When purchasing a commercial property there are many things that a buyer must consider. One which is often overlooked is whether the building has been correctly classified for the buyers proposed use, or even certified at all.
Any building constructed after 1 April 1975 is subject to the Building Act 1975 (Qld) (“Building Act”) and requires a certificate of classification, regardless of whether it is residential or commercial.
The lack of a certificate means the building has not been approved as constructed in accordance with the development approval and there may be significant consequences under the Building Act. Alternatively, the building may have been certified but is being used for a different use to what it was certified for. This again can have significant consequences. An incorrect use prior to a settlement does not excuse a buyer when doing the same after the settlement.
For a buyer, it is imperative to conduct a search for a certificate of classification through checking what is held on the local council’s records.
If one is held then the consideration is as to whether it is satisfactory to the buyer, keeping in mind their proposed use. The current owner or their tenant may be using the building incorrectly now, however, come settlement any consequences will become the buyers’.
This is as a standard REIQ contract for commercial land and buildings will not necessarily protect a buyer regarding the above matters. The position is further complicated for a purchase in a body corporate building.
For these reasons an expansive due diligence special condition is often needed, as the warranties in the standard conditions may be insufficient to protect a buyer.
When these matters are not addressed correctly, as part of due diligence, a buyer may have to proceed with settlement regardless of issues with a certificate. Addressing any issues after settlement is likely to come at a large cost to a buyer.
Lately, Hatzis Lawyers has encountered multipl properties where issues with certificates have arisen, so we strongly recommend seeking advice on these matters when you intend to purchase a commercial property, not after.
Purchasing a commercial property is not always a straightforward process and so we always recommend seeking legal advice before signing any contract.
If you have any questions about or require any advice on purchasing a commercial property, contact our Commercial Team for advice and assistance on 3345 4388 or at email@example.com.
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