Nominating A Substitute Purchaser?
Adam Held, Held Lawyers
It is common for a named purchaser under a contract of sale of land to nominate an additional or substitute purchaser:
- right to nominate is regulated by the contract
- the nominee does not become a party to the contract
- a nomination may be withdrawn and a fresh nomination made.
A nomination, in its simplest form, is a two-party agreement between the named purchaser and the nominated purchaser. There is no specified form of nomination.
It is important to realise that the effect of such a nomination is not to replace the named purchaser with the nominated purchaser in the contract. The named purchaser remains as a party to the contract and the nominated purchaser assumes no rights or obligations under the contract, other than being nominated to take a transfer in the place of the named purchaser.
The nominated purchaser is therefore entirely dependent upon the named purchaser for enforcement of the contract and it is unwise for the nominated purchaser to allow any reimbursement of the named purchaser’s deposit to be released to the named purchaser prior to completion of the contract.
What if disputes arise between the parties to the nomination?
The form of standard nomination agreements in common use means that if a dispute arises between the parties to the nomination, a court may be required to look behind the written agreement to determine the full extent of the rights and obligations of the parties to the nomination.
If the parties can agree to retract a nomination, can the named purchaser make another nomination?
There appears to be no reason in principle why a second nomination cannot occur. Subject to the vendor being informed of the retraction and second nomination, the vendor has no role in the process other than to comply with the purchaser’s written direction in relation to the transferee.
If you would like further details or assistance or to discuss the information contained in this article or more generally, please do not hesitate to contact us at Held Lawyers, or visit our website at www.heldlawyers.com.
This article is intended to provide commentary and general information only. It should not be relied upon as legal advice. It is not intended to be a complete or definitive statement of the law on the subject matter covered. Further professional advice should be sought before any action is taken in relation to the matters described.