Frequently Asked Questions About Selling and Buying Commercial Property

At the very beginning. We want to hear from you when you have a plan! Once you have found a property you are interested in, give us a call and we can discuss the preliminary things you should be thinking about to protect yourself and ensure you are purchasing the right property for you. We can work with your accountant and other important advisors to ensure you are covered from every angle.

It is all dependent on your current circumstances and existing assets. When buying a commercial property, you want make sure your assets are protected, and you are best placed from a tax and financial position, as well as the most cost effective method. We can work with your accountant to ensure the following are considered:

• Whether to purchase as an individual, company, trustee or other entity such as self
  managed super fund;
• Tax implications and structuring and
• Land tax and other holding costs.

Commercial contracts are generally not subject to a cooling off period, unlike residential contracts, which have a 5 day cooling off period. This means that you are unable to terminate the contract and recover your deposit if you change your mind (unless of course the contract is subject to other conditions which may allow you to).

Generally 10% of the purchase price is standard. However, depending on the seller’s appetite to negotiate, the deposit may be lower, and in rare cases there may be no deposit payable. If the deposit is more than 10% or non refundable, it could be classed as an instalment contract, and your rights may be significantly different. More on this here.

If there is an agent, the deposit will be paid into their trust account for them to hold until settlement has occurred. Once settlement has been effected, they will then release it to the seller ( accounting for any commission payments). If there is no agent involved, the deposit is generally paid into the sellers solicitors trust account. The reference schedule of the contract sets out the details of payment, and when it will need to be paid by. Due to cyber increases in recent times, always confirm verbally the payment details in which you are transferring your deposit too.

An instalment can be created for many reasons:

• The deposit is more than 10%;
• The deposit is stated to be non-refundable in all circumstances;
• The buyer is given a rebate off the purchase price which makes the deposit more than 10% of the rebated purchase price; or
• The buyer is required to pay money to the seller before receiving a transfer and the amount under the contract exceeds the market value.

An instalment contract alters yours and the sellers rights significantly, from a standard form contract.

If you default in the payment of any instalment or part of the purchase price (other than a deposit),the Seller cannot terminate the Contract until 30 days after having served a notice giving you 30 days within which to make payment. If you choose to make payment within the 30-day period(including any default interest payable under the Contract) then the Seller cannot terminate. This means that where the default is in the payment of the balance purchase price, you can effectively obtain another 30 days in which to settle.

Body corporate disclosures:

In addition to the disclosure of information required by the Body Corporate and Community Management Act 1997, s 206, under the Contract for Commercial Lots in a Community Titles Scheme, the Seller must notify you of any notices of body corporate meetings they receive and of any resolutions passed after the Contract Date. If you are materially prejudiced by any resolutions passed after the Contract Date, you may be entitled to terminate. If disclosure is not made before settlement, you may sue for compensation. Please tell us if you are or become aware of any of the following:

• any proposal to record a new Community Management Statement or a notice of meeting for that purpose (which may include proposed adjustments to lot entitlements within the Scheme);
• whether all body corporate consents to improvements made by the Seller to common property are not in place;
• whether the exclusive use allocations given to the lot are recorded or changed in the Community Management Statement (for example, car parking);or
• a change in the insurance details for the building and public liability for the body corporate.

Implied warranties given about the Body Corporate:

The Body Corporate and Community Management Act 1997 (Qld) (‘BCCMA’) also contains certain implied warranties that the Seller is deemed to have given you. Please tell us if you are, or become aware of any of the following:

• any patent or latent defects in the common property or body corporate assets (for example, substantial building defects that require repair which can include common boundary walls of the lot or exclusive use areas and may include repairs required as a result of issues such as concrete cancer, structural or water issues and rectification works required because of the use of combustible cladding on the building);
• any actual or contingent or expected liabilities of the body corporate not part of the body corporate’s normal operating expenses (for example, significant debts or judgments or other liabilities that may result or have resulted in the levying of a special contribution); and
• anything else you are aware of regarding the body corporate’s affairs which may affect you.If any of the above exist and are not disclosed to you before entering into the Contract you may have a right to terminate up until 14 days after your copy of the Contract is received by you or someone else acting on your behalf. The right of termination given under the BCCMA does not limit your rights in relation to a breach of warranty and, if you do not exercise that right and you proceed to settle the Contract, you may have a right to pursue the Seller for compensation for any loss you suffer or incur as a result of the breach of warranty. We recommend you instruct us to conduct a full search of the body corporate’s records so we may determine if any of the above exists and any potential right of termination or to compensation.

