Miro v Fu Pty Ltd [2003] NSWSC 1009
In the current real estate market, vendors and their agents are sometimes offering ‘rebates’ to potential purchasers on the basis that:
- the purchase price stated in the contract for sale is not reduced,
- a rebate arrangement is set out in a clause in the contract for sale, or in a side deed; and
- a discount or rebate is provided on settlement.
The main advantage for a vendor (particularly when selling ‘off the plan’) is that the apparent purchase price is higher than the actual purchase price.
However, if not properly structured, a rebate arrangement may be unlawful.
The risks are identified in Miro v Fu Pty Ltd [2003] NSWSC 1009, where the purchaser was relieved of the obligation to pay a deposit required under a contract.
In Miro v Fu Pty Ltd, the NSW Supreme Court held that such a rebate is:
…quite improper. It can be inserted for no purpose other than to mislead persons such as lending authorities and purchasers of other units in that development….it is likely that solicitors who purposely prepare contracts with contradictory clauses such as this may be guilty of professional misconduct. It is more serious when the solicitor is a party to the contract as vendor. Unreal stated consideration for reduction, although that is not the case here, does not improve the position. Instructions of clients cannot excuse such conduct…the contract gives a false figure and is a fraud on the Chief Commissioner for Stamp Duties.
With proper legal advice, it is possible to implement a rebate arrangement which is not unlawful.
Vincent Young can assist parties to implement rebate arrangements that are legally compliant.
If you would like to discuss this article with us, please contact Venice Leung, Senior Associate, or Petar Vladeta, Senior Legal Consultant on (02) 9261 5900.