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Considerations when you buy industrial property or commercial real estate

Entering the commercial property market requires a strategic approach and expert legal guidance. These properties offer unique opportunities for investment, expansion, and diversification of your portfolios, but they require careful consideration of the following key factors.

Whether you're a seasoned investor or new to the commercial and industrial real estate scene in Victoria, being well-informed about the property's zoning, potential lease agreements, environmental factors, structural integrity, and GST implications is crucial for a successful and smooth transaction.

Investigate zoning and planning

Before committing to buying commercial property, it's essential to verify the zoning of the land. Zoning laws affect how a property can be used, and ensuring that your building plans align with these regulations is a must.

Contact the local council to confirm that commercial and industrial activities are permitted on the property and to check for any potential zoning or planning breaches. This step not only avoids legal complications but also ensures that the property meets your investment criteria and business needs.

Review current lease agreements

Many commercial and industrial properties are sold with existing leases or tenancies. If the property you're buying has a current tenant, review the terms of any existing lease agreements thoroughly. These terms can significantly affect your intended use of the property and may impose limitations on modifications or renovations you plan to undertake.

Understanding the duration, obligations, and rights under these leases will help you assess the property's suitability for your objectives and ensure a smooth transition of ownership without disrupting existing operations.

Check any contamination concerns

Environmental factors play a significant role when buying industrial property. Potential contamination is a concern that requires attention. Making the relevant enquiries with the Environmental Protection Authority (EPA) to ascertain the property's environmental status is a critical step.

Contaminated sites may require extensive cleanup efforts that can be costly and time-consuming, impacting the viability of your investment. Conducting due diligence on the environmental health of a property protects you from unforeseen liabilities and aligns with responsible business practices.

Inspect building structure and defects

Unlike residential properties, commercial and industrial buildings do not come with specific statutory warranties regarding their structure. It's advisable to have a professional inspection conducted to identify any defects or issues with the building's structure.

These inspections can uncover problems that may require significant financial investment to rectify, affecting the property's value and your budget. A thorough understanding of the building's condition allows for informed negotiation and planning for future maintenance or renovations.

Consider GST implications

Whether the property is sold inclusive or exclusive of GST has substantial implications for your investment's overall cost. Ensuring that the contract of sale clearly outlines the GST position is essential to avoid unexpected expenses. Understanding your GST obligations and rights is crucial for financial planning and compliance with tax regulations.

Your comprehensive checklist for buying commercial property

Our expert property lawyers have put together a comprehensive checklist to ensure a thorough review before you buy commercial or industrial property:

  • Review the contract
  • Get expert legal advice
  • Research the market
  • Plan budgets and funding
  • Confirm rates, taxes, and government charges
  • Inspect the land and surrounding area
  • Look into zoning and town planning
  • Measure the land
  • Document all promises in writing
  • Check for any restrictions or easements
  • Understand settlement terms.

By addressing these considerations, property investors can confidently navigate the commercial and industrial real estate market, making informed decisions that drive investment strategies and business goals. Contact us for expert, commercially-sound legal guidance.

Please note: The information covered in this guide is general and should never be substituted for professional legal advice. Contact us for further information.