Depending on how far the transaction is along, you may not be able to change your buying entity once the contract is executed. The seller may not agree, you may be liable to pay double stamp duty or the current contract may need to be rescinded and a fresh contract be entered into, incurring you additional costs.

Make sure you pay your deposit by the due date. Our team will be in touch with you to discuss the key contract terms, and critical dates and discuss the next steps. We will have some initial paperwork for you to complete to get your matter underway.

In commercial contracts, the property is generally at your risk from 5pm on the first business day after the contract is fully signed. The contract will specify when risk in the property passes to you, so ensure you check this out. Despite this, the Seller has an obligation until settlement to take reasonable care of the property. If the risk in the property has passed to you and the property is damaged between the contract date and settlement ( for example fire or vandalism) you are still required to settle in accordance with the contract ( unless a residence is so destroyed or damaged as to be unfit for occupation). If the contract provides for risk to remain with the Seller until settlement, you may still be required to settle in accordance with the Contract despite the damage. We strongly recommend that in all cases you take out insurance from the day risk passes to you. Depending on what property you are buying will have some effect on what insurance you should arrange. We recommend in all cases you arrange property insurance cover for building, contents and public liability.

If you are buying a lot under a building format or volumetric format plan of subdivision, the body corporate must insure for full replacement value, each building in which a lot in the scheme is located.

If the lot is created under a standard format plan, in one or more cases a building on one lot has a common wall with a building on an adjoining lot, the body corporate must insure for full replacement value, each building that has a common wall with a building on an adjoining lot.

If you are obtaining finance it will be necessary for your financier to be noted on the policy as mortgagee.

The due diligence enquries required differ depending on what property you are buying, and your particular concerns regarding the property. Before you buy a property, you should be aware of a range of issues that may affect that property and impost restrictions or obligations on you as the owner of the property. Due diligence generally comprise of:

• Physical investigations of the property; and
• Legal due diligence which we will undertake for you.

Physical due diligence considerations:

• Valuation of the property
• Capital expenditure forecasts
• Environmental problems such as asbestos or contamination
• Tenants compliance with the lease terms
• Site identification survey

Legal due diligence considerations:

The purpose of legal due diligence is to enable us to confirm whether:

• The seller has title to the property and there are no impediments to the sellers ability to transfer title to you;
• No other interests affecting the sellers title to the property
• You will be entitled to use the property lawfully and in the way you intend;
• The seller has complied with its disclosure obligations relating to the Contract.

Stamp duty is a state tax which is payable on dutiable transactions in Queensland. It is calculated on the Property’s dutiable value which is generally the higher of the consideration payable under the Contract and the Property’s unencumbered market value. A transfer duty is applicable to each transaction, you must ensure that the Buyer named in the Contract is the person or entity that you intend to own the Property. Otherwise, you risk two or more assessments of transfer duty, which can increase the amount payable. Our team will advise you of your stamp duty payable, or you can calculate the amount payable here.

Your transaction may be exempt from stamp duty if:

1. the Contract is terminated or comes to an end;
2. it is a transfer pursuant to a Family Court order,
3. maintenance agreement or binding financial agreement;
4. it is a transfer between de facto spouses under a recognised cohabitation or separation agreement;
5. it is the distribution of a deceased’s property to
6. beneficiaries, surviving joint tenants or to a trust set up to distribute the estate
7. the Property was won in an art union competition;
8. you are a registered charitable institution (for example a religious body or educational institution);
9. the transfer is to correct a clerical error in a previous transaction;
10. it is a transfer between complying superannuation funds or entities;
11. it is a transfer to a registered industrial organization under the Industrial Relations Act 1999 (Qld).

You should contact us as soon as possible if you think that any of these exemptions may apply.

When you become the owner of the property, you will assume responsibility for all rates and statutory charges payable in relation to it. The standard reiq contract terms provide for rates, land tax and other outgoings such as rental adjustments and bond, to be apportioned as adjustments to the price at settlement.

