A person who has entered into an agreement to purchase property might want to nominate a third party or parties, known as the nominee(s), to complete the transaction.
This might occur, for example, because the purchaser would like the trustee(s) of a trust, or themselves and another joint buyer, to take title, perhaps in circumstances where all the intended nominees were not able to sign the original agreement.
Nomination is a common and useful aspect of conveyancing practice. This is evident in the standard form of agreement used in most conveyancing transactions in New Zealand – the ADLS/REINZ agreement for sale and purchase of real estate, which contains the words “and/or nominee” in the purchaser field by default. Even if these words are crossed out, nomination might still be possible.
To effect a nomination, the nominator(s) and nominee(s) will usually enter into a deed of nomination. That deed of nomination will give the nominee the right to complete the purchase of the property, including acquiring title, as if the nominee(s) was/were party to the agreement. In return, the nominee(s) will often grant an indemnity to the nominator(s) for any loss incurred under the agreement.
This indemnity is necessary because the deed of nomination, and nomination generally, does not affect the parties to the original contract. While it is usual for nominee details to be provided to the vendor’s solicitors, so the title can be correctly conveyed, the original purchaser recorded in the document will remain liable as the principal contracting party. The ADLS/REINZ form of agreement expressly states this in clause 1.5(2).
The legal parties to the contract will not change unless the vendor, purchaser, and third party enter into a deed of novation, under which the contract is formally transferred to the third party. This is generally rare in conveyancing practice, as the vendor’s consent is required.
Provided a purchaser understands its implications, nomination is a good way to allow someone else to complete a property purchase.
If you need help with a deed of nomination or nomination issue, contact our property team here.