When selling immovable property, most property practitioners are familiar with the usual transfer requirements. However, where a business owner is selling property, a common question is whether a Section 34 notice in terms of the Insolvency Act is required.
Section 34 is designed to protect creditors when a trader sells a business, its goodwill, or assets outside the ordinary course of business. If applicable, the seller must publish notices in the Government Gazette and local newspapers before transfer. Failure to do so can render the sale void against the seller’s creditors for six months after registration, exposing the purchaser to significant risk.
Fortunately, this requirement does not apply to every property sale. The Supreme Court of Appeal, in Kevin & Lasia Property Investment CC v Roos NO, confirmed that the sale of a property letting enterprise is generally not subject to Section 34. The court found that rental properties are capital investments that generate income, rather than trading stock sold in the ordinary course of business.
For property practitioners, the key takeaway is that while most residential and investment property sales will not trigger Section 34, transactions involving the sale of a business should always be carefully assessed. Obtaining legal advice early can prevent unnecessary delays and protect both buyers and sellers.
