Commercial Settlements Perth: What Buyers and Sellers Need to Know

Buying or selling a commercial property in Perth is a very different process from settling a typical home.

The basic objective is the same — transferring the property from seller to buyer and making sure the money, documents and registrations are dealt with correctly — but commercial settlements often come with additional layers.

Contracts can be more detailed. GST may need careful consideration. A property may have existing tenants and leases. Due diligence can uncover issues that affect the transaction. There may also be companies, trusts, lenders, guarantees and other parties involved.

For buyers and sellers, understanding these differences before settlement can make the process far easier.

At Lifestyle Settlements, we assist in helping clients with commercial property settlements across Perth and Western Australia. Here are some of the key areas that make commercial settlements different and what to watch for along the way.

1. Contracts: Commercial Agreements Can Be More Complex

A residential property contract is certainly important, but commercial property contracts can involve considerably more detail.

The contract establishes the obligations of the buyer and seller and provides the framework for the eventual settlement.

Depending on the transaction, a commercial contract may deal with matters such as:

• GST treatment

• existing leases and tenants

• vacant possession

• finance conditions

• due diligence periods

• deposits

• fixtures, equipment and other inclusions

• adjustments at settlement

• special conditions

• settlement dates and extensions

• defaults and remedies.

This means the details agreed before signing can have a significant impact later.

For example, imagine purchasing a Perth warehouse that already has a tenant. The transaction isn't simply about transferring ownership of the building. The existing lease, rental arrangements, security deposit or bank guarantee and other landlord obligations may also need to be considered as part of the transaction.

Commercial buyers and sellers should therefore obtain appropriate legal, financial and tax advice where required before committing themselves to a contract.

Once the contract has been signed, the settlement agent can work from its terms to coordinate the conveyancing and settlement process.

2. Due Diligence: Knowing What You Are Actually Buying

Due diligence is another area where commercial property differs significantly from many straightforward residential transactions.

For a commercial buyer, the question isn't simply, "Do I like the property?"

The more important question is: Does this property, and the transaction attached to it, meet my requirements?

The scope of due diligence will depend on the property and the proposed use. It may involve investigating:

• the Certificate of Title

• mortgages, caveats and other encumbrances

• easements

• restrictive covenants

• leases

• zoning and permitted uses

• approvals

• building condition

• environmental considerations

• outgoings

• rental income

• tenant obligations

• access and parking arrangements.

A title search is particularly important. Landgate recommends obtaining a title search when purchasing or selling property because it can reveal encumbrances affecting the title.

Due diligence becomes even more important when a property is being acquired as an investment.

A building might look attractive and be in an excellent location, but an investor also needs to understand what sits behind the advertised yield. How long does the tenant have left on the lease? Are there options? Who pays the outgoings? Are there incentives or unusual obligations?

These questions may require input from solicitors, accountants, building professionals, valuers or other advisers.

A settlement agent doesn't replace those specialists. Instead, the settlement process brings together the contractual and conveyancing requirements so the transaction can proceed towards completion.

3. GST Considerations: Don't Leave Them Until Settlement Day

GST is one of the areas capable of adding significant complexity to a commercial property transaction.

Whether GST applies depends on the circumstances surrounding the transaction.

A commercial property sale may, for example, be treated differently depending on the GST registration status of the parties, how the property is being used and whether the transaction qualifies for a particular GST treatment.

One concept that frequently arises in commercial property transactions is a GST-free supply of a going concern.

A leased commercial property may potentially form part of a going-concern transaction when the relevant legal requirements are satisfied. However, this should never simply be assumed because a tenant occupies the property.

The parties should obtain appropriate tax and legal advice and ensure the contract accurately reflects the intended GST treatment.

The GST position can also affect transfer duty. RevenueWA states that where GST is payable on a transaction, the GST amount is included when determining its dutiable value.

It's also useful to distinguish ordinary commercial property GST issues from the specific GST-at-settlement withholding regime. The ATO's property settlement withholding rules principally concern taxable supplies of new residential premises and potential residential land. Commercial property transactions still require careful GST consideration, but the existence of GST does not automatically mean the purchaser follows the residential-property withholding process.

The practical lesson is simple: work out the intended GST treatment early rather than trying to resolve it immediately before settlement.

