Australian Legal Documents


Commercial property licences

Australian property licence agreements.

4

How to buy a commercial property

Finding your property

If you are intending to buy a commercial property, you should contact a real estate agent specialising in commercial property.

Obtaining information on the property

If you find a suitable property you should have a valuation prepared for it. You should also obtain a Land Information Memorandum (LIM) on the property from your local council. These documents will provide you with much information important in assessing the property's value and potential uses.

The LIM will include, among other things, any special characteristics, the permitted uses of the land, and any relevant consents or notices issued by the council. See How to obtain a Land Information Memorandum (LIM).

What should be the ownership vehicle for the purchase?

You will need to decide what type of entity you should use to buy the property. The options include:

  • buying as an individual
  • buying through a company (see How to form a company)
  • buying through a trust (see How to form a trust)

Your lawyer and accountant will help you in deciding on the best ownership vehicle for your situation.

The return from the property

The basis of any successful purchase of a commercial property is the return from the property. The value of the lease is therefore paramount. You should check the term of the existing lease and the financial strength of the tenant. Where the tenant is a company, you should check whether any personal guarantee has been given by a representative of the company. For information on commercial leases generally, see How to enter into a commercial lease.

Making an offer

Before you make any offer on the property you should discuss it with your lawyer.

If this is not practicable, you should make the offer conditional on your lawyer giving his or her approval that the title to the property is in order, and also his or her approval of zoning matters and of any matters disclosed by the Land Information Memorandum obtained from the council.

Your offer should also be subject to your approval of the terms and conditions of all leases and, where appropriate, to your borrowing being approved on terms satisfactory to you.

Cautionary notes
  • At an early stage it is advisable to discuss with your bank the upper limits for any borrowing that you may need to do.
  • A lawyer will ensure that all documents are correct and will generally protect your interests. As well as checking the LIM, your lawyer will check the certificate of title to ensure that any prior mortgages are discharged and that any easements are correctly established (see How to create an easement). Your lawyer will also advise you on relevant tax matters such as whether the purchase price includes or excludes GST.

How to enter into a commercial lease

Introduction

The main difference between a commercial lease (or "tenancy") and a residential lease is that the RESIDENTIAL TENANCIES ACT 1986 does not apply to commercial leases. Commercial leases are instead governed by the PROPERTY LAW ACT 1952. (For information on residential tenancies, see How to enter into a residential tenancy.)

With a lease the landlord is referred to as the "lessor" and the tenant is referred to as the "lessee".

What should be included in the lease agreement?

In order to be valid, a commercial lease must include the following elements:

  • The lease must be for a time period that is certain, unless the lease is periodic (see below).
  • The leased premises must be certain.
  • The tenant must be granted the legal right of exclusive possession of the property.
  • The lease must be properly created as a legal contract.

A lease will ordinarily be in writing, although this is not necessary for the lease to be valid. A written lease ensures that the parties know exactly what their rights and obligations are.

The parties are at liberty to negotiate specific terms in the lease agreement that suit their particular requirements. Because of the nature of commercial property and its uses, the parties may wish to provide in the agreement for issues such as ownership of fixtures and fittings and the intended uses of the property.

Periodic and fixed-term leases

An important distinction is between periodic and fixed-term leases. With a periodic lease there is no requirement for the beginning and end of the lease to be certain; instead, the lease ends on notice being given by either party. A fixed-term lease, on the other hand, requires a certain duration for the lease – that is, a certain starting and ending time.

If the lease agreement does not specify otherwise, a lease will be a monthly periodic lease, which means that either party can terminate it by one month's notice in writing.

The landlord or tenant may be a company

Frequently one, if not both, of the parties to the lease will be a company. A landlord (lessor) may require a personal guarantee from a representative of the company, usually a director or major shareholder. The effect of this is that the guarantor will be personally liable for any amount owed by the company in the future.

The rights and obligations of the parties

The rights and obligations of the landlord and tenant are provided for in the PROPERTY LAW ACT 1952, and are implied by the law into all commercial leases. These include the following:

  • The tenant (the lessee) must pay the rent when it is due under the lease.
  • The tenant must keep the premises in good repair.
  • The landlord (the lessor) is entitled to enter the premises at all reasonable times to view the state of repair. The landlord can serve the tenant with a notice requiring the tenant to repair any defect within a reasonable period of time specified in the notice.
  • The landlord may re-enter the premises if the rent (or part of it) is in arrears for a period of 21 days. The landlord can also re-enter if the tenant has failed to perform or observe any of the terms of the lease. The landlord can exercise these rights to re-enter the premises either personally or through an agent. If the landlord does re-enter, this does not relieve the tenant of liability for the overdue rent or other breach.

Registration of leases

The parties have the option of protecting their interests by registering the lease on the Certificate of Title for the property.

Cautionary notes
  • With commercial leases often very large amounts of money will be involved. Given the changeable nature of business life, it is very important that certainty is achieved as far as possible by providing in the lease agreement for any disputes or other difficulties that may arise.
  • The rights and obligations that arise under commercial property law may lead to harsh consequences for one or other of the parties. It is therefore strongly recommended that in negotiating a lease you seek advice from a property lawyer who specialises in this area.

NZ$39.00

This commercial property licence for a suite of offices has been drawn for short terms only. Suitable for use throughout Australia.

Document Delivery Format:Delivery format: Download MS Word file
Document Source:Complies with current Australian law
Document User Guide Available:Comprehensive document Guide Notes
Document Assembly Method:User fills in template blanks
Document Preview/Sample Available:No document preview
Help Support Email/Telephone:Limited - not legal advice
Country:Australian jurisdiction
State:Select State
MainSiteUrl:www.NetLawman.com.au
NZ$29.00

Business property licence to establish a proper cost for tax and partner purposes. Suitable for use throughout Australia.

Document Delivery Format:Delivery format: Download MS Word file
Document Source:Complies with current Australian law
Document User Guide Available:Comprehensive document Guide Notes
Document Assembly Method:User fills in template blanks
Document Preview/Sample Available:No document preview
Help Support Email/Telephone:Limited - not legal advice
Country:Australian jurisdiction
State:Select State
MainSiteUrl:www.NetLawman.com.au

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Australia
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