"I signed the SPA in my name. Can I change it to my company later?"

A purchaser signs a Sale and Purchase Agreement to buy a commercial unit for RM800,000.

Two weeks later, his accountant recommends that the property be held by his company instead.

The purchaser calls the agent and says:

“Please replace my name with the company’s name. The seller and price are still the same.”

The purchaser assumes this is an administrative correction.

It may not be.

Once a Sale and Purchase Agreement has been signed, changing the purchaser can affect the contractual parties, financing, stamp duty, tax reporting, consent requirements and completion timeline.

1. Changing the purchaser is not the same as correcting a spelling error

A typographical mistake in a name or identity number may sometimes be corrected through appropriate documentation.

Replacing an individual purchaser with a company, spouse, relative or unrelated third party is fundamentally different.

The new party did not sign the original agreement. It may have a different legal capacity, financing position, ownership eligibility and tax profile.

The original purchaser cannot ordinarily assume that the seller is required to accept a replacement purchaser.

The starting point is the signed Sale and Purchase Agreement. It should be reviewed to determine whether nomination, assignment, novation or substitution is permitted and what conditions apply.

2. The seller’s consent may be required

From the seller’s perspective, the identity of the purchaser can be important.

The seller may have agreed to:-

• A particular payment structure.

• A specified financing period.

• Representations made by the original purchaser.

• A restriction against assignment before completion.

• Particular default and termination provisions.

If the proposed change requires the seller’s agreement, that consent should be documented clearly.

The documents may need to state whether the original purchaser is fully released or remains liable if the replacement purchaser fails to complete.

Until a proper release is given, the original purchaser should not assume that his obligations have disappeared.

3. A developer transaction may involve additional restrictions

For a property purchased directly from a developer, the purchaser should check the statutory or contractual framework governing the sale.

The developer may not allow the purchaser’s interest to be transferred freely before completion, issuance of title or full payment of the purchase price.

The proposed change may require:-

• The developer’s written consent.

• A deed of assignment or novation.

• Supplemental documentation.

• Payment of administrative or legal costs.

• Approval from the developer’s financier or proprietor.

• Compliance with eligibility conditions applicable to the development.

A conversation with the sales representative is not a substitute for written confirmation of the legal process.

4. The existing loan approval may no longer be usable

A housing or commercial loan approved for an individual is not automatically transferred to a company.

The bank assesses the legal and financial position of the named borrower. A company purchase may require a different facility, repayment period, margin of financing and security package.

The bank may request:-

• Company financial statements and bank records.

• Directors’ and shareholders’ information.

• Board resolutions.

• A legal charge or assignment.

• A debenture over company assets.

• Personal guarantees from directors.

• A new valuation or credit assessment.

If the purchaser changes after financing has been approved, the financing process may need to restart. This can place the contractual completion deadline at risk.

5. There may be more than one dutiable or taxable transaction

The parties should not assume that replacing the purchaser merely changes the heading of the original agreement.

Depending on the documents already executed and the method used, the arrangement may involve an assignment or disposal of contractual rights from the original purchaser to the new purchaser.

That can create additional stamp duty, Real Property Gains Tax reporting or other tax consequences.

The result will depend on the transaction structure, the stage reached, the consideration involved and the applicable law.

Before signing a deed of nomination, assignment or novation, the parties should obtain advice on whether the proposed structure creates a second transaction rather than a simple amendment.

6. Adding a spouse may also have consequences

A purchaser may decide to add a spouse because both will contribute to the loan instalments.

However, adding another purchaser may affect:-

• The approved financing.

• The proportions of ownership.

• The use of each purchaser’s funds.

• Consent or eligibility requirements.

• Stamp duty and tax treatment.

• What happens upon separation, death or sale.

• Whether both signatures will be required for future dealings.

The parties should state clearly whether they will hold equal or unequal shares where the title and applicable law allow that choice.

Financial contribution and registered ownership should not be left to assumption.

7. Using a nominee can create serious problems

Sometimes a person signs as purchaser with an informal understanding that the property is “really” being acquired for someone else.

This may result in disputes about beneficial ownership, repayment of the deposit or entitlement to the sale proceeds.

It can also create concerns if the arrangement was intended to avoid:-

• Bank disclosure requirements.

• Ownership restrictions.

• State consent.

• Tax liabilities.

• Creditor claims.

• Eligibility conditions imposed on the property.

All material information should be disclosed accurately to the lawyer, bank and relevant authorities. A side agreement should not be used to disguise the real purchaser or purpose of the transaction.

8. Decide the purchasing entity before paying the deposit

Before signing a booking form or Sale and Purchase Agreement, decide whether the purchaser should be:-

• An individual.

• Two or more individuals.

• A company.

• A limited liability partnership.

• Another legally appropriate structure.

That decision should take into account financing, tax, asset management, succession and the intended use of the property.

Where the agreement has already been signed, obtain advice immediately. Delay may reduce the available options because the completion period continues to run while the parties discuss the proposed change.

A purchaser’s name is not merely a label on the agreement.

It determines who has the right to acquire the property - and who is responsible for completing the purchase.