Generally, you are entitled  (after giving reasonable notice to the Seller) to access to the Property for specific reasons and to enter the Property once for the purpose of conducting a pre-settlement inspection. We suggest you make arrangements with the Seller’s agent to access for such things as meter readings and valuations. You should also arrange to inspect the property closer to settlement and check that no fixtures are removed, or there are no other anticipated issues with the seller providing vacant possession.

You should let us know if the seller has made any changes to the property, as this may entitle you to terminate the contract or claim compensation.

E-conveyancing allows for an electronic settlement of a conveyancing transaction through an online exchange such as PEXA. The system operates across Australia and is mandatory for a number of transactions across Queensland.

The system allows for the preparation and signing of documents and their lodgement in the Land Titles Office as well as completion of financial transactions involved in a conveyance ( such as settlement money transfer and stamp duty payments). This means a more streamless process for everyone involved, with less paperwork and reduces the delays of getting all parties to physically sign the original documents, increasing efficiency. Not only does the process make it unnecessary to attend a physical settlement for exchange of documents and funds, when the exchange occurs, cleared funds are credited to the recipient’s account within a very short time. This has particular benefits for a Seller who will not be required to wait for cheque clearing procedures following a settlement.

If applicable, we recommend you instruct your solicitor to thoroughly review all leases as part of the legal due diligence process. You or us should make enquiries prior to signing the contract such as:

1. Rental terms
2. Is the rent or other payments in arrears or current?
3. Is there any subsisting lease breach known to the Seller?
4. Is the Seller in dispute with the tenant on any issue?
5. Are there any special agreements between the Seller and the tenant that do not appear in the Lease?
6. Is there any correspondence between the Seller and the tenant regarding the exercise of any option or a rent review?

What searches are required to be conducted, are defendant on the type of property you are buying, and what your concerns are. Our standard searches list is found here.

As soon as possible. You must apply for finance required, and tell us before the finance due date whether or not your finance approval is satisfactory to you. Finance approval is often subject to conditions including satisfactory valuation. If so, it is up to you to satisfy any conditions of the finance approval before notifying us of approval. Give us a copy of your finance approval so we can check there are no hidden conditions. We will then satisfy it with the Seller.

We will send you a purchase pack with all your important documents, such as the contract, settlement statement, trust account receipts and any other associated documents. You should diarise any key dates such as lease renewals or rent reviews. Now you can sit back and enjoy your new investment!

Depending on the nature of your transaction, will depend on the costs for us to act in the transaction. We will give you a quote at the start of your transaction, so you know what you are looking at. See our fee schedule here.

The Work Health and Safety Regulation 2011 (Qld) requires workplaces to have an asbestos register unless:

• the workplace is a building that was constructed after 31 December 1989;
• no asbestos has been identified at the workplace; and
• no asbestos is likely to be present from time to time.

Where an asbestos register is required, the person with management or control of the workplace must ensure that a register is kept current which identifies any asbestos at the workplace or likely to be present at the workplace. If asbestos has been identified at a workplace or is likely to be present at a workplace, an asbestos management plan must also be prepared.

The Standard Contracts do not require the Seller to provide a copy of any asbestos register or asbestos management plan to you although the Work Health and Safety Regulation 2011 (Qld) does place an obligation on a person relinquishing control of a workplace to ensure, so far as reasonably practicable, that the asbestos register is given to the person assuming control.

Where your Contract has not been signed by both parties, we can request the inclusion of a special condition requiring the Seller to supply you with any asbestos register and management plan for the building.

If your Contract has already been signed, please chat to us about the Sellers obligations.

Following completion you will need to comply with any applicable laws regarding the identification and management of asbestos on the Property. If you buy property with asbestos or other hazardous materials (e.g. dust or toxic chemicals), other health issues might become relevant for any occupants of the property. Depending on the circumstances, this may also give rise to rights in personal injuries against the property owner or material manufacturer. This is outside the scope of our retainer. If this becomes an issue, you might want to retain a lawyer urgently as time limits apply and any delay might compromise available rights.

Unless specified in the contract, the seller is not bound to allow you early possession of the property. If agreeable, you will likely be required to maintain the property in substantially the same condition at the date of possession except fair wear and tear, and that you must insure the property to to the sellers satisfaction. They are also likely to require that you indemnify them against any expense incurred as a result of your possession. We urge you to discuss with us if you have agreed for early possession so we can ensure you are covered from any costs the seller may try pass on to you, or any other risk for loss.

