By Jaco Fraser
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In the context of South Africa's abundant agricultural potential, investing in agricultural land holds considerable opportunity. The prosperity of such an investment, however, significantly relies on a legal due diligence process. It is imperative not only to identify potential risks but, also to navigate and address risks effectively, ensuring a seamless acquisition process.
A due diligence process remains paramount, irrespective an acquiring of a farming enterprise as a going concern or acquiring of shares.
When embarking on legal due diligence process, standard factors to consider includes, but are not limited to:
Title Deeds and Zoning Regulations:
- One of the primary considerations in the due diligence process is verifying the authenticity of title deeds. Ensure that the seller has registered ownership of the sale property and that there are no disputes regarding its ownership.
- Verify that the seller is in possession of the title deeds. A lost title deed may slow down the sale process, and the seller will need to apply for a replacement at the relevant Deeds Office.
- Ensure that the sale property is appropriately zoned not only for current agricultural use but also consider potential future developments. Also consider if the envisaged sale property requires subdivision from an existing title deed in order to form the sale property.
- Understand the impact and consequences of any servitudes that are registered against the title deeds.
Environmental Impact Assessments and Water Rights:
- Given the environmental sensitivity of agricultural activities, it is essential to conduct a comprehensive environmental due diligence to ensure that the sale property is fit for the envisaged usage and compliant with environmental regulations.
- Be aware of potential issues such as soil contamination, water usage restrictions, protected species on the sale property etc.
- Water is the most important aspect of any agricultural business. It is essential to consider the water rights associated with the sale property and ensure that the water source is dependable and sufficient for its agricultural needs.
Infrastructure and Accessibility:
- Assess existing infrastructure on and around the sale property. Consider factors such as road access, proximity to markets, and availability of utilities like electricity and irrigation systems.
Persons Residing on the Sale Property:
- It is a common occurrence that farms have occupants residing on the property, which varies from previous and current farmworkers (and their families). When obtaining ownership of the sale property, specific procedures should be followed when evicting occupants or bargaining for occupation rights.
The success a transaction involving the acquisition of agricultural land relies on a detailed understanding of legal, environmental, financial, and social aspects associated with the sale property and the related agricultural enterprise. Through a systematic due diligence process, prospective buyers can mitigate risk and make informed decisions, setting the foundation for a successful and sustainable agricultural investment.