Purchasing a commercial property is a sensitive legal process that each investor ought to comprehend. It is vital to examine some components in this checklist to avoid property disputes or litigation that may arise when investing in a property.
It also helps eliminate any uncertainty that might emanate when analyzing the benefit or cost of each commercial property transaction. It will show the investor what strategies and decision to take for a particular commercial property investment as it creates awareness of what is being bought.
Property buyers will be able to determine the legal suitability of a commercial property and hence, be able to weigh out what kind of business will suit the property. When an investor keenly follows this legal checklist, the real property worth will be enhanced. It highlights some crucial legal things that an investor ought to consider to make the commercial property buying a painless exercise.
Legal things to perform in respect to a Commercial Property
- Engage a conveyancer
Your legal journey to commercial property ownership usually commences with the conveyance process. A conveyancer or solicitor will be needed to take care of all the legalities that you will undertake.
There are plenty of conveyancers around, some are non-qualified, and others are qualified. Most law firms usually source registered conveyancers since they are experts in undertaking conveyancing work. A conveyancer that you employ will look at corporate body constraints, permitted uses, national or local planning controls, and heritage overlays.
As an investor, you will constantly seek advice and air concerns regarding the commercial property you intend to buy to your conveyancer or solicitor to get a better direction.
- Be aware of the sales process
The sales process is not the same in Australia since conveyancing tend to differ from territory to state. For instance, it is possible to buy private treaty sales through a ballot, but with auctions, especially those found in bigger cities, there exists no cooling off. Hence, it is crucial to understand and know the process which you are engaging in before you commence.
- Examine the title
There are buildings in Australia that are under a freehold title. However, most of the existing titles of different property types have their legalities. That is why it is crucial to tour the local authorities and land registry to examine the kind of title of the commercial property you intend to purchase. There is a kind title form introduced in 1961 in Australia known as the Strata title. It is a kind of system that handles legal ownership in some structures of buildings like warehouses, retail shops factories, villas, townhouses, commercial offices and other units.
A company title was utilized to effectively validate the purchase of any part of a building before 1961, and even, some older buildings are still under such title. All-in-all every system has its legalities as well as pros and cons.
You can notify a property lawyer to accompany you when researching on the property and doing a strata search before you purchase the property. Let the conveyancer guide you through the kind of regular levies the council expects you to pay.
- Carry out the paper work effectively
When buying a property, the legal paper work needed will vary from state to territory. The legal paper work process entails the following major documents and events:
Contract paper work
A contract of sale or contract note that has all the information about the property on sale will be prepared with the vendor’s solicitor. The contract can be sometimes very complex like a property being sold off the plan. The settlement date should be well specified in the contract, whether 90,60 or 30 days.
There are other documents that will be attached to accompany the contract like a Certificate of Title, a plan for the land, a zoning certificate, and drainage diagram to confirm existing ownership as well as iron out any encumbrances that may be on the property.
When it is signed at “exchange”, the contract will be deemed binding. It will occur at the auction or after a deposit is paid as part of the agreed private treaty sale price.
Six weeks after the contracts are exchanged the settlement takes place at a specific date to pay the remaining amount. Later on, depending on the state or territory, the stamp duty will be settled within 30 days from the time the settlement was made.
It is the duty of the conveyancer to finalize the land transfer document during the time of settlement. Check if the property differs with the land registry plan and inform the changes to the land registry. If there is any fees charged by the local authorities or Land Registry, the conveyancer will make necessary adjustments.
Your conveyancer or solicitor will give your lender the necessary documentation incase a loan finances the property. A mortgage deed will provide the mortgage lender the interest and legal right of the commercial property at the time of exchanging the property. The new commercial property will act as the security for the mortgage for you as the borrower.
There are two ways of ownership which you can opt when purchasing a property from another person: tenants in common or joint tenants.
- Carry out proper inspection
Another crucial component of the legal checklist when buying a commercial property is building inspection.
For instance, it is important to examine whether the boundaries of the commercial property are rightly positioned. Check also whether certain requirements are met when installing plumbing and electric works. The council has to approve any renovation that has been made on the property. A proper pest and building inspection helps to uncover potential fault that you may not be aware.
- Income tax deductions
You can claim necessary tax deductions for property expenses when your property is used to run a business. The tax deductions related to the commercial property ownership are maintenance expenses and interest on loan for the purchase of a property. It is essential to safely keep any requisite records of expenses so that you can easily claim the deductions you are entitled.
A commercial property investor is eligible to claim any GST that has been included in the purchase price of the commercial premise you intend to buy.
GST on other expenses that are associated to the property you are purchasing are also claimable like GST on on-going running expenses and solicitors’ fees. When you buy a property as a GST-free supply or from a person who has not registered for GST, you can claim any related GST. Likewise, if are not registered for GST or if the seller has used a margin scheme to calculate GST, then, you can claim.
From a legal perspective, whenever an investor is purchasing a commercial property, whether a resale or a newly constructed one, the investors should make the necessary effort to consider all the items described in this checklist. As long as you tick off this legal checklist, you will fully enjoy the freedoms that come with owning a commercial property like the right to renovate, bequeath, invest, buy or sell.