It is a very exciting step when you purchase your own commercial premises. You perhaps move from being a tenant to being the landlord - and it may be your first foray into commercial real estate. For that reason it pays to take every opportunity to learn to reduce chances of things going wrong - either in the transaction or in the future. And it also pays to engage an experienced commercial lawyer to make sure choices are appropriate and that all goes smoothly!
Here Are 4 Quick Tips To Help You Get Started
1. Purchasing Entity – there are a number of different entities which can purchase commercial premises, namely: an individual, company, trust, SMSF or a combination of these. We strongly recommend that you obtain professional accounting and legal advice prior to entering into a contract to ensure your best tax and asset protection needs are considered. Purchasing in the incorrect entity at the beginning can mean additional stamp duty and capital gains tax in the future if you decide to transfer to a different related entity in the future.
2. GST – the sale and purchase of a commercial premises will generally attract GST. GST will normally be imposed if the Seller is registered or required to be registered for GST. There is however an exemption to this requirement if the property is sold as a “going concern”. Again, obtaining proper legal and financial advice prior to enter into a contract will assist with minimising any GST which may be payable.
3. Zoning – Is a key ingredient to your commercial property and business success. Zoning is governed by the local council and is normally split into 4 general categories: Commercial - Industrial - Residential -or- Rural. Make sure you make proper enquiries with your local council regarding zoning, including any current or future zoning restrictions which may apply. (Your lawyer can assist with this.) If you are thinking of purchasing your own premises you most likely have an idea of where your business is headed in the next 5 years - so make sure the premises is zoned properly to accommodate your needs now and in the future.
4. Due Diligence – conducting an investigation into the physical and technical aspects of a property are imperative. We can assist with conducting technical investigations such as contaminated land, town planning, title, easement, certificates of classification – just to name a few. We can also assist by asking the right questions of the seller or agent, including whether an asbestos report exists and who owns the air conditioners (if the premises was previously tenanted). Generally, a thorough due diligence investigation is not undertaken until a contract is signed. As such we can assist with drafting a special condition to be inserted into a contract which will allow you to terminate the contract should the results not be to your satisfaction.
Having a lawyer will provide you with protection you and give you the greatest choice options. Good luck!
- by Georgina Paterson, Commercial Lawyer, O'Shea & Dyer Solicitors, Townsville.