A purchaser can therefore often assume it has the absolute and automatic right to nominate an alternate purchaser under the contract of sale before they are required to settle the purchase of the property.
Whilst the right to nominate may not be in doubt, there are other significant other factors to consider before any proposed nomination by a purchaser. An example is whether or not there is a special condition that sets out the nomination process to be followed. This article will not address these other issues but will instead focus on land development and the effect it can have on a nomination.
The significance of land development is that the State Revenue Office (SRO) continues to investigate and assess whether or not the correct amount of stamp duty has been paid in relation to the contract of sale. This is not an empty threat from the SRO – the Legal Practitioners Liability Committee (LPLC) has recently issued a telling reminder that failure to provide correct legal advice around nomination and land development continues to remain a significant basis for professional negligence claims against practitioners where a nomination has occurred, and the SRO subsequently determines there has been land development. What does this mean? In short it can mean that double duty may be payable under the contract of sale.
What is land development?
In a general sense, land development can be summarised as the process of altering the state and/or use of the land. Expanding on this further, the SRO has issued a Ruling on this point that breaks land development down into the following six limbs:
- Preparing a plan of subdivision of the land or taking any steps to have a plan registered under the Subdivision Act 1988.
- Applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land.
- Requesting under the Planning and Environment Act 1987 a planning authority to prepare an amendment to a planning scheme that would affect the land.
- Applying for or obtaining a permit or approval under the Building Act 1993 in relation to the land.
- Doing anything in relation to the land for which a permit or approval referred to in paragraph (4) would be required.
- Developing or changing the land in any other way that would lead to the enhancement of its value.
The limbs above are very broad and need to be considered in detail in every case where it is proposed that a nomination occurs. The SRO Ruling also assists in setting out many common examples of what can be categorised as land development. The LPLC recently advised that the most common base for claims against practitioners is where the original purchaser has made an application for a planning permit after signing the contract of sale but before the nomination took place.
Not all land development will result in double duty – the timing of the land development is key and must not occur before any nomination takes place.
There are many issues to consider when a purchaser intends to nominate an alternate purchaser (we will discuss these in future posts) with land development being a key one. We recommend legal advice be taken at the earliest opportunity to allow all of these matters to be fully considered and ideally before the contract of sale is entered into but if that is not possible, before any nomination takes place.