There has been much talk in conveyancing circles about “and/or nominees” over the years. But what does it mean and how important is the nominee clause in contracts of sale here in South Australia? Read on to find out.
Overview:
- What does “and/or nominees” mean?
- Is the “and/or nominee” clause required in South Australia?
- Letter of Nomination/Letter of Agency
- Deed of Nomination/Assignment
What does “and/or nominees” mean?
The “and/or nominees” clause in a property sale contract is significant as it provides flexibility to the original signatory by allowing them to nominate another individual or entity to take their place as the purchaser of the property. This provision is beneficial in various scenarios, such as investment acquisitions or partnerships, and when the original buyer cannot proceed with the purchase for personal or financial reasons.
Engaging professional conveyancing services is essential to ensure that all legal requirements are met. This process involves thoroughly examining all relevant documents, including mortgage agreements, contracts of sale, and any local council and government authority requirements. Licensed or professional conveyancers play a pivotal role in this process, offering expertise in property law and the intricate details of property settlement.
Financial institutions are crucial in property transactions, especially when arranging finance or mortgage agreements. The “and/or nominees” clause may necessitate additional scrutiny by banks or financial institutions to ensure that the nominee has the financial capability to fulfill the contract’s obligations.
The settlement process involves several critical steps, including lodging legal documents, calculating and paying conveyancing fees, and ensuring all legal disputes are resolved before the property changes hands. The final settlement marks the completion of the property transaction, transferring ownership from the seller to the buyer or their nominee.
Sellers must understand the implications of accepting a contract with an “and/or nominees” clause as it introduces additional variables into the transaction, such as potential delays or complications if financial institutions do not readily approve the nominee or if there are legal disputes involving the nominee.
Professional indemnity insurance for conveyancers, thorough due diligence, and a comprehensive understanding of property law are essential safeguards in navigating the complexities introduced by the “and/or nominees” clause. Being well-informed about all the documents, legal processes, and potential risks involved in property transactions with this clause is paramount to a successful and legally sound property transaction, whether you are a buyer, seller, or conveyancer.
“And/or nominee” clause in South Australia
In 2015, a ruling in South Australia changed how property sale contracts were drafted, specifically concerning the “and/or nominee(s)” clause. This clause allows the named purchaser in an agreement to nominate another person or entity to take their place as the purchaser, either in addition to themselves or instead of themselves. This was to provide flexibility in case of changes that might arise between the signing of the contract and the settlement date.
However, a 2015 ruling in South Australia acknowledged that the strict requirement for the transferee’s name on the transfer to match precisely with the purchaser named on the contract was no longer necessary.
This ruling profoundly impacted the conveyancing process and property law in South Australia. It simplified the property transaction process by reducing the need for amendments and additional documentation if a purchaser nominates another party. This has streamlined the settlement process, making it more efficient and less cumbersome for all parties involved.
The ruling also has implications for property ownership, allowing for more dynamic investment strategies and financial planning. Purchasers can engage in transactions with greater confidence, knowing that they have the flexibility to adjust their purchasing entity if necessary without undergoing a complex and potentially costly amendment process.
Financial institutions involved in financing property purchases also benefit from this flexibility. The ability to nominate another entity or individual can facilitate the arrangement of finance and the meeting of land tax obligations, stamp duty, and other costs associated with the property purchase. This can be particularly beneficial in complex transactions involving multiple parties, joint tenants, or investment groups.
Long gone is the need for a Letter of Nomination or Letter of Agency
A Letter of Nomination is no longer required in South Australia if the purchaser who signed the Contract of Sale wishes to direct that someone additional or in replacement of themselves be nominated as the purchaser on the transfer at settlement.
Revenue SA now takes the position that it doesn’t care whether the entity on the contract is different from the entity on the transfer.
This change of heart back in 2015 seemed to hinge on this legal insight:
Revenue SA has advised that the purchaser has a common law right to direct the vendor to transfer the property to any entity it desires without the requirement for any further documentation.
As a result of these changes, conveyancers no longer need a Letter of Nomination/Letter of Agency in any circumstances.
Of course, at Eckermann Conveyancers Adelaide we will always confirm with the purchaser the exact entity that is buying the property before we prepare transfer documents, even if an agent has still written ‘and/or nominee’ or not.
Some incoming banks want to see the document that links the purchaser on the contract to the actual purchaser/transferee, in this situation we provide them with a ‘Confirmation of Purchaser’ document which we have both parties sign.
A restricted need for a Deed of Assignment
Legal documentation and conveyancing processes are crucial in property transactions. A Deed of Assignment is critical in transferring property rights from one party to another. However, its necessity may vary depending on specific circumstances, especially in transactions involving related parties and significant consideration.
When a Deed of Assignment Is Not Required
If the buyer mentioned in the contract has a close relationship with the transferor and no additional payment is involved, legal requirements like Deed of Assignment or Letter of Nomination become unnecessary and can be skipped. This simplifies the property settlement process by acknowledging the trust and understanding between the related parties.
Situations Demanding a Deed of Assignment
Transactions with a third party require a formal approach, mainly when the transferee provides additional consideration to the purchaser. In such cases, a Deed of Assignment is necessary to bind and recognize the transfer of property rights legally. This document ensures that all parties’ interests are protected by delineating the terms, rights, and obligations transferred from the original purchaser to the new owner.
Our team is committed to ensuring full compliance with legal and financial obligations in both types of transactions. One of the critical components of the conveyancing process is the assessment and payment of stamp duty. This obligation applies twice: first, from the vendor to the purchaser/assignor, and then from the purchaser/assignor to the transferee/assignee. By fulfilling this dual obligation, you can ensure that the government’s requirements for property transaction taxes are met, avoiding any potential legal disputes and financial penalties.
The Revenue Ruling provides helpful insights for those looking to understand property law and conveyancing services. It gives detailed examples that explain the conditions under which a Deed of Assignment is required. This includes all the legal documents and considerations relevant to property transactions. This guidance is essential for professionals and laypeople, providing clarity on the conveyancing process, settlement date considerations, and the roles of stakeholders such as real estate agents, licensed conveyancers, and financial institutions.
Out with the old (well for the most part)
Even though this change took place in 2015, we did notice a transition period where ‘and/or nominee(s)’ were still coming through from time to time on paperwork, while real estate agents changed habits forged over a lifetime.
Luckily, the old habit does not cause any issues, it’s simply a fragment of the way things were once done.
From what we’ve ascertained, when we do see the old “and/or nominees” pop up, it tends to be because so many purchasers and their accountants are entrenched with the old ways of needing to include “and/or nominee(s)” on the contract.
And that’s where we come in, deep in the details, we check everything thoroughly and continue to apply the correct protocols as each situation requires.
So, whether you’re a first home buyer or property developer, trust Eckermanns to handle the transaction with skill and professionalism.
