A Nominee Agreement is an agreement through which the owner of a particular property transfers the rights in the property (such as mortgages, licenses, easements, charges etc.) to a nominee selected by him. The property is registered in the name of the nominee for the duration of the agreement so as to enable him to perform his functions under the contract. The nominee has the power to execute transactions on behalf of the owner but he can only perform the acts authorized by the owner and cannot take any decisions on his own.
When Do You Need a Nominee Agreement
A nominee agreement is needed when an owner of a property wants to transfer certain rights in a property to a nominee so as to enable him to perform certain duties on behalf of the owner.
This purpose of the nominee agreement is to lay down the terms and conditions of the agreement and the rights of the nominee. In most cases the nominee can only execute certain documents according to the power given to him under the agreement. There is no liability incurred by the nominee and he is not responsible for performing contracts between the owner and a third party.
The existence of a nominee agreement does not change the manner of inheritance of the property. In case of the death of the owner, the nominee becomes a trustee of the property and holds it on behalf of the legal heirs.
Inclusions in a Nominee Agreement
The nominee agreement must clearly state the names of the parties between whom the agreement is entered into. This will include the owner who is transferring the rights in a particular property and the nominee who is accepting such rights.
The agreement must outline clearly what acts the nominee is empowered to do and what transactions he may execute on behalf of the owner. The agreement must also mention that the nominee does not have any beneficial interest in the property and has to transfer all the financial proceeds from any transaction undertaken by him to the owner.
The date on which the agreement is entered into must also be mentioned along with the territory in which the agreement is enforceable. Apart from this, the agreement must clearly mention under which law it will be governed and how the agreement shall be terminated. The manner in which the agreement is to be modified should also be described.
How to Draft a Nominee Agreement
The following are the steps to be followed while drafting a nominee agreement:
- Clearly define what powers the nominee will have under the agreement and what transactions he will be able to execute on behalf of the owner.
- Draft the agreement keeping in mind all the important clauses such as how the nominee will perform his duties, how he shall deal with third parties etc.
- Once the agreement has been drafted, review it thoroughly to make sure that the interests of both the parties are well protected under it.
- Once the agreement is executed, the concerned property is then registered in the name of the nominee for the duration of the agreement.
Benefits of a Nominee Agreement
- The roles and responsibilities of the nominee are clearly laid out in the agreement. This avoids any confusion or misunderstandings between the parties in the future.
- This agreement helps the owner of a property who is unable to perform certain functions due to whatsoever reason. He can bestow such powers upon the nominee so as to enable the nominee to carry out certain specified duties and transactions.
- The interests of the nominee are protected as he bears no liability for the contracts of the owner.
- The agreement also clearly lays down that the nominee will receive no beneficial interest in the property. This can also prevent any misunderstandings between the parties in the future.
Key Clauses in a Nominee Agreement
The following are the key terms of a nominee agreement:
- Designation of nominee
- Administration of designated properties
- Reliance by third parties
- Payment obligations
- Covenants and undertakings of the owner
- Covenants and undertakings of the nominee
- Limitation of liability
- Indemnification and damages
- Modification of the agreement
- Termination of the agreement
- Governing law and jurisdiction
- Dispute resolution and arbitration
What Happens When You Violate a Nominee Agreement
Generally, nominee agreements have a clause that talks about the actions to be taken when a party to the agreement breaches the clauses of the said agreement. An arbitration clause is present in most agreements and states that if a clause of the agreement is breached or if any dispute arises with respect to the terms of the agreement, the matter will be resolved by arbitration. The clause mentions where the arbitration proceedings will take place i.e. seat of arbitration, the language in which the proceedings shall be conducted and the manner in which the arbitrators shall be appointed.
Alternatively, any other form of dispute resolution such as mediation or negotiation may also be mentioned in the agreement.
The agreement can also mention that all disputes arising out of the agreement will be subject to the exclusive jurisdiction of a specified court.
Sample of a Nominee Agreement
If you require a template of a nominee agreement, you can download a sample here.
Download this USA Attorney made Original Agreement for only $9.99
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