce risk and support a more efficient development process.
On the Sunshine Coast, where residential and rural residential developments continue to grow in response to changes in demand and evolving council planning requirements, the choice of development structure becomes particularly important for navigating local zoning, infrastructure contributions, and environmental considerations. At Argon Law, we regularly assist developers with these early-stage decisions and help them to align their legal structure with both Queensland regulations and their individual project goals.
If you’re beginning a property development project or already have one underway, get in touch with the Argon Law team today for tailored, expert advice.
A: There is no single ‘best’ structure that suits every development. Choosing the best structure involves reviewing the size of the project, the financial circumstances of the developer, the number of investors involved, and the intended development strategy. Seeking professional advice tailored to your particular property development and your specific financial position is always recommended to identify the most suitable option.
A: Many residential properties can potentially be subdivided into two lots. However, this depends on property zoning, minimum lot size, and council planning requirements and seeking approval from the local authority is usually required.
A: Strata titling allows multiple dwellings within a development – such as duplexes or townhouses – to be legally separated into individual lots with separate titles within a body corporate. This allows the individual lots to be sold separately.
A: Yes. Rural subdivisions often involve additional planning considerations such as zoning restrictions, environmental impacts, and infrastructure requirements. Approval processes can also take longer.
A: Ideally, the structure should be established before purchasing the development site or entering contracts. Changing the structure at a later stage of development can be a complex task. Altering the established structure mid-project can also trigger unintended financial consequences such as stamp duty or greater tax.
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