Buying immovable property from a company? Do your due diligence!
Buying a property from a company in these difficult times can be a minefield. Many companies adversely affected by the COVID-19 pandemic have become desperate to sell their major asset (their property) in order to create enough cash flow to continue trading. Desperation often tempts persons to take shortcuts and, if you are the unlucky purchaser in this example, you will struggle to get your transfer over the line.
One example of where your transfer can come unstuck is at the level of authority. Where a company wishes to sell its major asset, it is obliged to get a special resolution of shareholders in accordance with sections 112 and 115 of the Companies Act. If these sections are not followed to the letter, one or more shareholders can challenge the sale in court, which at best will cause a significant delay.
A second example relates to rates and utilities. As part of the transfer process, the conveyancers need to obtain a rates clearance certificate. A seller in distress often stops servicing the bond and the utilities over the property in the hope that, if the seller can sell the property quickly, the seller can use the sale proceeds to bring these arrears up to date. Problems arise if the seller doesn’t resolve the problem quickly and the debts end up being higher than the purchase price. This is known as a distressed sale and can take a long time to resolve.
In order to avoid the above problems, it is imperative that you do proper due diligence when buying property from a company by asking for the appropriate resolutions and utility bills either before signing your sale agreement or within the due diligence period given to you in your sale agreement.