Articles

Thinking of Buying a Commercial Property?

Friday, January 19, 2018

Consider these five tips before entering into an agreement.

1.   Finance Approval

Any agreement for sale and purchase that you enter into should be subject to you obtaining finance approval from your bank.  You must ensure you have sufficient time in respect of the finance condition to achieve this.

 We have started to see banks become more strict in respect to lending on property in general.  Borrowers are being asked to provide registered valuations and seismic strength reports on commercial buildings as part of the banks' lending conditions, before finance is approved.  In order to ensure you have sufficient time to achieve the banks' requirements we recommend inserting a due diligence clause into your purchase agreement in addition to the finance condition.

2.   Building Report

A commercial property is a significant investment and ensuring that the property has no hidden defects is essential.  A building report executed by a qualified builder with specific commercial property experience is recommended.  Even if there are no hidden defects, the building report will highlight potential future required expenditure and allow you to budget for the same when you take ownership of the property.

3.   LIM Report

A LIM report will, amongst other things, confirm whether the property has consents for all its building work, what zoning it has and whether your intended use of the property is a permitted activity.

The LIM will also determine whether the building has a current Building Warrant of Fitness – this is a statement supplied by a building owner, confirming that the systems (eg features of a building that give ease of exit or access, escape from fire, and other safety aspects) for their building have been maintained and checked in accordance with Council requirements for the previous 12 months, and that they will continue to perform as required.

We recommend that you purchase a LIM directly from the Council rather than relying on one provided by the vendor or the vendor's agent.  This way, if it later transpires the local authority made a mistake with the LIM, you are more likely to have a cause of action against the local authority than if you rely on a LIM not specifically provided to you.

4.   Unit Titles

It is common for commercial buildings to be incorporated in a Stratum in Freehold Title ("Unit Title").  If the building is held on a Unit Title, then there will be Unit Titles Act 2010 considerations to take into account.  Essentially, you, as the new owner will become part of the body corporate.  The body corporate together makes decisions that affect the whole of the complex.  You will have to pay body corporate levies which go towards the maintenance of any common property, administration fees and insurance premiums.  It is essential you are comfortable with the body corporate processes and fees.

5.   Commercial Tenants - Leases

Before committing to the purchase of a tenanted commercial property, you should review all the lease documentation, obtain confirmation from the vendor that the terms of the lease are being met by the tenant and confirm there are no rental or outgoings (OPEX) arrears.

Summary

Commercial property investment differs from investing in residential property and even an experienced investor should undertake thorough due diligence prior to purchasing.  At McVeagh Fleming we have the experience and expertise to assist you with all your commercial property needs.

For further information please contact Kate Chivers on (09) 415 4477 (kchivers@mcveaghfleming.co.nz)

© McVeagh Fleming 2018

This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.

 

Recent Posts


Tags

Interpretation of documents Charity Body Corporate Mortgage Domestic violence Divorce Section 15A Dismissal Financial services Wills Act 2007 Section 8 Mortgagor Work and Income Wills Act 2007 Section 11 Credit Contracts and Consumer Finance Act 2003 (CCCFA) Marriage Offending Gifts Testamentary capacity Skilled migrant points Verbal abuse Subsidies Lease Titles Anti-money laundering (AML) Commercial Property Invalid wills Lump sum Gifting Asset Protection Seperation Trust busting Income Interpretation Act 1999 Section 29 Wills Act 2007 Domestic Violence Act 1995 Ministry of Social Development Terms of Trade Due Diligence Compensation Changes Indoor Management Rule Physical abuse Intellectual Property Casual employee Shareholders' Agreement Interest Directors' Duties Clayton case Fair Trading Act 1986 Case Study Trust Check Up Eviction Matrimonial Home Holiday pay Trustee Duties Lankow v Rose Deceased's wishes Family Trusts Termination Companies Act 1993 Elder Law Financial Markets Conduct Act 2013 (FMCA) Testamentary freedom Pattern of offending Family Home Resident Unfair contract terms Charities Re Estate of Feron Division of Functions Frustration Immigration New Zealand Duress Sale of Goods Insurance Principal Trusts Fair share Violence Limitation defence Tenants Document Disclosure Administrators duty SN v MN [2017] NZCA 289 Broadbent v Ministry of Social Development Part payment Repayment Ministry WINZ 50/50 Split Contract Law Break up Constructive trusts Consumer credit contracts Blackwell v Hollings Personal Properties and Securities Act 1999 Wills Skilled migrant Six years Psychological abuse Zero Hour Contracts KiwiSaver Separate Property Abuse Auckland Office Undue influence Mortgagee Litigation Financial Advisers Act 2008 Residential Health and Safety Reform Bill Acknowledgment Section 15 Temper Vessel Sale and Purchase Partner of resident Murrell v Hamilton Incapacity Maritime Lien Maritime Law Unequal Sharing Limitation Act 1950 Partnership based work visa Section 182 Family Proceedings Act 1980 Trust Confidentiality Economic disadvantage Estate Administration Amundson v Raos Property Albany Office Creating Trusts Hawkes Bay Trustee Company Limited v Judd Claims against estates Legislation update Beneficiary Rights Testamentary writing Customary Authority Limitation Act 2010 Landlord Ship Registration Ilott v Mitson 2017 UKSC 17 Acknowledgment of Debt Interpretation Act 1999 Erceg v Erceg Wilson v Donnellan Dividing Property De facto Recovery of money SMC Validity of Wills Valid wills Reckless Trading Limitation period Tenant Loss of income Living standards Rest Home Subsidies Personal Commercial Law Family Ship Visa application Splitting Up Resident Visa Employment White v White Will that do Re Estate of Campbell Family Court Relationship Property Character requirements Financial products Employer ''Best Endeavours'' Vessel survey Immigration Vessel surveyor Charity begins at home Contract and Commercial Law Act 2017 Commercial Ship's Mortgage Trusts Bill Twelve years Protector Expression of interest Financial services provider (FSP) Sharing Executors duty Civil union Testamentary Promises Medical Will Wills Act 2007 Section 14 Privacy Act 1993 Grey Power Business Family Protection Act 1955 Protection Order Tamarapa v Byerley Company Law Property (Relationships) Act 1976 Lease

Archive