Buying an Office Building or Strata Office Suite

An office building purchase can range from a single-tenant building leased to one corporate tenant, to a strata-titled suite inside a larger commercial tower shared with dozens of other owners. The due diligence required changes significantly depending on which of these you are buying, and a commercial purchase of either type needs a conveyancer who understands both the leasing side and, where relevant, the strata side of the transaction.

Whole Building or Strata Suite

A whole office building purchase usually means dealing directly with one or more head leases, without an owners corporation layer to consider. A strata office suite, by contrast, means you inherit shared responsibility for the building's structure, common areas, lifts and often a building manager engaged by the owners corporation. Before deciding which structure suits you, it helps to understand that a strata suite gives you less control over building-wide decisions such as major upgrades or a change of building manager, decisions that are made collectively with other owners rather than by you alone. Confirm how car parking is allocated within the strata scheme, since exclusive use rights over specific bays are sometimes attached to a separate lot or by-law rather than automatically transferring with the office suite itself.

Reviewing the Tenancy Schedule and Leases

If the building or suite is tenanted, request a full tenancy schedule showing rent, outgoings, rent review dates, option periods and any incentives or rent-free periods still running. Read each lease for make good obligations, since a tenant's obligation to restore the premises at the end of the lease can be a real factor in the building's condition and future costs. Ask for a tenant estoppel certificate confirming the tenant agrees with the lease terms as you understand them, and check whether the seller holds a bank guarantee or security deposit that needs to be formally transferred to you at settlement as part of the lease assignment process.

Building Compliance and Essential Services

Office buildings are subject to ongoing fire safety and essential services compliance obligations, including annual fire safety statements or equivalent certificates depending on the state. Ask for the building's compliance history, any outstanding fire orders or notices from council, and records of essential safety measures such as sprinkler systems, smoke detection and emergency lighting. If the building has a cooling tower as part of its air conditioning system, check that it is registered with the local council or health authority and that legionella testing has been carried out on schedule, since this is a specific compliance obligation that is easy to overlook during a standard building inspection. Older buildings in particular may have air conditioning plant or lift equipment approaching the end of its service life, and a building consultant's report can identify capital works that are likely within the next several years.

Strata Levies and the Owners Corporation

For a strata office suite, request the same records you would for any commercial strata purchase, including recent meeting minutes, the sinking fund balance, any special levies raised or proposed, and the current strata by-laws governing use of the suite, since some schemes restrict trading hours, signage or even the type of business permitted. A strata report will also confirm whether the scheme has adequate building insurance and whether any disputes or building defect claims are outstanding.

Environmental and Asbestos Considerations

Office buildings constructed before the 1990s commonly contain asbestos in ceiling tiles, floor coverings or fire-rated materials, and most states require a building's asbestos register to be made available to prospective purchasers or kept on site for tenants and contractors. Confirm whether an asbestos register exists, when it was last updated, and whether any remediation work has been carried out or is recommended. Buildings from a similar era may also have older fluorescent light fittings or electrical transformers that once used materials now restricted for environmental reasons, so ask whether these have been assessed or replaced. This does not necessarily rule out a purchase, but it should factor into your due diligence timeline and any conditions you negotiate into the contract.

Foreign Investment and Ownership Structure

If you are buying as a foreign person or through a foreign-controlled entity, commercial property purchases above certain thresholds may require approval, and the process is outlined in our guide to the FIRB approval process for foreign buyers. Several states also apply a foreign purchaser surcharge to the transfer duty payable on commercial property, an issue explained in our state-specific guide to the NSW foreign purchaser surcharge duty, and similar surcharges exist in other jurisdictions. Even for Australian resident buyers, the ownership structure you choose, whether personal names, a company or a trust, affects how the purchase is financed and how the property is eventually sold, so it is worth settling this before contracts are exchanged rather than during the settlement period.

GST on Office Building Purchases

A tenanted office building or suite may qualify for GST-free treatment as the sale of a going concern, provided the lease and related agreements are transferred along with the property and both parties agree in writing that the sale is a going concern. Where the building is vacant or partly vacant, this treatment may not be available, and the margin scheme or standard GST treatment could apply instead. The ATO's guidance on selling a going concern sets out the conditions in detail. GST treatment should always be confirmed with your accountant, as this article provides general information only and is not tax advice.

Before You Commit

Office building and strata suite purchases reward buyers who do their homework on the tenancy, the building's physical condition and its compliance history before exchange, not after. A conveyancer working alongside your accountant and, where relevant, a building consultant, can help you identify which of these issues genuinely affect value and which are routine. Working through a proper due diligence checklist for a commercial property purchase before you sign gives you a clear picture of what you are agreeing to and reduces the chance of surprises once settlement is underway.