Contract of Sale
Unlike for a residential property, the Contract of Sale for a commercial property in Victoria is usually likely to contain certain Special Conditions that are set out by the seller’s legal team or brokers. This includes clauses such as council regulations, permitted usage for the unit, fixtures and fittings, tax, and others. It is imperative that all Special Conditions of the Contract of Sale are clearly communicated to you before you sign off.
Existing tenant or lease
Often investors buying commercial property for the first time will prefer choosing a property with an existing tenant or lease. This way you can incur fewer initial expenses and the rent conditions are already covered in the lease. However any incentive and first right of refusal clauses in the existing lease can affect you as the buyer. If the tenant has been a long-term one, they may get first choice in buying the property if they choose to do so. If the existing lease has lapsed, it presents further complications that you need to consult property lawyers in Melbourne to mitigate.
Tax and stamp duty calculations
Commercial property vendors in Victoria are generally required to be registered for Goods and Services Tax (GST), and these liabilities will usually be passed onto the buyer when the property is being sold. Sometimes, in the case of an existing lease, there may be conditions included in the Contract of Sale that allow the property to be exempt from GST if the property is sold as a ‘Going Concern’. However, keep in mind that the Australian Tax Office (ATO) can still challenge these decisions.
The contract also needs to outline Capital Gains Tax (CGT) depending on how long the property has been held with the vendor. Additionally, in Victoria you are required to pay government stamp duty when buying commercial property. This depends on the value of the property and is 8% extra if you are a foreign buyer.
Essential safety measures
It is mandatory by law to include essential safety measures (ESMs) in every commercial property in Victoria. According to amendments in the Retail Leases Amendment Act 2020, the costs of ESMs can be transferred to the outgoing tenant or property owner if the building is being sold. Additional costs may be incurred if the vendor has built unauthorised structures on the property which do not conform to the ESMs outlined in the lease. Ask your property lawyers in Melbourne how to best navigate the costs of ESMs.
Conducting due diligence
All these and more come under conducting due diligence about the property before it is sold. You may want to think about the commercial viability of the property – whether it is located in a residential or industrial area, the Victorian plan scheme and zone it falls under, body corporate records if any. The ATO may also conduct a land tax assessment to ensure there is no outstanding land tax on the property. Be sure to conduct all these checks so no liabilities are conferred on you when you become the new property owner.
Find the right assistance when buying commercial property with P&B Law
Without the proper legal guidance, you may run into potentially disastrous issues when making the commercial property purchase of your dreams. But when you consult with the right property lawyers in Melbourne you can be assured of peace of mind. Make an appointment with P&B Law today and our team of legal experts can answer all your commercial property concerns.