Commercial property purchase.
Review before exchange.
GST treatment that wasn't checked. Vendor warranties that don't cover what you assumed. Tenancy variations that weren't disclosed. Kontractually reviews commercial property purchase agreements against your playbook before exchange.
No credit card required. First 3 reviews free.
What changes when you review every clause before exchange.
You exchange on a $2.4M commercial property assuming going concern GST exemption applies. Post-settlement, the ATO determines the exemption didn't apply because one tenancy was vacant at completion. GST liability: $240,000 plus penalties.
Kontractually flags the GST clause and checks whether going concern conditions are explicitly warranted - including that all tenancies are current, the property is fully operational, and both parties are GST-registered. You get tax advice before exchange, not after.
You purchase a leased office building. The vendor provides a tenancy schedule showing 95% occupancy. After settlement, you discover two tenants have side letters granting 6-month rent abatements that weren't disclosed. Effective yield drops from 7.1% to 5.8%.
Kontractually checks vendor warranty clauses for coverage of all tenancy variations, side agreements, and incentive arrangements. Missing warranty coverage is flagged before you rely on the tenancy schedule for yield calculations.
Your due diligence condition gives you 14 days. You order a building report, environmental search, and strata records. The strata records take 12 business days. You either waive diligence on incomplete information or lose the deal.
Kontractually flags due diligence periods that are shorter than the typical turnaround for standard searches in your jurisdiction. You negotiate 21 or 28 days at the outset - enough time to complete all searches without pressure.
6 provisions to review in every commercial purchase agreement.
GST on commercial property depends on the transaction structure. The 'going concern' exemption applies when: the property is being operated as a business (typically, it must be leased and generating income), all things necessary to carry on the enterprise are supplied, and both parties are registered for GST. If the going concern exemption applies, GST is not payable on the purchase price. If it doesn't apply, GST at 10% adds significant cost. Margin scheme may also apply to reduce GST. Tax advice from an accountant is essential before exchange.
Standard commercial property due diligence: title search (registered encumbrances, caveats), planning certificate (permitted uses, zoning), building and pest inspection, lease review (all tenancy documents, rent roll verification), outgoings review, environmental search, strata records review (if strata), and PPSR search (personal property security charges). The contract should be conditional on satisfactory completion of due diligence to allow exit without forfeiting the deposit.
At minimum, the vendor should warrant: accuracy of the tenancy schedule (including all side letters, variations, and incentive arrangements), current outgoings amounts, absence of undisclosed environmental contamination, compliance with development approvals and building certifications, no current or pending disputes with tenants or authorities, and that the property is not subject to any compulsory acquisition notice. For investment properties, the vendor should also warrant that no tenant is in material default and that all disclosed rental amounts are actually being collected. Warranties that survive settlement (typically 12-24 months) give the purchaser recourse if issues emerge after completion.
A sunset clause sets a deadline by which all conditions precedent must be satisfied or the contract automatically terminates. In commercial property, sunset clauses typically run 30-90 days from exchange. If finance approval, due diligence, or other conditions aren't met by the sunset date, either party (or both) can terminate and the deposit is usually refunded. The risk for purchasers is a short sunset period that doesn't allow enough time for finance approval on complex commercial transactions. For off-the-plan purchases, sunset clauses can extend to 2-3 years - and vendors have historically used long sunset clauses to terminate contracts when property values rise, reselling at higher prices. Legislative reforms in some states now restrict vendor sunset termination rights.
Foreign persons (including companies with foreign ownership above certain thresholds) must obtain Foreign Investment Review Board approval before acquiring commercial property above the relevant monetary threshold. The threshold varies by property type and the purchaser's country of origin - free trade agreement countries have higher thresholds. FIRB applications take 30-40 days (and up to 90 days in complex cases). The purchase contract must include a FIRB condition if there is any possibility the purchaser is a foreign person. Failure to obtain FIRB approval before settlement is a criminal offence with significant penalties. Kontractually flags contracts where FIRB conditions may be required based on the purchaser entity structure.