Should You Borrow GF’s Name To Buy Apartment?

Let me begin with providing some background. Nominal purchases refer to situations where one party, known as the borrower, uses another’s name – the nominal owner – to purchase a property. Even though ownership is registered under the nominal owner, the borrower enjoys the de facto rights to the property. There are typically various reasons for these arrangements, such as circumventing purchase restrictions, using preferential housing quotas, or evading loan eligibility rules.

In practice, nominal purchases often lead to disputes down the road. A key question courts must address is whether such contracts are deemed valid. When examining validity, the main considerations include whether the contract violates any mandatory laws or regulations, or goes against public order and morality. If so, it may be ruled invalid. However, if all parties are acting with true intentions and legal capacity, respecting their autonomy of will becomes important as well.

Take, for instance, the Dalian Intermediate People’s Court’s verdict in Liaoning Province. In case number 2467 of 2022, the court faced a borrower who had employed a nominee to sidestep local housing purchase restrictions. The ruling was insightful – the court held that since the restrictions did not stem from laws or administrative regulations issued by the highest legislative or executive bodies, they could not be the basis to deny the contract’s validity. This decision underscores a vital point – the contract remained valid, establishing a legal precedent for similar situations.

Yet, this is not a blanket pass for all such transactions. In another landmark ruling, case number 530 of 2021, the Shanghai No. 1 Intermediate People’s Court handled a borrower who used a nominee’s eligibility to purchase policy-based housing. The court’s stance was clear: the act violated mandatory housing policy regulations, undermining the housing needs of legitimate buyers and the market’s order. The contract was declared invalid, sending a strong message about the consequences of flouting mandatory provisions.

Moreover, financial regulations are another battleground. In case number 446 of 2022, the Guangzhou Intermediate People’s Court found that a borrower had used a nominee to circumvent loan-to-value ratio restrictions. The court ruled that this breached financial regulations, thus invalidating the property purchase and loan contracts. This case highlights the repercussions of undermining financial management and transaction security in the market.

Therefore, we can see courts generally validate nominal contracts unless they seriously endanger public interests. For example, if the borrower meets eligibility after a policy changes, or a subsidized house can be legally traded, contracts will more likely be upheld. Invalidating contracts merely to address legal technicalities excessively intervenes with people’s freedom to transact.

In terms of risks, borrowers face challenges proving the nominal purchase occurred if no written agreement exists. They also bear the burden of proof that contracts should be enforced if validity is questioned. Nominal owners risk shouldering responsibility if contracts are ruled invalid, and may lose anticipated benefits by indefinitely “lending” their names. It would be highly suggested to have a lawyer draft such a contract before using someone else’s name to buy property.