WHO IS THE BUYER – PERSONS, TRUST OR COMPANY?
It seems a simple question. But far too regularly, when people enter into a contract for sale, the wrong Buyer has been documented and this simple and avoidable error can be very costly to rectify. To give an indication to the additional costs; we mean extra, sometimes double, Transfer Duty.
So how do you avoid documenting the wrong Buyer and incurring those additional costs?
The most important thing to do is to not rush into a contract for sale without giving careful thought to the transaction.
The three most likely forms a Buyer will take are:
- An individual or individuals;
- A Company in its own right; or
- A Trustee (either person/s or a Company) as Trustee on behalf of a Trust.
BEFORE you put any pen to paper consider which entity or person the Buyer should be.
For example, if it is your intention for a Trustee to purchase a property on behalf of a Trust, ensure that this relationship is documented in the contract and that the Trust is actually formed. A classic error is where an individual is a Trustee of a Trust and they enter into a contract for sale in their own name, thinking this is sufficient for what they are trying to achieve. This is not the case. If an individual is a Trustee of a Trust the contract must acknowledge the Trustee relationship. Many peoples misconception around this area is because WA is one of the few states which does not recognise when land is held on Trust on a Certificate of Title. This does not mean however, that this relationship can be overlooked in the contract.
If you do not possess sufficient evidence, i.e. a contract for sale acknowledging the land was purchased on behalf of a Trust, you may find it difficult to vest that land out of the Trust at a later date and capitalise on the nominal Transfer Duty applicable when vesting to a beneficiary of a Trust. If you cannot prove that the Trust held the land in the first place you may be subject to Transfer Duty on this transaction.
The take home advice is, if you are considering entering into a contract for sale we recommend that you seek legal advice if you are unsure of “who is the Buyer”.
WA Property Lawyers are well placed to answer any queries you have in regard to contracts for sale and we also have a very experienced settlements department who can assist you with the settlement of any property, be it large or small.