Ensuring The Purchaser And Vendor Names Are Correct On An Agreement For Sale And Purchase
18 October, 2019 | Jennifer Edwards
As property professionals, you understand the need to get all of the details on an agreement for sale and purchase as accurate as possible. The task of ensuring that the names of the parties involved is correct turns out to be a little tricky when your clients don’t give you the correct information. Most clients don’t realise the legal ramifications and often don’t fully understand the correct way to identify the names of the individuals or entity when buying or selling as a trust or company.
Why is it so important to get it right?
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:
- Obtain a title search and ensure you have recorded the names exactly as they are on the title
- Check the vendor’s drivers license or passport to ensure the names on the ID also exactly match the title
- Double check with the client that the property is held in their personal capacities and not for example in a partnership or as trustees of a trust
- Ask who the client intends to be the final purchaser of the property (i.e. who do they want to end up on the title? Is it them personally or is it a trust or a company?)
- Wherever possible, record the intended final purchasers on the agreement as this will mean that an extra deed of nomination document will not be required (we understand in some cases, not all final purchasers may be available at time of signing an agreement or that the entity may not be formed yet). Having one person sign an agreement with a view to nominating another entity or person at a later stage has posed problems in the past.
- Always check that the name as written on the agreement matches the purchaser’s photo identification.
Where the vendor or purchaser is a company
- Obtain a Companies Office search and write the name of the company exactly how it is recorded on the Companies Office register (“the register”).
- Directors must sign documents on a company’s behalf and the general rule of thumb is if there are two or more directors of the company then at least two directors must sign to bind the company. If the company only has one director, then that one can validly bind the company.
- You should check that the names on the director’s photo identification exactly match the register. If it does not there are two solutions – have them update the details on the register or get their lawyer to draft a statutory declaration confirming that the director as named on the register and the person in the photo identification are one and the same person.
- Another thing you should check is that any directors have authority to enter into the contract. If there are more than two directors, you should at least ask for confirmation that all other directors of the company have also approved entry into the agreement.
- Remember, some clients don’t know who the directors of their companies are so it is best to rule out any ambiguity and just obtain a Companies Office search in every case.
Trusts (and these are slightly different)
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 a trust might be John Doe, Jane Doe and Smith & Partners Trustee Co. Limited. This is all you would see on the title of the property. The words “Doe 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 and 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: “John Doe, Jane Doe and Smith & Partners Trustee Co. Limited (as trustees of the Doe 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 Jane Doe Trust and the John Doe 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.
- Ask for a copy of the Trust Deed and any variations (especially any documents recording a change in trustees)
- Check that the clients’ identification match the names as listed on the title and the trust deed itself.
- If there is a corporate trustee, you should go through the process for companies set out above as well – get a Companies Office search and check the directors (to see who can bind the company) etc.
- ALL trustees of a trust must sign the agreement and it is not binding until all trustees sign or until all trustees ratify entry into the agreement.
For assistance with any conveyancing matters, contact NZ Conveyancing expert, Jennifer Edwards by email at email@example.com or by phone at 09 837 6889