A question that seems to come up quite regularly is whether you can change the name of the purchaser once contracts have been exchanged. The scenarios that may arise include;
- Someone may buy a property at an auction then speak to their accountant who suggests that it should be bought in their spouse’s name, or in the name of their super fund or even having both them and their spouse on the contract;
- A parent may negotiate and sign a contract for the purchase of a property on behalf of their child who is away and then needs to put the Contract in the name of that child;
- Someone wants to bid at an auction or is under pressure to buy for fear of missing the opportunity, but has not worked out what entity should be the ultimate owner. Often they will purchase in ‘their name or nominee’. This can be dangerous and could be considered to be a sub-sale by Revenue NSW, which may have stamp duty implications.
The basic rule in NSW is that the name of the transferee on the Transfer registered at NSW Land Registry Services must be the exact same as that of the Purchaser who signed the purchase Contract. In the first two scenarios the Duties Act in NSW allows a transferee or the ultimate registered owner to be a different person from the purchaser on the Contract if the purchaser and the transferee are ‘related persons’ both at the time the Contract was signed, exchanged and on completion. “Related persons” include:
- spouses (formal and de facto), parent and child or siblings;
- related private companies (as per the Corporations Act);
- a private company and a natural person who is a director or majority shareholder of that company;
- a trustee of a trust and a natural person who is a beneficiary of the trust; or
- a private company and the trustee of a trust, if the company, or a director or majority shareholder of the company, is a beneficiary of the trust.
The crucial point is that the purchaser and the transferee must have been ‘related persons’ at the date the Contract was entered into, which is also known as exchange. If a company or trust is formed after the date of the Contract, it does not satisfy the ‘related person’ requirement. In the final scenario, when a contract is entered into, the purchaser/transferee can only be amended by formal rescission of the original Contract and re-entering into a new Contract in the name of the correct purchaser. Of course, the vendor would need to agree and the purchaser would more than likely be expected to pay any additional legal costs incurred by the vendor. It is important to ensure that you speak to your solicitor/accountant well before you enter into any contracts to ensure you have the correct entity on the Contract at the time of signing.