I’m often asked how agents should word ‘agent for’ contracts, so here I’ll explain what the Office of State Revenue recommends for such contracts.
The need for an ‘agent for’ contract arises when a buyer wishes to purchase a property but is unable to physically sign the Offer and Acceptance. For example, if Joan and Chris Smith plan to buy a property on Saturday, but Chris is called away on urgent work matters on Friday night, he can ask Joan to sign the Offer and Acceptance on his behalf.
As per section 42(4) of the Duties Act, this agreement will entitle Joan to sign the Offer and Acceptance on behalf of Chris. This applies whether or not she is related to Chris. Unlike a Power of Attorney, an ‘agent for’ agreement will not allow her to sign any other documentation on his behalf, such as the Transfer of Land.
The Duties Act doesn’t specify that the agreement needs to be made in writing, however the Commissioner may request evidence of the agency relationship, and some real estate agents ask buyers for written agreements as proof that the agency relationship exists.
According to Revenue Ruling DA 7.1 (section 10), the Commissioner will accept that an agency relationship existed if the agreement (ie. Offer and Acceptance) “clearly indicates that at the time it was entered into, the person who executed the agreement as the purchaser was acting as agent for another named person”.
For example, if Joan were to sign the contract on behalf of Chris, the wording could be “Joan Smith as agent for Chris Smith of 123 Hay Street, Perth.” *
If Joan were to sign the contract on behalf of herself and Chris, the wording should be “Joan Smith of 123 Hay Street, Perth and Joan Smith as agent for Chris Smith of 123 Hay Street, Perth.”
A common mistake we see when two people intend to buy property using an ‘agent for’ relationship is that only one of them is written on the contract, as in the first example above. However, if both Joan and Chris want to purchase, both need to be included on the contract, as in the second example above – so Joan’s name is written twice.
This mistake can be remedied with a substituted purchaser if both parties are spouses or family members, but if they are unrelated, they risk incurring double stamp duty.
To avoid the risk of incurring double stamp duty, ensure the nature of the agency relationship is clearly and correctly specified on the Offer and Acceptance.
* This is general information based off the content of the Duties Act 2008 and Revenue Ruling DA 7.1, and does not constitute legal advice. For specific advice about writing contracts, seek the advice of a legal professional.
Image by Kevin Dooley via Flickr.