Commercial property generally refers to properties such as retail shops, vacant industrial land, offices warehouses, factories, storage sheds and the like.
If you are considering purchasing commercial property in Queensland it is more than likely that you will be entering into a Real Estate Institute of Queensland (REIQ) form of a contract.
Matters to be aware of with Commercial contracts
Cooling Off Periods
There is a five day cooling off period with a residential contract which allows a buyer to terminate for any reason within the cooling off period.
There is no such cooling off period for commercial contracts.
Use of Land
As the value of commercial property is linked to it’s usage, it is vitally important to ensure that the use that is sold is permitted.
It is the buyer’s risk to ensure that the use of the land is an allowed use with local government and that all appropriate approvals have been obtained for such use
It is common with commercial property for there to be a lease in place as that generally gives the property the value it has. It is critical that such leases are reviewed by your lawyer to ensure that they do not contain clauses that may impact the value with unduly onerous or unusual obligations on the landlord.
Apart from the physical land and buildings that will be transferred, there are generally more documents that need to be collected and reviewed as part of the settlement of a commercial contract.
These can include documents such as the Certificate of Classification for the building, the plans and drawings relating to the construction of the buildings, other documents to enable management of the tax (e.g. depreciation) for the buildings and lease documentation which could include lease extension documents and tenancy assignment documents.
Financing and Settlement Periods
Typically a residential contract is generally conducted within a 30 day timeframe. With commercial contracts the timeframes for settlement are generally for longer periods because of the level of scrutiny that will be required. Consequently, buyers will seek more time to obtain finance and conduct their due diligence and settlement is also more likely to be in excess of 30 days.
Special attention must be paid to ensure that any purchase price negotiated has considered the application of GST. GST may apply in certain circumstances and may be excluded in others. Either way, before a contract is signed, advice needs to be obtained to make sure that there is complete understanding and assurance that the price to be negotiated either includes GST or not.
Otherwise a Buyer may need to find an extra 10% of the purchase price or a seller could be getting 10% less than what is expected.
As the reasons for purchasing a commercial property are varied (e.g. purchasing for own business usage, investment, development), a buyer needs to be properly advised before signing a contract. This is to ensure there is scope to conduct such investigations or enquiries into the property, or the use of the property is included in the contract.
The point of such investigations is that if a buyer is not satisfied with the results of their enquiries that they have the ability to terminate the contract and obtain a refund of any deposit paid.
Because of the vagaries of commercial contract transactions it is more common to have such contracts “tailored” than having contracts with just say conditions like a finance clause or building inspection clause to satisfy. Your solicitor should be consulted early in the negotiations to ensure that you are properly protected through the contracting process.