Contract of Sale of Commercial Property Template

In plain language: Identifies the vendor and purchaser by full legal name, describes the property by its registered title reference or legal description, and confirms the vendor's capacity to sell.

Common mistake: Using a trading name or individual director's name instead of the registered legal entity. If the contracting party doesn't match the registered title holder, the contract cannot be completed without a corrective deed.

In plain language: States the total price, the deposit amount and percentage, when it is payable, who holds it in trust, and what happens to it on default by either party.

Common mistake: Not specifying who holds the deposit and on what conditions it is released. If the deposit stakeholder and release trigger are not defined, disputes about entitlement to the deposit on a failed transaction can be costly to resolve.

In plain language: Lists the conditions — typically finance approval, due diligence, and planning consents — that must be satisfied or waived by a specified date before the parties are bound to proceed to settlement.

Common mistake: Setting a finance condition date with too little lead time — lenders routinely require 14–21 business days for commercial loan approval. A condition that expires before approval is obtained forces the purchaser to waive or rescind.

In plain language: Grants the purchaser the right to inspect the property, review tenancy schedules, outgoings, environmental reports, building reports, and statutory certificates before the due diligence condition expires.

Common mistake: Granting broad inspection rights without a carve-out requiring the purchaser to make good any damage caused during inspection. Purchasers who remove asbestos samples or core-drill slabs without a reinstatement obligation create real liability.

In plain language: The vendor warrants that title is clear of undisclosed encumbrances, that all registered interests will be discharged by settlement, and that there are no unregistered agreements affecting the property.

Common mistake: Disclosing encumbrances in a schedule but failing to confirm which will be discharged at settlement and which will run with the land. Purchasers often discover post-settlement that a disclosed easement or covenant imposes unexpected restrictions on use.

In plain language: Schedules all existing leases, their terms, rent, review dates, options, and any arrears, and apportions ongoing outgoings — rates, insurance, land tax — between vendor and purchaser at settlement.

Common mistake: Omitting arrears warranties for investment property acquisitions. A purchaser who inherits six months of rent arrears has no contractual remedy unless the vendor warranted the tenants were current-paying at exchange.

In plain language: Allocates the risk of loss or damage to the property during the period between exchange of contracts and settlement, and requires the vendor to maintain adequate insurance until settlement.

Common mistake: Failing to define 'material damage' with a threshold — for example, damage exceeding 5% of the purchase price. Without a threshold, parties dispute whether minor storm damage entitles the purchaser to rescind.

In plain language: States whether the sale is subject to GST or VAT, identifies the applicable rate or exemption (going concern, margin scheme, or input-taxed supply), and allocates the tax between the parties.

Common mistake: Not confirming both parties' GST registration status before nominating a going-concern exemption. If the purchaser is not registered for GST at settlement, the exemption fails and the vendor becomes liable for the full GST — typically 10–20% of the price.

In plain language: Defines what each party must do on the settlement date — vendor delivers clear title and keys; purchaser pays the balance price — and requires production of a settlement adjustment statement calculating prorated outgoings.

Common mistake: Not specifying who prepares the adjustment statement and by when. If both parties prepare their own statement without a single agreed version, settlement is routinely delayed by calculation disputes on the day.

In plain language: States what constitutes a default by either party, the notice required before exercising termination rights, whether time is of the essence for settlement, and the remedies available — including retention of deposit, specific performance, and damages.

Common mistake: Omitting a 'time of the essence' clause. Without it, a party who misses the settlement date cannot immediately terminate — they must serve a further notice making time essential and allowing additional time to perform, which can delay resolution by weeks.

A contract of sale of commercial property is a legally binding agreement between a vendor and a purchaser that governs the transfer of a commercially zoned or income-producing real estate asset. It records the agreed purchase price, deposit mechanics, conditions the transaction is subject to, title warranties, tenancy details, tax treatment, and the settlement date on which ownership legally transfers. Once both parties sign, neither can withdraw without legal consequences unless a condition precedent fails or a default occurs.

Commercial property contracts are typically less regulated by consumer protection legislation than residential ones — cooling-off periods are often shorter or unavailable, disclosure requirements differ, and GST or VAT is commonly applicable. Commercial contracts also routinely include tenancy schedules, going-concern GST clauses, environmental warranties, and more heavily negotiated default and risk provisions. Residential templates should never be used for commercial transactions.

The most common conditions are finance approval (the purchaser obtaining unconditional loan approval by a specified date), due diligence (satisfactory review of leases, financial records, building reports, and environmental assessments), and planning or development approval where the purchaser intends to develop. Each condition must specify the deadline, what constitutes satisfaction, and whether the benefiting party can waive it unilaterally.

In Australia, the US, the UK, Canada, and most EU jurisdictions, commercial property sales are generally subject to GST, VAT, or sales tax unless a specific exemption applies. In Australia, the going-concern exemption applies when the property is sold with an active tenancy and both parties are GST-registered. In the EU, VAT applies to commercial property unless the property qualifies as an exempt old building. Always confirm the tax treatment with an accountant before exchange, as the liability can be 10–25% of the purchase price.

A 10% deposit is the most common commercial convention in Australia, the UK, and Canada. In the US, deposits on commercial transactions vary widely — earnest money of 1–5% of the purchase price is common, with the balance of any agreed deposit paid after due diligence clears. The deposit is typically held in the vendor's solicitor's or agent's trust account and released to the vendor on settlement or forfeited to the vendor on a purchaser default.

If the purchaser fails to settle on the settlement date and time is of the essence, the vendor must typically serve a written default notice allowing a short cure period (often 5–10 business days). If the default is not remedied, the vendor may terminate the contract and forfeit the deposit. The vendor may also claim damages for any loss suffered beyond the deposit — for example, where the property is resold at a lower price. The vendor can alternatively seek specific performance through the courts to compel completion.

Yes, in almost every jurisdiction. Commercial property conveyancing involves title searches, stamp duty calculations, GST compliance, FIRB or foreign investment approvals where relevant, discharge of vendor mortgages, and registration of the transfer — all of which require a licensed conveyancer or solicitor. A template provides a solid structural starting point but must be reviewed and completed by a qualified real estate lawyer before exchange in every case.

A settlement adjustment statement is a document prepared by the vendor's lawyer that calculates the prorated apportionment of council rates, water charges, land tax, body corporate levies, and rent as at the settlement date. It results in an adjusted final payment figure — the balance purchase price plus or minus the net adjustments — that the purchaser must pay on settlement day. It is typically prepared 5 business days before settlement and agreed in writing before the date.

Generally, once both parties have signed and exchanged contracts and the cooling-off period (where it exists) has passed, rescission is only available if a condition precedent fails, the vendor is in material breach of a warranty, the property suffers material damage before settlement, or the parties mutually agree in writing. Unilaterally rescinding without a contractual basis exposes the rescinding party to forfeiture of the deposit and a damages claim.