Role of the property broker in the due diligence process
The commercial property broker, not being party to the contractual agreement, is under no obligation whatsoever to perform the due diligence investigation on behalf of the purchaser, nor should he be expected to source the information as promised by the seller to the purchaser.
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"This understanding is important to grasp, but clients can often be unaware of the distinction of roles. The more efficient and popular the broker is, the more the seller and buyer may want the broker to conduct such matters - but it must be made clear that this is not part of his legal duties," says Jason Gregoriades of the Rawson Property Group's commercial franchise division.
The seller can indeed forward information and documents to the purchaser via the broker, and this is a fairly common practice, but the total responsibility for the due diligence exercise remains the seller's obligation and he is expected to do this by himself and at his own expense.
Inadequate information
In certain cases, says Gregoriades, the purchaser may suspect that the information provided by the seller is inadequate or inaccurate. Should this occur it is up to the purchaser to deal with the seller directly to resolve the matter and the broker cannot be held liable, although he may and often does play an intermediary role in advising sellers and purchasers of their responsibilities.
What is the situation if the broker, although, as explained, not party to the agreement, acting independently or in connivance with the seller, withholds information or allows inaccurate information to be handed over?
In these cases, said Gregoriades, he is quite clearly an obstacle to the due diligence process being done honestly and thoroughly and he can in South African law be held liable on this count. This, too, is an important principle that has to be understood.
Stressing again the importance of the due diligence exercise in many property transactions, it will pay the seller and purchaser to ensure that this is clearly and timeously carried out that there can be no comebacks later on. Where the exercise is not done thoroughly and loopholes and omissions are later discovered, recrimination and arguments can follow.
