What is a Nomination Sale in Real Estate?
When purchasing property in Victoria, understanding the nomination form in the sale of real estate is essential, especially in off the plan contracts or land development projects. This form allows the original purchaser to nominate another party – such as a family member or company – to take over the purchase rights and responsibilities under the contract of sale. Properly handling the nomination process can help avoid issues like double stamp duty, where tax may otherwise be imposed twice on the transaction.
However, this process requires close attention to purchaser rights, general conditions, and any special conditions in the original contract. In cases where the original purchaser remains involved up to settlement, it’s crucial to be aware of how additional consideration or any adjustments to the contract price can affect stamp duty and potential tax implications. This blog will guide you in understanding the process so you can avoid costly surprises, ensuring a smooth and compliant transfer of rights to the nominated purchaser.
What is a Nominee in a Property Purchase?
In a property purchase, a nominee refers to an individual or entity nominated by the original purchaser to take over the rights and responsibilities outlined in the contract of sale. Generally speaking, anyone can be a nominee in a property purchase as long as they meet the legal requirements and conditions set by the contract of sale. Typically, nominees are family members, companies, or trusted parties who the original purchaser wants to involve in the transaction. The arrangement allows flexibility by permitting the original purchaser to nominate a new purchaser to step into the transaction without triggering an entirely new contract.
Nomination can be advantageous as it allows for the smooth transfer of ownership rights under specific circumstances, potentially avoiding double stamp duty or additional fees if the transaction meets certain legal requirements. The original purchaser remains the primary party to the contract until settlement unless a formal assignment form transfers all contractual rights to the nominated purchaser. This nominee does not sign a new contract but is instead legally allowed to complete the purchase on behalf of the original purchaser.
When would a contract purchaser use a sale of real estate nominate form?
There are several circumstances in which a property purchaser may choose to nominate an alternative purchaser:
- The nominated purchaser is unavailable during the offer stage or cannot attend the property auction.
- Multiple purchasers are involved, but only one party signs the contract of sale.
- The contract purchaser is unable to settle on the property, and only a nominated purchaser can provide the funds for the purchase.
The contract price can influence the decision to nominate another purchaser, particularly in cases where financial dynamics such as potential discounts or implications for stamp duty are considered.
Including a Nomination Clause in the Contract of Sale
Incorporating a nomination clause into the contract of sale is a common practice. By adding the term “and/or nominee” after the purchaser’s name in the contract, the contract purchaser gains the ability to nominate a nominee purchaser by way of a sale of real estate nomination form.
The right to nominate is recognised in common law and is also contained with the general conditions of the Law Institute of Victoria (LIV) Contract of Sale. General Condition 4 of the LIV contract of sale states as follows:
“The purchaser may no later than 14 days before the due date for settlement nominate a substitute or additional person to take a transfer of the land, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.”
This means that the original purchaser remains liable for any obligations if the nominee fails to fulfil them.
Both the contractual and common law rights can be utilised for the nomination process, although the common law right may be excluded by the contract of sale.
Is a new contract of sale necessary?
The nomination process does not require a separate contract of sale. Instead, a sale of real estate nomination form is drafted and used to verify and pay stamp duty with the State Revenue Office (SRO) and finalise the property transfer.
For an off-the-plan contract of sale, the purchaser’s solicitor typically prepares the sale of real estate nomination form.
When does nomination lead to double stamp duty?
Nomination generally does not lead to double duty, except in limited cases involving additional consideration or when land development occurs following a contract or option.
How Do You Prove That Nomination Has Occurred?
Although a written sale of real estate nomination form is not required, a standard form is typically drafted for the purpose of the State Revenue Office (SRO). Additionally, a Statutory Declaration is necessary, which is commonly lodged with the transfer of land documents as part of the Digital Duties Form.
Can Multiple Nominations Be Made?
While there haven’t been cases specifically addressing multiple sale of real estate nomination forms or revoked sale of real estate nomination forms, there doesn’t appear to be any inherent limitations on exercising this right. It is the responsibility of the nominee to satisfy the State Revenue Office regarding the duty consequences of the nomination process.
Can a Vendor Charge a Fee to Approve a Nomination?
According to section 42(3) of the Property Law Act 1958 (Vic), a vendor is prohibited from charging legal costs to the purchaser for finalising the sale of real estate nomination. Furthermore, they cannot include a special condition in the contract to enforce such a request.
How Does Nomination Interplay With Default?
The vendor can enforce the contract against the original purchaser, and any notice of default must be served on that purchaser. In practice, it may also be served on both the original purchaser and the nominee. However, a nominee typically does not have the right to enforce the contract against the vendor since they are not a party to the contract. Only the purchaser can do so.
The Role of an Assignment Form
Using an assignment form may become necessary when there’s additional consideration involved, or if the contract price changes, as these factors can affect stamp duty and the potential for double duty. In some cases, the assignment form helps clarify the purchaser’s rights and any implications under common law.
What Distinguishes Nomination From Assignment and Novation?
Under a nominated contract, the purchaser remains liable, and the nominee is permitted to exercise the purchaser’s rights. In an assigned contract, the nominee takes the place of the purchaser. Novation, on the other hand, involves cancelling the original contract and entering into a new contract between the vendor and the new purchaser.
Haitch Convey: Victoria’s Best Conveyancing Lawyers
We are here to assist you with your property purchase or sale and ensure the validity of your sale of real estate nomination form. Require assistance in drafting a standard sale of real estate nomination form? Contact our team on (03) 8590 8370 to obtain legal advice from our expert property lawyers and conveyancers.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.
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