Due Diligence for Commercial Property Purchases in NSW
Buying a commercial property in NSW is riskier than buying a home if you skip due diligence. There is generally no statutory cooling-off period, so problems with title, zoning, tenancies, contamination, GST or foreign investment approval are usually your responsibility once contracts are exchanged. This article sets out the due diligence steps Caspian Legal recommends before you sign, and the documents to request from the vendor. It is general information only and is not legal advice for your transaction.
If you are considering a commercial property purchase in Hornsby or the Upper North Shore, Caspian Legal can review the contract and coordinate your due diligence before you commit. Call (02) 7264 3200 or visit caspianlegal.com.au to arrange a consultation.
What Due Diligence Means for a Commercial Purchase
In this context, “due diligence” means the checks a purchaser carries out on a property, its title, its planning status, its tenants and its tax treatment before becoming legally bound to buy it. For residential property, a statutory cooling-off period under section 66S of the Conveyancing Act 1919 (NSW) gives a purchaser limited room to withdraw after exchange. That right generally does not apply to commercial, industrial or rural property, or to a property bought at auction. In practice, this means due diligence for a commercial purchase should usually be completed, or the contract made conditional on it, before you exchange — not after.
The vendor is required, under section 52A of the Conveyancing Act 1919 (NSW), to attach certain prescribed documents and certificates to the contract before you sign. Those documents are a starting point for due diligence, not a substitute for it — they tell you what the vendor and council currently know about the property, but they do not cover tenancy arrangements, GST treatment, contamination that has not been notified, or building compliance issues that are not on the public record.
Key Terms Explained
| Term | What it means |
| Due diligence | The searches, enquiries and document review a purchaser carries out on a property before becoming legally bound to buy it. |
| Section 52A disclosure | The vendor’s obligation under the Conveyancing Act 1919 (NSW) to attach prescribed certificates and documents to the contract before a purchaser signs. |
| Section 10.7 certificate | A council-issued planning certificate (formerly a section 149 certificate) showing zoning, permitted use and planning constraints on the land. |
| Cooling-off period | A statutory right to rescind a contract within a short period after exchange. It generally applies only to residential property, not commercial property. |
| Going concern (GST) | A sale of a tenanted, income-producing property that can be GST-free if the requirements of the GST law are met and the parties agree in writing. |
| FIRB approval | Approval that may be required under Commonwealth law before a foreign person acquires an interest in Australian commercial land. |
| Surcharge purchaser duty | Additional NSW duty that applies to a foreign person acquiring residential-related property. It generally does not apply to purely commercial or industrial property, unless there is a residential component. |
Step-by-Step Due Diligence Process
- Engage a solicitor before you sign anything, including any expression of interest, heads of agreement or option.
- Review the draft contract for sale and the documents attached under section 52A of the Conveyancing Act 1919 (NSW).
- Order a current title search and check for mortgages, caveats, easements and covenants affecting the land.
- Order a section 10.7 planning certificate from the local council to confirm zoning and permitted use.
- Order a section 603 rates certificate under the Local Government Act 1993 (NSW) to confirm outstanding rates and charges.
- Check for contaminated land notations, flooding, bushfire and heritage constraints noted on the planning certificate or council records.
- If the property is tenanted, review the lease(s), any Retail Leases Act 1994 (NSW) disclosure statement, rent reviews, bank guarantees and outgoings.
- Check building and fire safety compliance, including any outstanding council orders or an essential fire safety statement.
- Discuss GST treatment (taxable supply, going concern or margin scheme) with your accountant before exchange.
- If you or your purchasing entity may be a foreign person, consider whether Commonwealth foreign investment approval is required.
- Arrange finance approval, and any building, pest or structural inspections relevant to a commercial property.
- Negotiate special conditions covering finance, due diligence, lease assignment and any adverse search results.
- Exchange contracts and pay the deposit once you are satisfied with the outcome of due diligence.
- Complete pre-settlement searches and attend to settlement, including adjustments for rates, land tax and rent.
Key Due Diligence Areas
| Area | Why it matters | Typical source |
| Title and ownership | Confirms the seller can transfer clear title and reveals mortgages, caveats or easements. | NSW Land Registry Services title search |
| Zoning and permitted use | Confirms your intended use is lawful and identifies development constraints. | Section 10.7 planning certificate |
| Contamination and environment | Identifies notified contamination, flooding or bushfire risk affecting value or use. | Council records; EPA contaminated land record |
| Existing leases | You generally take on the landlord’s obligations to sitting tenants on settlement. | Lease documents, disclosure statements, rent roll |
| Building and fire safety | Non-compliance can mean orders, remediation costs or restricted use. | Council building file; fire safety statement |
| Rates, land tax and charges | Unpaid charges can affect settlement adjustments and, in some cases, bind the land. | Section 603 certificate; Revenue NSW land tax search |
| GST treatment | Affects price, cash flow and whether the sale can be GST-free as a going concern. | Contract terms; accountant’s advice; ATO guidance |
| Foreign investment approval | Acquiring commercial land without required approval can carry civil and criminal penalties. | Australian Government Foreign Investment Portal |
| Transfer duty and surcharge duty | Standard transfer duty applies. Surcharge purchaser duty generally applies only to residential-related property, so it will usually not apply to a purely commercial purchase. | Revenue NSW |
Document Checklist
Before you exchange, ask the vendor’s agent or solicitor for the following:
- Contract for sale, including all section 52A attachments
- Current title search and any plan of subdivision
- Section 10.7 planning certificate (zoning certificate)
- Section 603 rates certificate
- Sydney Water and other utility searches
- Copies of all leases, disclosure statements, bank guarantees and rent roll (if tenanted)
- Building and essential fire safety statements
- Survey or identification survey, if available
- Any known contamination reports or council contaminated land advice
- Evidence of GST registration and going concern status, if claimed
- Strata records, if the property is a strata-titled commercial lot
What Not to Do
- Do not exchange contracts without reviewing the section 52A attachments and a current title search.
