Nominating Alternative Purchasers under a Contract of Sale
Alternative Purchasers
When purchasers enter into contracts of sale to purchase property and/or land, they rarely imagine that they will not be able or willing to complete the contract of sale and take possession of their new property.
However, it is possible to nominate alternative purchasers. For a variety of reasons, it can be practical or necessary to nominate a “nominee purchaser” to complete a contract of sale. This may be to avoid personal liability for the obligations set out in the contract of sale, because it is no longer practical for the purchaser to complete the contract of sale, or because another person has offered to complete the contract for a higher price than set out in the Contract.
What to be mindful of
Purchasers considering assigning their obligations under a contract of sale need to be mindful of a number of things when making a decision as to whether to assign the contract of sale to a nominee, for example:
- Whether the contract of sale allows nominations, and in what time frame? For example, it is common for contracts of sale to have a special condition which prohibits nomination more than 10 days prior to settlement;
- What documentation needs to be executed in order to validly nominate a nominee purchaser? For example, in addition to a standard nomination form, a deed of nomination or a separate contract of sale may need to be entered into in order to formalise any special conditions which have been agreed to; and
- Will the nomination attract payment of double stamp duty? This may be relevant where the purchaser is make a profit from the on-sale of the property, or where the land has been developed after the contract of sale was entered into and prior to the nomination (including submitting an application for a planning permit).
Recommendations
We recommend that purchasers obtain legal advice about whether nominating an alternative purchaser under a contract of sale is the right move for them, and how the nomination can best be documented to protect their interests.
Contact Julia Reid or a member of our Property Team to discuss your requirements as a purchaser.
