Commercial property looks like residential property with bigger numbers. It isn't.
The standard protections residential buyers take for granted mostly don't apply, the tax treatment is different enough to move the price by ten per cent, and the property usually comes with tenants attached. Here's what actually changes.
Commercial conveyancing has no cooling-off period
Cooling-off in NSW is residential only. Buy a commercial or industrial property and you're bound from exchange, with no five-day window to reconsider.
That single fact reorganises the whole process. Everything a residential buyer might do during cooling-off — inspections, finance confirmation, a proper read of the contract — has to happen before you sign.
GST changes the number
Residential sales generally don't attract GST. Commercial sales usually do, and it's the most common source of confusion.
The critical question is whether the price is expressed as inclusive or exclusive of GST. On a $2 million property that's a $200,000 difference, and it is entirely possible to misread it.
Where the property is sold as a going concern — broadly, a tenanted property sold with the lease in place — the sale may be GST-free, but every condition has to be met. The buyer must be registered for GST (or required to be), the parties must have agreed in writing that the supply is of a going concern, the seller must supply everything necessary to keep the enterprise running, and the seller must carry on that enterprise right up to the day of the sale.
The one that catches buyers is registration. Buying through a company incorporated last week and not yet registered for GST is enough to lose the concession — and if the conditions aren't satisfied, GST applies after all, and someone has to pay it.
If you're registered for GST you may be able to claim an input tax credit, which changes the real cost again. That's a question for your accountant, and it's worth asking before you make an offer rather than after.
The property comes with tenants
Most commercial purchases are of tenanted property, which means you're not just buying land and a building. You're buying a stream of income governed by a lease you didn't negotiate.
What matters:
- How long is left on the term, and what options to renew the tenant holds
- How rent is reviewed — fixed increases, CPI, or market review, and when
- Who pays outgoings — rates, insurance, land tax, strata levies. Commercial leases vary enormously here, and it directly determines your net return
- What security exists — bank guarantee or bond, and whether it transfers to you
- Whether the tenant is actually paying, and has been
The lease should be read in full before exchange. A property with a good yield on paper and a tenant three months in arrears is a different asset from the one in the marketing material.
Due diligence is broader
There's a structural reason this falls on you. The prescribed disclosure documents a NSW vendor must attach to a residential contract — planning certificate, drainage diagram, title and plan — are a residential protection. A commercial vendor has no equivalent statutory obligation. What you don't ask for, you don't find out. Caveat emptor is not a figure of speech in commercial property.
A residential buyer checks the title, the planning certificate and the building. A commercial buyer checks all of that plus:
- Permitted use under the zoning, and whether the current use is actually approved
- Development consents and any conditions attached to them
- Contamination, particularly for anything industrial or formerly industrial
- Fire safety compliance and current certification
- Disability access obligations
- Outgoings history, so the numbers you're relying on are real
Some of this sits outside a conveyancer's scope and needs a building consultant, a town planner or an environmental specialist. Part of the job is telling you which questions need someone else.
Duty works the same way, minus the relief
Transfer duty on commercial property uses the same general scale as residential, but the concessions that soften residential purchases — first home buyer relief in particular — don't exist here.
It cuts the other way too. Premium transfer duty and the foreign purchaser surcharge both apply to residential land only, so a commercial purchase escapes them. For an overseas buyer that difference is substantial.
Where the purchase includes business assets as well as land, how the price is apportioned matters. Get that wrong and you'll pay duty on more than you should, or find the assessment reopened later.
Land tax is also a live issue: commercial property doesn't get the principal-place-of-residence exemption, so it's an ongoing cost to factor into the return.
Settlement periods are usually longer
Residential settlements run to a standard 42 days. Commercial matters often need longer, because there's more to verify and the finance is typically more involved.
Don't compress it to win the deal. The time is doing something.
How we handle commercial matters at Malko Conveyancing
Malko Conveyancing acts on commercial purchases and sales. The first thing we do is read the contract and the lease properly, then tell you in plain language what you're taking on — the GST position, the lease terms that affect your return, and what the due diligence has to cover.
Where a matter needs a specialist we don't replace — an environmental consultant, an accountant on the GST treatment, a solicitor where there's a dispute — we'll say so early and work alongside them.
If you're considering a commercial purchase, book a free 15-minute call before you make an offer. The commercial mistakes that cost real money are almost all made before exchange, and almost all avoidable.
Tanya Kats is the Director of Malko Conveyancing and a Licensed Conveyancer in NSW. This article is general information and not legal advice for any specific matter.