- Do not assume a cooling-off period applies — it generally does not for commercial property.
- Do not rely solely on the real estate agent’s description of zoning or permitted use.
- Do not overlook existing leases — you generally take on the landlord’s obligations on settlement.
- Do not assume GST treatment without written agreement between the parties and your accountant’s advice.
- Do not ignore foreign investment approval requirements if you or your purchasing entity may be a foreign person.
- Do not leave searches and certificates until the last minute — council processing can take several weeks.
Frequently Asked Questions
Is there a cooling-off period when buying commercial property in NSW?
Generally, no. Section 66S of the Conveyancing Act 1919 (NSW) provides a cooling-off period for residential property only. Commercial, industrial and rural property, and property bought at auction, are generally excluded. This is why due diligence is usually completed, or made a condition of the contract, before exchange.
Do I need FIRB approval to buy a commercial property?
It depends on whether you, or your purchasing entity, are a “foreign person” under the Foreign Acquisitions and Takeovers Act 1975 (Cth), and on the value and type of the land. Approval requirements and monetary thresholds change from time to time and are published on the Australian Government’s Foreign Investment Portal. You should check your position before signing a contract.
What is a “going concern” sale and why does it matter?
A sale of commercial property can be GST-free as a “supply of a going concern” under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth), broadly where the property is tenanted and income-producing, the purchaser is registered for GST, and the parties agree in writing before or at settlement that the sale is of a going concern. Getting this wrong can mean an unexpected GST liability, so it should be discussed with your accountant and reflected correctly in the contract.
What happens if the property is contaminated?
Contamination can affect permitted use, redevelopment potential and value, and in some cases trigger remediation obligations. The section 10.7 planning certificate will show if the land is recorded as significantly contaminated or subject to a council contamination policy. You should raise any concerns before exchange and consider whether further environmental investigation is warranted.
Do I have to honour the existing tenant’s lease?
Generally, yes. As the incoming owner you typically step into the landlord’s position under any existing lease, including obligations regarding rent reviews, repairs and any retail lease disclosure requirements under the Retail Leases Act 1994 (NSW) where that Act applies. Reviewing the lease terms before exchange is an important part of due diligence.
What documents must the vendor give me before I sign?
Under section 52A of the Conveyancing Act 1919 (NSW), the vendor must attach certain prescribed documents and certificates to the contract before you sign. These typically include title documents and a planning certificate, but the full list depends on the property. This is a minimum legal requirement, not a complete due diligence package.
How long does due diligence usually take?
This varies with the property and the certificates required. Council planning and rates certificates can take one to several weeks to issue, and lease or contamination reviews add further time. Starting due diligence early, and building an appropriate due diligence condition into the contract, helps avoid time pressure.
Local Focus: Hornsby and the Upper North Shore
Caspian Legal assists clients buying and selling commercial property in Hornsby and surrounding Upper North Shore suburbs, including Waitara, Asquith, Wahroonga, Turramurra, Thornleigh, Pennant Hills, Normanhurst and Berowra. Hornsby is a significant local commercial and retail centre, and purchasers in this area should pay particular attention to council zoning controls, flood and bushfire provisions that can apply in parts of the Upper North Shore, and, where relevant, heritage constraints noted on the section 10.7 certificate.
What Happens at Your First Consultation
At an initial consultation, we review the contract for sale and section 52A attachments, discuss your intended use and any finance conditions, and identify which searches and certificates should be ordered for your specific property. We will also flag any issues that need to be raised with the vendor before you commit, such as tenancy arrangements, GST treatment or foreign investment approval.
Next Steps
Contact Caspian Legal to discuss your options before you sign a commercial property contract. Call (02) 7264 3200, email ryan@caspianlegal.com.au, or visit caspianlegal.com.au to arrange a consultation. See our reviews at g.page/r/CYig8LJ260Y7EB0/review.
Sources
- Conveyancing Act 1919 (NSW) s 52A — https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/ca1919141/s52a.html
- Conveyancing Act 1919 (NSW) s 66S — https://classic.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s66s.html
- Environmental Planning and Assessment Act 1979 (NSW) s 10.7 — Planning Certificates, NSW Planning Portal — https://www.planningportal.nsw.gov.au/development-and-assessment/post-consent-certificates/online-section-107-planning-certificate-service
- A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 38-325 and GSTR 2002/5, Australian Taxation Office — https://www.ato.gov.au/law/view/document?docid=GST%2FGSTR20025%2FNAT%2FATO%2F00001
- Foreign Acquisitions and Takeovers Act 1975 (Cth) — Commercial land, Australian Government Foreign Investment Portal — https://foreigninvestment.gov.au/guidance/types-investments/commercial-land
- Retail Leases Act 1994 (NSW), NSW legislation — https://legislation.nsw.gov.au/view/html/inforce/current/act-1994-046
- Local Government Act 1993 (NSW) s 603 — Rates certificates, NSW legislation — https://legislation.nsw.gov.au/view/html/inforce/current/act-1993-030
- Duties Act 1997 (NSW) and land tax — surcharge purchaser duty and land tax, Revenue NSW — https://www.revenue.nsw.gov.au/
