A Checklist for Buying a Business With Property Included

Buying a business that includes the property it operates from, whether a freehold shop, a warehouse or a farm, is really two transactions running in parallel: a business sale and a property purchase. Each has its own due diligence requirements, and the two need to be structured together so settlement of one does not create a gap for the other. This checklist covers the areas that need separate attention when property is bundled into a business purchase.

Separate the Business Value From the Property Value

Ask for the purchase price to be apportioned between the business (goodwill, stock, plant and equipment) and the property in the contract, since this affects transfer duty, depreciation and how the deal is financed. A single lump sum figure with no breakdown makes it harder to value each component properly and can create disputes later about what you actually paid for the real estate versus the trading business. Have an independent valuation done on the property itself, separate from any business valuation, particularly if the freehold is a meaningful portion of the total price.

• Request a price apportionment between goodwill, plant, stock and the property.
• Commission an independent property valuation alongside the business valuation.
• Confirm whether GST applies to the property component or the going concern exemption applies to the sale as a whole.
• Check zoning permits the business's current and intended use of the property.

Conduct Business Due Diligence Properly

Review the business's financial records, tax returns and business activity statements for at least the past few years, check outstanding debts and any security interests registered against the business assets, and confirm all licences and permits required to operate are current and transferable to you. If the business trades from leased premises elsewhere in addition to the freehold you are buying, check those lease terms too. The Australian Government's guide to buying an existing business sets out a useful general due diligence framework covering contracts, licences, assets and liabilities that applies whether or not property is included in the sale.

Have the Property Searched and Inspected Separately

Even though the property comes bundled with the business, it still needs the same due diligence as a standalone commercial purchase: title search, zoning confirmation, building and pest inspection where relevant, and a check for easements, caveats or registered notices that could affect future use. If the business involves food handling, manufacturing or another regulated activity, confirm the property holds any required environmental or health approvals and that they transfer with the sale rather than needing to be reapplied for under your name.

Check Existing Employees and Contracts

If the business has staff, confirm whether their employment transfers to you and what entitlements, such as accrued leave, come with that transfer under the relevant employment framework. Review supplier and customer contracts for change-of-control or assignment clauses that might require third-party consent before the sale can proceed, since discovering this after exchange can delay settlement significantly. These issues sit outside your conveyancer's usual scope, so involve your accountant and, where employment or contract complexity is significant, a commercial lawyer as well.

Think About Transition Support and Settlement Timing

Some business-with-property sales involve a transitional period where the seller stays involved to help hand over client relationships and operational knowledge. If this applies to your purchase, put the terms in writing, including how long the transition period lasts, what support is provided, and what happens if the arrangement does not work out as planned. Consider too whether settlement of the property and handover of the business need to happen on the same day, or whether a short gap between the two is workable, since coordinating a property settlement with a business handover that involves staff, stock transfer and customer notifications is more complex than either transaction alone.

Arrange business insurance and building insurance to begin from the appropriate dates, and confirm public liability cover is in place from the day you take over operations, not just from the day the property settles, since there can be a gap between taking control of the business and legal settlement of the freehold.

Structure the Contract and Settlement Carefully

Because you are effectively settling a business and a property at the same time, the contract should clearly set out what happens if one part of the deal falls through, for example if finance for the property is not approved but the business sale would otherwise proceed. Your conveyancer and any commercial lawyer involved should coordinate so settlement of the property transfer, registration of any new lease back to the business (if applicable) and handover of the trading business all happen in a coordinated sequence rather than as disconnected events.

Understand Transfer Duty on the Combined Purchase

Transfer duty (stamp duty) is generally payable on the property component of a business-with-property purchase, and in some states duty can also apply to certain business assets depending on how the transaction is structured. Rules and thresholds vary by state and change periodically, so this is general information rather than tax advice, and your conveyancer or accountant should confirm the current position for your specific purchase and jurisdiction before you finalise the contract.

Get the Right Advisers Involved Early

A business-with-property purchase benefits from a conveyancer experienced in commercial property working alongside your accountant from the earliest stages, rather than being brought in once the contract is close to final. Getting a fixed-fee quote on the property side of the transaction early gives you a clear picture of that part of the cost while you are still working through business valuation and financing.