Vineyard Due Diligence
Freddy finds out about vineyard due diligence.
Farmer Freddy is sitting down at the kitchen table, pen poised in hand, ready to sign an Agreement for Sale and Purchase. Never one to pass up (what he thinks is) a great opportunity, Freddy has decided to purchase a 30 acre vineyard.
Just as he is putting pen to paper, Pebbles walks in. “What have you got there Dad?”
“Just the Agreement for the purchase of my new vineyard!” replies Freddy excitedly.
Pebbles sits down at the table next to Freddy. She is all too aware how impulsive her father can be and suspects he may not have fully thought about the implications of buying a vineyard or the contents of the Agreement.
“Presumably you’ve discussed irrigation and water permits with the Vendor and requested the permits be transferred as part of the Agreement?” asks Pebbles.
“No”, replies Freddy.
“Oh”, says Pebbles. “But I’m sure you’ve identified all the plant and machinery being transferred and whether the vineyard is being sold as a going concern?”
Freddy’s head drops. “I get your point”, says Freddy. “I haven’t thought about this enough, have I?”
“No Dad, you haven’t. Buying a vineyard can be an expensive undertaking if you overlook these sorts of issues. Due diligence must be comprehensive and the results of that due diligence should be covered fully in the Agreement.
“One of the big issues which you have to be aware of is water, which is required for irrigation and the wine making process. The Vendor must have the necessary permits and consents and those consents must be transferred to you. Sometimes there are restrictions and sometimes there aren’t adequate sources of water at all.
“The grape varieties and root stocks should be identified and recorded, as well as production levels.
“You have to consider whether there is a grape supply agreement in place and if there is, you need to fully understand its terms. You also need to know whether there are on-going vineyard management arrangements which need to be transferred”.
“I didn’t realise that it was so complicated”, exclaims Freddy. “I’ve already got a headache and I haven’t even started drinking the wine yet!”
“It doesn’t have to be complicated, Dad”, reassures Pebbles. “You just have to make sure that you ask the right questions and that the Agreement covers all of the issues it needs to. That way you avoid any nasty surprises later on.
“I think you need to have a chat with your solicitor and accountant”, advises Pebbles.
Freddy sighs. “I think I do Pebbles…. I think I do”.