Due Diligence Clause
One of those clauses in there in both the contract and the option agreement is the due diligence clause. The due diligence clause is kind of a get out of jail free card. People use it to mean a lot of things, but from a legal context, what we mean when we say, “Let’s put a due diligence clause in there”, is, “Let’s put a clause in there to provide us time to look at whatever needs to be looked at before we go ahead in the deal’.”
The due diligence clause is generally worded in a very general sense so that it allows the buyer the right to look at all aspects of the deal as far as he’s concerned. Again, it comes down to the wording of these clauses that you have to be very careful about. So, you say, “Conduct such due diligence inquiries as the buyer requires regarding the property”.
There are no restrictions across the States with nominee clauses, but there are with contracts. Contracts in Victoria seem to be the easiest ones to assign to somebody else, where you can sign a contract and it’s written as “and/or nominee” on the contract. So, if you haven’t got your structure set up, you put, “and/or nominee”, and it gives you time to go out there, get your structure set up, and buy the property in that structure’s name. Victoria’s great for that. If you are looking to buy property in New South Wales, you need to have sorted out who is going to buy it before. In other States, a nominee clause is used when people just want to put their foot on the contract and say, “Well, I’ll put my name down and/or nominee. I’ll go talk to my accountant, set up a structure and try and put a nominee in there.” You need to be careful here, as there’s a whole process to manage that so that you don’t pay double Stamp Duty.
You’ve got to check with the Office of State Revenue on the issue of whether you’re going to pay Stamp Duty or not. In Queensland, if you’ve got a contract that’s you and/or nominee, that means that’s the name on the contract. So, that’s what needs to go onto your title which obviously you don’t want. You don’t put another structure in there, or your trust, or anything else. You’ll pay Stamp Duty on the first one, and Stamp Duty on the next one, so you don’t use a nominee clause in Queensland. When you buy in other States, don’t assume that the paradigm that you live in, the box that you live in, will apply in other States. You need to instruct your lawyer accordingly. Don’t just assume that your Queensland lawyer will think the same as your New South Wales lawyer. Remember ‘assume’ makes an ‘ass’ out of ‘u’ and ‘me’. It may seem obvious but say it as well. Communicate with your advisors, and make sure everyone is on the same page.
If you had actually made this mistake because you were dealing interstate, and hadn’t communicated with your advisors, there is a management strategy. In Queensland for instance, what would actually have to happen is, you would have to go back to the buyer and say, “Look, I’ve really messed up here. What I want to do is cancel that contract and sign a new contract with the proper name on there. I’m really sorry. I’ve messed up. Will you agree?” And they have the right to say ‘yes’ or ‘no’ .So, if they’ve signed a contract with you that might be a little bit under market value, they’re going to say, “No, sorry. I’ve changed my mind. The price is now this”, or “I’m going to sell it to somebody else.” So, they don’t have to agree. Be really careful with those nominee clauses. It’s easier in Victoria than it is anywhere else.