4. Leasing Issues: When the Property Comes With Tenants

Many commercial properties in Perth are sold subject to an existing lease.

That can turn what appears to be a property settlement into a transaction involving several interconnected relationships.

The buyer may effectively become the tenant's new landlord after settlement, so the lease needs careful attention.

Important matters can include:

• current rent

• rent-review dates

• remaining lease term

• options to renew

• responsibility for outgoings

• bonds and security deposits

• bank guarantees

• incentives

• make-good obligations

• arrears

• insurance obligations

• maintenance responsibilities.

There is also an important distinction between buying a property subject to a lease and transferring a leasehold interest.

Where a registered lease itself is being transferred, additional requirements may apply. Landgate notes, for example, that the terms of a registered lease can require the lessor's consent before a transfer of that lease can be registered.

This is one reason commercial settlements need to be approached according to the specific transaction rather than treated as a larger version of a residential settlement.

5. Settlement Complexities: More Moving Parts to Coordinate

Settlement is where all the pieces finally need to come together.

For a straightforward property transaction, this involves transferring funds and completing the legal transfer of ownership. Commercial transactions can have considerably more moving parts.

Possible issues include:

• discharge of an existing mortgage

• registration of a new mortgage

• caveats

• multiple titles

• company or trust purchasers

• leased premises

• adjustments for rent and outgoings

• outstanding rates

• transfer duty

• GST treatment

• other contractual adjustments.

Timing becomes particularly important.

A delay involving one document, lender or third party can potentially affect the entire settlement.

In Western Australia, eligible stand-alone transfers and certain combinations of transactions are required to be lodged electronically. Landgate also requires applicable transfers to have been assessed for transfer duty before registration requirements can be completed.

Transfer duty is generally the purchaser's responsibility. RevenueWA calculates duty according to the dutiable value of the transaction, subject to the applicable legislation, exemptions and concessions.

A commercial settlement therefore involves much more than simply sending the purchase price to the seller.

The settlement agent coordinates the conveyancing component, prepares and checks relevant documentation, deals with the required adjustments and works with the other parties involved so the transfer can be completed correctly.

Commercial vs Residential Settlements: What's the Difference?

At a high level, the differences look like this:

Area	Residential Settlement	Commercial Settlement
Contract	Often more standardised	May contain detailed commercial conditions
Due diligence	Usually property-focused	May extend to leases, income, zoning, use and commercial risks
GST	Often not applicable to established residential property	Can be a significant transaction consideration
Leasing	Property often sold with vacant possession	Existing commercial leases are common
Adjustments	Rates and standard property adjustments	May include rent, outgoings and other commercial items
Parties	Often individuals	May involve companies, trusts and business structures
Settlement	Can be relatively straightforward	Often involves additional documents, parties and conditions

No two commercial transactions are exactly alike, which is why early preparation matters.

Preparing for a Commercial Property Settlement in Perth

If you're considering buying or selling commercial property, start preparing for settlement before the settlement date is approaching.

Make sure you understand the contract you're entering into. Complete appropriate due diligence. Get advice about GST and tax consequences where necessary. If tenants are involved, make sure the lease documentation is available and understood.

It is also worth identifying early whether additional parties need to become involved — such as your bank, accountant, solicitor, property manager or leasing agent.

The earlier potential complications are identified, the more opportunity there is to address them without putting unnecessary pressure on settlement.

Need Help With a Commercial Settlement in Perth?

Commercial property transactions can involve substantial amounts of money and considerably more complexity than a standard residential sale.

Having an experienced settlement agent coordinating the conveyancing side of the transaction can help keep the process organised from contract through to settlement.

Lifestyle Settlements is a licensed Western Australian settlement agency assisting buyers and sellers with commercial property transactions in Perth and beyond.

Whether you're purchasing an investment property, selling commercial premises or dealing with a property that has existing tenants, our team can assist with the settlement process and work with your other professional advisers where required.

Speak with Lifestyle Settlements about your commercial property settlement and make sure the conveyancing side of your transaction is ready for settlement.

This article provides general information only and should not be relied upon as legal, taxation or financial advice. Commercial property transactions vary, and professional advice should be obtained for your individual circumstances