If you are foreign person or are a trustee of a foreign trust, you may need to:

1. obtain a notification from the Foreign Investment
2. Review Board under the Foreign Acquisition and Takeovers Act 1975 (Cth) (‘FAATA’) that it has no objection to your acquisition of the Property (‘No Objection Notification’); and
3. notify the Department of Natural Resources, Mines and Energy (‘DNRME’) under the Foreign Ownership of Land Register Act 1988 (Qld).

Additionally, a foreign person who has purchased agricultural land or water entitlements in Australia must register their acquisition on the Land and Water Register maintained by the ATO within 30 days of settlement.

Give us a call if you think this applies to you.

Our team will give you a call the morning of settlement to confirm you are happy to proceed, and discuss the process. Our team will finalise the process in the background, and sign off for settlement on the electronic workspace. You can continue your day and our team will call you once everything is effected! All you will need to do is wait for the call and arrange for collection of the keys, and then celebrate!

If you have concerns regarding the properties use, let us know and we can assist you. You can also call your local council to enquire regarding the current use and zoning and planning of the property.

In Standard commercial contract, the seller is required to give to you as buyer at settlement, a certificate of occupancy which certifies the property’s use for commercial, and signifies that the structure is fit for occupancy and compliant with all building and housing codes.

The property is at the buyer’s risk from 5pm on the first business day after the contract date. Despite this, we strongly recommend you maintain your insurance policy until we confirm settlement has been effected. There are many circumstances in which the risk will pass back to you without notice (even after the contract is unconditional) and failure to maintain adequate insurance could result in significant loss to you.

You are required to notify the buyer of the following:

• Any patent or latent defects in the common property or body corporate assets.
• Any actual or contingent or expected liabilities of the body corporate not part of the body corporate’s normal operating expenses.
• Anything else you are aware of regarding the body corporate’s affairs that may affect the buyer; and
• Any notices you receive from the body corporate meetings or any resolutions that have been passed after the contract date.

You’re required to disclose the key terms of any existing leases in the contract and provide a copy of all leases within 7 days after the contract date. We must provide the buyer’s solicitor with copies of all lease documents & service agreements and a statement of the rent & arrears of rent for each lease. The buyer then has an additional 7 days to terminate the contract if they are not satisfied with the lease terms and conditions.

Land tax is a state tax that may be applied to your land if it meets a certain threshold. The amount of land tax which is applied to your land will depend on the total taxable value of your freehold land at the end of the financial year. The QLD Government determines the taxable value of each parcel of land separately and then combines the value of your land to determine the total taxable value.

If tax is to be applied to your land, you will receive a land tax assessment that will include each value and how the liability was calculated. It’s important to pay your land tax when due and owing as when you go to sell your property, a land tax search will be conducted and if land tax is payable there will be an adjustment made at settlement and this amount will be taken out of the settlement proceeds.

A dispute with a neighboring property regarding fences, trees or anything connected to the property may need to be disclosed to a potential buyer. If you’re aware of any of the following you must tell us:

1. Notices to fence from a neighbor;
2. Applications to QCAT in relation to fencing or trees; or
3. QCAT orders in relation to fencing or trees affecting the property.

You’re also obligated under the contract to promptly give the buyer a copy of any notice, proceeding or order, received after the contract date that affects the property.

You must not, after the contract date, give any notice to another party or seek or consent to any order or agreement that affects the property without the buyer’s prior written consent.

Every commercial property that was built after 1 April 1976 is required to hold a Certificate of Occupancy if building approval was issued. The Certificate of Occupancy contains information about:

• The permitted use of the building;
• The type of building class;
• Any ongoing maintenance requirements;
• Fire safety requirements; and
• Any other special requirements to be compliant with the Council’s regulations.

If you do not hold a Certificate of Occupancy or you don’t know if one was issued with the building approval, you can obtain one from your local government.

If you’re selling your property, it’s best to query whether you do hold a Certificate of Occupancy before you enter a contract as obtaining a Certificate of Occupancy from the council can be subject to delays and if the certificate is not ready before settlement, you may be at risk of being in default under the contract.

You should pay the council and water rates for the property before the due date. An adjustment will be made at settlement in your favour, and you will be reimbursed for these costs. You will only be liable for the portion of the rates from when you still owned the property.