Nomination Risks When Purchasing Property in Victoria

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By David Dawn,
Victorian Property Settlements
PO Box 11220, Frankston VIC 3199
📞 03 9783 0111
✉️ david@quick32.com

Introduction

In Victorian property transactions, many buyers believe that nominating another person, company, or trust after signing a contract is a standard and risk-free exercise. In reality, this process—commonly referred to as a "nomination"—can carry a host of legal, financial, and practical risks that are often misunderstood or underestimated.

This article explores the legal foundation of nominations, the most common traps, and real-world examples where buyers have been caught out—sometimes with catastrophic consequences.

1. Legal Foundation of Nominations in Victoria

The ability to nominate another party arises from the freedom of contract, but it is not without boundaries.

Most contracts of sale in Victoria are based on the standard Law Institute of Victoria (LIV) pro forma, which contains General Condition 4, permitting a purchaser to nominate another person or entity to complete the purchase. However, this general condition can be:

  • Overridden or restricted by special conditions; or

  • Expressly excluded in off-the-plan, development, or builder-supplied contracts.

In addition, nomination rights are affected by obligations under:

  • Sale of Land Act 1962 (Vic)

  • Transfer of Land Act 1958 (Vic)

  • Duties Act 2000 (Vic) – particularly sections 32J to 32XC

  • Land Use Victoria Nomination Guidelines

  • State Revenue Office Rulings (e.g., DA-064 and DA-064v2)

2. “And/or Nominee” – Harmless Phrase or Legal Time Bomb?

Buyers often sign contracts as "John Citizen and/or nominee", assuming this allows them to substitute a company, trust, or spouse at a later stage.

But this phrase does not absolve the original purchaser from liability. Even if the nominee completes the transaction:

  • The original purchaser remains jointly and severally liable unless released.

  • The vendor may still enforce the contract against the original party.

Under the standard 2024 Law Institute of Victoria Contract of Sale of Real Estate, General Condition 4 reads:

4. Nominee
The purchaser may nominate a substitute or additional transferee, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.

While this permits nominations without requiring vendor consent, it does not relieve the original purchaser from liability, nor does it override taxation risks. The State Revenue Office (SRO) may still treat the nomination as a sub-sale depending on the circumstances, with potentially significant stamp duty consequences.

📌 Important: Many off-the-plan, builder, or development contracts include special conditions that restrict or prohibit nomination altogether, or impose time limits and financial penalties. Always check the special conditions before relying on General Condition 4.

3. Sub-Sale Provisions and the “Double Duty” Trap

Under section 32J of the Duties Act 2000 (Vic), a nomination can be recharacterised as a sub-sale if the nomination:

  • Is accompanied by additional consideration.

  • Results in a change in the beneficial interest of the land.

  • Occurs after the purchaser has undertaken steps that indicate ownership or control (e.g., subdivision, development, or assignment of rights).

  • Is to a person or entity that was not a clear agent or associated party of the purchaser at contract signing.

If any of these apply, both the original and the nominee may be required to pay stamp duty, often adding tens of thousands of dollars to the cost.

📌 Case Example:
A buyer signed in their personal name with “and/or nominee”, intending to set up a company and trust. The nomination was made a few weeks before settlement to the company—but that company paid the deposit directly and had not been incorporated at the time of contract signing. The SRO ruled the nomination was a sub-sale. Result: Double duty assessed.

4. Financing Risks and Title Errors

Buyers relying on finance need to understand that lenders approve loans in specific names. If a nomination is made after finance approval, the lender will:

  • Reassess the application (delaying settlement),

  • Potentially withdraw approval, or

  • Require the entire application to be resubmitted.

Further, the title and mortgage documents must exactly match the name(s) of the purchaser(s). If not rectified before settlement:

  • Title registration will fail.

  • Mortgage documents will be rejected.

  • PEXA settlements may collapse.

This is particularly relevant in company and trust nominations, where ABNs, ACNs, and trust deeds must be finalised and verifiable at the time of nomination.

5. Practical and Administrative Pitfalls

Even if a nomination is otherwise compliant, a buyer may face difficulties if:

  • The nominee does not exist (e.g., trust not established or company not registered).

  • The nomination is made less than 14 days before settlement, breaching contractual or Land Registry requirements.

  • The purchaser has lodged a caveat in their own name but fails to withdraw it or amend it to reflect the nominee.

Many vendors and their solicitors will insist on seeing the nominee's identity documents, company extract, trust deed, and evidence of authority before acknowledging the nomination.

6. Contractual Default and Vendor Objection

A poorly executed nomination may also expose the purchaser to default claims under:

  • General Condition 27 – failure to settle due to title or finance mismatches.

  • General Condition 2.1 – breach of contractual terms.

  • Special Conditions – especially if the vendor has restricted nomination rights or required prior written consent.

Vendors may treat nomination errors as a basis to:

  • Withhold documents or settlement figures.

  • Claim default interest or losses.

  • Rescind the contract and retain the deposit.

7. Best Practice: How to Nominate Safely

To minimise risk, we recommend:

Before You Sign

  • Decide the purchasing entity at the time of contract.

  • Avoid “and/or nominee” unless absolutely necessary.

  • If a trust or company will be used, set it up beforehand and sign accordingly.

After Signing

  • Discuss the nomination with your conveyancer immediately.

  • Ensure the nominee:

    • Exists,

    • Has its tax and regulatory registrations in place,

    • Can be verified with ASIC and/or the ATO.

  • Prepare a formal Deed of Nomination.

  • Notify the vendor in writing as per the contract.

  • Lodge all updated details with PEXA and Land Use Victoria.

8. What We Do at Victorian Property Settlements

We assist clients with:

  • Nomination risk assessments before signing.

  • Drafting and lodging Deeds of Nomination.

  • Advising on stamp duty exposure.

  • Coordinating with lenders, brokers, and mortgage managers to avoid title mismatches.

  • Ensuring compliance with PEXA requirements and Land Registry processes.

We also advise vendors on how to limit nomination rights, particularly in development transactions or builder sales, to prevent on-sale risks or tax complications.

9. Conclusion

Nomination can be a useful tool when structured correctly, but when done poorly, it introduces significant and avoidable risk.

At best, a faulty nomination causes administrative headaches. At worst, it can lead to financial penalties, contract rescission, and litigation.

If you are contemplating a nomination, or considering buying in a name other than your own, we strongly encourage you to seek advice before signing—or as soon as possible afterward.

Need Advice on Nomination or Contract Review?

Contact us today to arrange a review.

📞 03 9783 0111
✉️ david@quick32.com
🌐 www.victorianpropertysettlements.com.au