The Revenue Ruling explains the importance of ensuring that the correct instrument is stamped with ad valorem duty as a loan security so that if necessary, it will be admitted into evidence in court proceedings. It is not intended to inhibit commercial transactions nor is it intended to increase the administrative costs associated with the stamping of the loan security. This practice has allowed lenders to provide flexible loan facilities, by allowing substituted securities to be taken without incurring a further liability to ad valorem duty. A discharge of the existing mortgage would be given by the mortgagee and a new mortgage given by the mortgagor over the newly purchased property. The new mortgage would qualify for nominal duty as a collateral security to the stamped loan security, namely the loan agreement or letter of offer.
Loan agreements used by lending institutions contain widely varying terms and conditions.
A letter of offer would only be dutiable upon written acceptance by the borrower, at which time it becomes an agreement. In some instances, the loan agreement is clearly liable to stamp duty as a loan security. In such an instance the Real Property Act mortgage will become liable to the ad valorem duty as the prime security unless the loan agreement comes within the definition of a debenture. Any lending organisation which uses a standard form of loan agreement or letter of offer which they require to be stamped as a loan security should submit copies of the agreement to OSR for determination of liability. This Ruling applies to all loan agreements lodged for stamping or held for assessment on and from the date of this Ruling.