Once you have settled on a property that you would like to buy for your business, there will be various contracts to negotiate. This article will give you a very basic guideline, but this is an area where the expense of legal representation is money well spent.
Buying a commercial property is a very complicated process with numerous technicalities that can arise. It's for this reason that you should hire a lawyer who specializes in commercial property to look after your best interests. In the meantime, we will give you some information on the most important part of the deal: the contract between you and the seller.
Whether you are signing an Offer to Purchase or an Agreement of Sale, a valid contract must be in writing and include the following:
- The agreement must be in writing to be valid
- Conditions of the sale must be included, such as: Responsibility of costs, commissions and fees; the date of possession of property, a voetstoets clause ("as it stands") if there is one, conditions regarding zonings, rental income, addresses of parties, etc.
- The contract must be signed by both the buyer and seller, which makes it legally binding. Should either party back out of the deal at this state, they will be responsible for the legal consequences.
There are, however, certain conditions under which the buyer or seller may break the contract. In what is called the "Cooling Off" clause in terms of the Alienation of Land Amendment Act 104 of 1998, "a Purchaser has 5 days to revoke or terminate a Offer to Purchase / Agreement of Sale by notifying the Seller in writing that the Offer to Purchase/Agreement of Sale has been unconditionally revoked or terminated".
Reasons for terminating the agreement might include:
- The agreement is subject to certain suspensive conditions which are not fulfilled
- The purchase price is less than R250,000 and certain additional criteria in terms of the Alienation of Land Amendment Act are present entitling the Purchaser to "cool off"
Make sure that when you are buying a property, you're always on the front foot by having done your research, knowing what your rights are and employing formal legal representation.
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