When a purchaser named in a contract wants to nominate an additional purchaser or a full substitute to complete a property purchase in Victoria, most people assume it’s a simple paperwork exercise: sign a Nomination Form, hand over the contract, done. In many cases that’s true. However, under the Duties Act 2000 (Vic), a nomination can sometimes trigger a second round of duty on top of the duty already payable on the original contract. This is commonly known as double duty, and it can catch buyers and their nominees by surprise if it isn’t considered before the Nomination Form is signed.
What triggers double duty?
The State Revenue Office may treat the nomination as another dutiable transaction where either of the following applies between the date of the original contract and the date of nomination:
- Land development has occurred. This is defined broadly, and doesn’t require a completed project. Simple steps such as lodging a planning or building permit application, preparing or registering a plan of subdivision, requesting an amendment to a planning scheme, carrying out building works that would require a permit, or any other step that enhances the value of the land can be regarded as ‘land development’. Even making enquiries about any of these steps can be relevant.
- The nominee (or an associate of the nominee) provides additional consideration in connection with the nomination; in other words, if money or some other benefit changes hands as part of arranging the nomination.
If either circumstance applies, duty may be assessed on both the original contract and the nomination itself. Whether additional duty is actually payable, and how much, depends on the specific facts of the transaction.
The original purchaser remains liable
A nomination doesn’t release the original purchaser from the contract. If the nominated party later defaults, the vendor can still pursue the original purchaser for performance or damages. Nominating a substitute purchaser shifts who is expected to complete the deal, but it doesn’t shift legal liability under the contract.
Before you sign a Nomination Form
Because of these risks, it’s important to confirm, in writing, before a Nomination Form is signed, that:
- No land development has been undertaken or participated in – no matter how insignificant.
- No additional money or other consideration has been accepted in connection with the nomination.
- The purchaser understands these risks and instructs their lawyer or conveyancer to proceed with the nomination on that basis.
How can Novum Law Group assist you?
Nominations are a routine part of many property transactions, but “routine” doesn’t mean risk-free. Anyone considering nominating an additional or substitute purchaser should check the timeline of the contract against any development activity or consideration paid and get advice on the specific facts before signing.
If you have any questions or wish to discuss your nomination, our Property Law Team would be glad to assist you. Please call us on 9063 0300 or send us an email to discuss with one of our lawyers, or click here to make an appointment.
Authors
Renee Legg
Sheredyn Legg
The information provided in this article is for general informational purposes only and is not intended to serve as legal advice. For specific legal concerns, please speak directly with one of our qualified lawyers.
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