"SAPOA anticipates that in its present form, the Bill could have a widely negative impact on property owners, developers and managers," says Dinga Nkwashu, chair of SAPOA's legal committee, pointing out that Chapter 6 will effectively repeal and replace - in its entirety - Chapter 14 of the Companies Act 1973.
 
The business rescue provisions come into play in three general scenarios: temporary supervision of a company's affairs, including its fixed property; a temporary moratorium on the rights of claimants, including landlords and property managers; and the implementation of an action plan to rehabilitate the company.
 
These applications raise some thorny issues for the commercial and industrial property industry, says Nkwashu.
 
"SAPOA members will be particularly affected where a tenant business is subject to the rescue process, or where a property management company administers properties for a landlord that is subject to business rescue processes," he says.
 
At the crux of SAPOA's concern is the fact that rental and property management fees owing will be frozen during the rescue process. At the same time, companies undergoing the rescue process cannot be evicted from premises or sued for outstanding rental income.
 
"Clearly the situation would be economically destructive to SAPOA members where they find themselves settled with such tenants or clients," adds Nkwashu.
 
He goes on to say that the business rescue provisions are in contradiction of the law of contract, because any lease or professional services agreement concluded between members and the business in distress is effectively disregarded.
 
"The landlord's hypothec and other common law as well as contractual rights are relegated to the bottom of the pile," he adds, speculating that SAPOA members could be left with a huge, unpaid rental or fees bill.
 
To address these shortcomings, SAPOA has proactively submitted a number of practical comments on the Bill to the Department of Trade and Industry. These include: the registration of a notarial bond over the movable goods of a tenant; introducing a requirement for cash deposits instead of bank guarantees; and encouraging swifter action on the part of the landlord against arrears.
 
"We will also be recommending to members the registration of a second bond over immovables to secure suretyship, as well as implementing a different, more stringent approach to risk management," he says.
Publisher: eProp
Source: Sapoa