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18 October, 2019 | Jennifer Edwards
The worst case scenario if the names on the agreement do not match the title or do not reflect the entity that is selling or purchasing is that the agreement may not be legally binding on the parties.
A common scenario if names do not match, either by error on the original title registration, or error on the agreement or identification is that the lawyers either have to enter into additional correspondence with each other or draft an extra document (a statutory declaration) to clarify and/or rectify the same. This takes more time (both for us and for the client) and can cause added stress and extra costs for the clients.
Incorrect names on the agreement can also cause issues if your client is applying for a bank loan to assist with the purchase. Banks will often ask for copies of the agreement for sale and purchase and will extract the names of the borrower from the contract. Again if incorrect, this can cause time to be wasted on the rectification and the clients having to rush around last minute if the error is not picked up well in advance of settlement.
Below is a small checklist of things that you can do that will assist both you as agents and us lawyers (as well as providing the clients with that extra little bit of added value). Your clients will appreciate that you are attempting to foresee potential problems and prevent those problems turning into real issues arising during the transaction:
Where the vendor or purchaser is a company
Trusts are not technically legal entities in that the trust itself cannot hold or own property. The trustees hold the property on behalf of the trust (or more correctly on behalf of the beneficiaries of the trust).
Trusts are usually (but not always) set up with an independent and sometimes corporate trustee (a corporate trustee is just a trustee that is a company), for example the trustees of my trust are Samantha Curtis, Scott Curtis and Smith & Partners Trustee Co. Limited. This is all you see on the title of my property. The words “Curtis Family Trust” do not appear on the title.
Despite the fact the trust name does not appear on the title, the details on the agreement should go and above beyond what is recorded on the title. If you know it is a trust and you know the name of the trust then you should list the vendor or purchaser as the case may be as: “Samantha Curtis, Scott Curtis and Smith & Partners Trustee Co. Limited (as trustees of the Curtis Family Trust”).
This may seem like overkill but it makes the paper trail far easier to follow years down the track. Some clients have separate mirror trusts with the exact same trustees – e.g. the Sam Curtis Trust and the Scott Curtis Trust which is why it can be crucial to specify the name of the trust that is entering in to the contract.
Sometimes the clients do not have an independent trustee at all, so if you did not record that they were buying the property as trustees of a trust, then the whole transaction could proceed and the property could be mistakenly thought to be held in the clients’ personal names. This can cause major accounting issues.
18 September, 2013 | Jennifer Edwards
24 June, 2015 | Jennifer Edwards