WHAT IS A NOMINATION SALE?

Selling an off the plan property before settlement is known as a Nomination Sale.

Buying a property off the plan offers some fantastic benefits. When you purchase a property before construction has started, you are purchasing the property at the lowest rate. As construction commences the value of the apartment increases substantially along with the stamp duty value.

Most people are comfortable paying a deposit and waiting the 12-24 months for the construction or settlement to unfold without needing to pay any more money.

However, sometimes circumstances change causing the purchaser to be unable to settle.

The term ‘and/or nominee’

A term ‘and/or nominee’ is also known as a ‘nominee sale’. This clause in the contract of sale, provides the option for someone who has purchased a property to find another buyer to step in and have the contract transferred to their name and finalise the settlement.

This transfer of ownership releases all rights to the property, legal ties and the title of the property to the new nominee. The title to an off the plan property doesn’t actually pass to the new buyer until settlement has occurred. Technically, once you’ve signed an unconditional contract the property can be re-sold.

Off-the-plan purchase

A nomination sale is common in new developments where the original purchaser has purchased unconditionally from the Developer. In such a case, the nomination process is where the original purchasers/contract holders, transfers their off-the-plan contract to a nominee buyer. Some developers have a condition to restrict the re-sale of a propriety prior to settlement. Some also charge fees to complete the nomination sale. It’s important to speak to your conveyancer or solicitor before signing a contract.

Benefits to Nominee Buyer

The nominee buyer benefits from the stamp duty savings of the original contract, this means they only pay the stamp duty based on the dutiable value of the property at the time of original contract was signed.

In addition, the Nominee buyer is purchasing the property at a discounted rate based on the contract price, regardless of the stage of construction. When a project is sold off the plan, the value of the apartment increases in stages as construction moves closer to completion.

To put it simply, it's a win-win for both parties involved. The original purchasers, manages to sell the property they no longer could settle on and the nominee buyers obtained a discount which they would not have received if purchased directly from the Developer.

What needs to be considered?

There are some important considerations to factor in prior to implementing the nomination sale.

• Taxation– In some situations if re-sold at a profit you may be liable to pay capital gains tax. Discussing this with your accountant is essential.

• Stamp duty - Although it doesn’t seem that you actually own the property for any period of time, the law considers that you will actually take ownership of the property. It’s important to remember that you will be required to pay stamp duty.

• Additional legal fees- When processing a ‘nomination sale’, you will be required to employ a solicitor to complete some forms to implement the sale. They are relatively simple to execute, but you’ll have to engage a solicitor to draft them.

• Most important – you remain bound. Even though you have a buyer to take over your purchase, if that buyer does not complete the purchase, you are still bound to settle with the developer.