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Legal Chat - By Andrew Padanyi B.A., LL.B.

It is common for a purchaser of land to nominate an additional or substitute purchaser to complete the purchase at settlement. This usually arises where the person who signed the contract as purchaser wants to add their spouse or another family member. Alternatively, the named purchaser might prefer to complete the purchase in the name of a company for investment reasons. At present, the only restrictions are that the words "and/or nominee" must be used in the particulars of the contract, and the nomination must be made at least 14 days before settlement.

However, in these circumstances the named purchaser remains responsible for performance of the contract and the vendor retains contractual rights against the named purchaser if there's any default by the nominated purchaser.

The vendor is entitled to be provided with a written direction, signed by the named purchaser and confirmed by the nominated purchaser, authorising the vendor to transfer the property to the nominated purchaser. The vendor then meets its contractual obligations by handing over a transfer in favour of the nominated purchaser at settlement. Such transactions do not involve the named purchaser receiving any additional consideration or a higher price and, accordingly, do not incur additional stamp duty.

In contrast, sometimes a nomination takes place in circumstances where the purchaser wants to on-sell the property to a third party without completing the contract with the vendor. These transactions are known as "on-sales" and additional duty is payable. However, it's not the vendor's responsibility to ensure the payment of duty - this is a matter between the nominated purchaser and the State Revenue Office.

Some vendors insert special conditions that add unnecessary complexity to the nomination process and require the purchaser to pay costs to the vendor in relation to any nomination. However, such conditions are inappropriate and do not serve any useful purpose.

The new 2008 contract of sale, which will be available for use shortly, continues to recognise the purchaser's right to nominate and, according to the latest press, will remove the restrictions on nomination in the current version of the standard contract.

 

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