Starting the process to invest or purchase your first piece of commercial real estate is an exciting time. Although this transaction will revolve around buying or investing in a piece of property, land, or a building, the actual deal will rely on obtaining, reviewing, and possibly amending a big stack of paperwork.
Among other responsibilities that arise during the initial auditing process of a property sale, a major portion of this due diligence includes acquiring the appropriate paperwork to confirm all the facts. A portion of these documents will be necessary to finalise the transaction while other documents will help you decide whether the property is a good investment.
The following is a partial list of the most important paperwork for your first commercial real estate transaction:
The property title is perhaps the most important document for commercial real estate. This document officially validates the property's ownership.
Australia utilises several different types of property title classifications, some more common than others. Most land falls under the Torrens Title land category. The titles are registered and guaranteed in a public register by the state or territory government. Barring a mortgage, the title owner will be named on the title deed.
Group or Strata titles apply to properties that share certain facilities, walls, roofs, stairwells, entrance halls or other types of community amenities. These are common in multi-level buildings or horizontal subdivisions.
These restrictions generally carry over from one titleholder to the next, and will impact the use of your land.
An easement is a right of way on the parcel of property. These are typically either to allow passage through the land via a road or path, or they're for officials to provide essential services, such as water, electricity, or sewage.
A covenant is a type of agreement between landowners governing how the property or building is divided and managed. This might be the maximum number of units or dwellings on the land, height restrictions, or any type of previously agreed upon restriction to the property.
The survey will plot out the tract of land.
Not all property will have a survey on file. If it doesn't already exist, it's typically a good idea to get one drafted. And even if it already does exist, consider getting a new one, as there could very easily have been mistakes made on the first one that could impede on the ownership of the property.
Any and all current lease documents – many commercial properties house shops, corporate headquarters, retail space, or some other type of business. Be sure to review any leases currently governing the property and see if they transfer along with ownership.
Reflecting the diversity of Australia's bustling market economy, no two commercial properties are exactly alike. This means there may be other factors to consider depending on the property's usage, structure(s), and prior ownership.
See if there are any bonds/deposits/bank guarantees held by the building or property.
Any current tenant agreements, this might include duties whose responsibilities will transfer to you upon taking ownership, such as paint and repair obligations. This might uncover any tenants who are in arrears, and could indicate the need to take action.
Check to see if any maintenance agreements are in place, such as those for cleaning, landscaping, escalators or lifts, electrical, and more.
While the type of insurance you'll need will vary depending on the property, you'll no doubt need to obtain some form of insurance. This could be commercial liability.
For more info on purchasing and investing in commercial property, contact a specialist at Ray White today.