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Special clause - Q'land - addition or deletion of a buyer

Discussion in 'Accounting, Tax & Legal' started by See Change, 29th Jul, 2006.

  1. See Change

    See Change Well-Known Member

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    17th Aug, 2005
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    59
    Just received a contract on a property we're selling and the vendors have added a clause that I havn't come across . Now we will be running this past our solicitor on Monday..... , but this arrived Firday evening so I wanted to see if anyone had an opinion prior to that .

    This is in Q'land. There are two seemingly related buyers on the contract
    and at least one has bought through the same agent recently before .

    Addition or Deletion of a buyer.
    The seller agrees to amend the contract by adding or deleting a buyer if so requested by the buyer . The buyer warrants that no consideration will pass between any of the buyers as a result of the contract being amended . The buyer agrees to indemnify the seller as a result of the contract being amended . The Buyer agrees to indemnify the seller against any additional stamp duty that may be payable as a result of a buyer being added or deleted . The remaining buyer and the new buyer agree to waive the cooling off period and provide a form 32 A Prior to the contract being amended.


    I'm not sure of the legal ramifications of modifying a contract in Q'land after it's been signed.
    Does that trigger a second lot of stamp duty ?
    Would it be considered a second contract ?
    Stamp duty , that's paid by the purchaser , so why do they need to indemnify us ? ( is my understanding wrong ? )
    Could this impact the settlement period ?
    Any other thoughts ?

    See Change
     
  2. D&K

    D&K Well-Known Member

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    Canberra
    Hi See Change,

    I am not certain but it appears that this wording would suit wrap financing. That is, the first buyer (who probably bought through the agent recently for someone else) is providing the finance (plus a small margin) to the second buyer (who might have trouble getting a loan the 'usual' way). There is no consideration (ie fee) on the amendment of the contract because the profit is made from the small margin on the finance over a couple of years.

    The objective would be to transfer the name on the title to the second buyer within the settlement period (keeping the same contract), but within that time buyer one may need to secure a loan (against the property in a round about way) and set up another loan agreement with the second buyer. The first buyer is essentially taking the risk that this goes through (by waiving the cooling off period). Buyer one would only be buying what buyer two wants anyway.

    I think (not having done this) that buyer one ends up the borrower, and buyer two the mortagor, but the property would be still provided as security (via guarantee?) to the initial borrower (buyer one). Then there's another loan between buyer one and two.

    I don't think that amending the contract in this way should cause a problem provided it's all sorted before settlement. I have signed an initial contract under my name "or nominee", the nominee in that case being a family trust (that I had to sort out during the settlement period) with no adverse impact on the sale process.

    Hopefully a forumite, with wrap experience, can either confirm or exclude this as being a wrap loan situation. But buy all means, get it checked by your solicitor.

    Regards, Dave
     
  3. See Change

    See Change Well-Known Member

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    Was finally able to get onto the agent. They hadn't mentioned any unusual conditions when they said they had a buyer and there were technical problems getting the fax through .

    According to them the a buyers agent is organising it , and the peoples who's names are on the contract are his clients.

    See Change
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
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    Hi Seech

    Sorry for the delay in responding.

    On the stamp duty point see below from Qld OSR revenue ruling. Whilst it's true under the reiq standard contract that:

    10.3 Duty
    The Buyer must pay all duty on this contract.

    As between you, them and the OSR, under the Duties Act:




    Which includes you! Ie if the buyer doesn't pay then you will have to. Realistically they can't get their transfer registered until it's stamped so it only becomes an issue where they don't settle.

    Hence you have a quite legitimate concern about backroom shennanigans which might end up with double duty...

    From the extract below you'll understand why they state that there's no consideration passing. (I bet there is though! If not then why do it? I suspect that D&K may be onto the commercial reason behind this special condition.)


    Maybe you can say okay to this clause so long as the deposit is sufficient to cover agent's commission plus 2x transfer duty ;)

    The indemnity is poorly worded. If the first bit works then why the second duty indemnity? Talk to your lawyer about appropriate wording, but remember an indemnity is only worth the person standing behind it...and you'd need to sue them to recover the loss...

    Also, how can the new buyer waive the cooling off period BEFORE he's a party (remember it says "...prior to the contract being amended"). Poor drafting.

    What I'd be minded to do, if the price is not well above what you think you'll get elsewhere is to reject the clause entirely and tell them to get their ducks in a row BEFORE coming to you with a contract...

    Keep us posted how it goes and sorry for the delay.

    Cheers
    N.


     
  5. D&K

    D&K Well-Known Member

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    See Change, I'm curious. If the person is a buyers' agent, then how come there's no consideration on the change of the title to the new owner (or a related event such as the settlement)?

    Unless there is a separate fee paid up front, payment (when I've used a buyers' agent) has been linked to the assignment of the name on the title.

    Dave
     
  6. See Change

    See Change Well-Known Member

    Joined:
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    Posts:
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    The buyers agents namme doesn't appear on the contract . If the current buyers change to other buyers , then there is ( I assume ) no payment going between the alternate buyers, or that's my reading of the situation.

    See Change