Vendor beware

19/12/2009

It’s usually the buyer who needs to beware, but Federated Farmers is cautioning would be farm sellers to  conduct strict due diligence before entering into sale and purchase agreements.

The warning follows news a trust which is thought to have backing from Dubai World has signed up 28 farms in Southland.

It goes against every commercial norm for major capital items to be sold on a ‘no-deposit’ basis and farms are as big a capital item as you can get,” says David Rose, Federated Farmers rural security spokesperson. . .

“I must say that I am extremely nervous of reports that no-deposits are being taken. It’s pretty fundamental that a deposit be exchanged as a tangible sign of good faith.

“Our second concern relates to the financial backer being reported as Dubai World – the Emirates’ owned and controlled corporate lender.

“On 27 November, the Federation warned that Dubai World was close to defaulting on a substantial part of its $82 billion (US$60 billion) debt. Only on Monday, another Emirates, Abu Dhabi, injected US$10 billion in order to save Dubai World from an immediate default.

“Given these pressing business issues, we are naturally concerned that the supposed backer may not be prioritising the purchase of Southland farms. The fact that a reported deposit milestone has already been missed is further cause for alarm. . . “

Another factor which requires caution is the possible need for these purchases to go before the Overseas Investment Commission which could delay sales or derail them completely.


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