Property
Buying a strata office: what people check before they commit
Tenure, share value, the management fund, permitted use and the collective sale question. A checklist, not a recommendation.
Every unit at Fortune Centre has now been sold, so we no longer have anything to sell you. That makes it easier to write honestly about what buyers of small strata commercial space actually look at.
This is general information. It is not legal, tax or financial advice, and it is not a substitute for a lawyer, a licensed agent or a valuer.
Tenure
Freehold, 999-year and 99-year leasehold behave very differently over time. A 99- year strata office with forty years remaining has a different financing profile, a different depreciation path and a different buyer pool than a freehold equivalent. Banks lend against remaining tenure. Check the title, not the marketing.
Share value and maintenance
Strata share value determines your proportion of the management fund contribution and your voting weight at general meetings. Two units of similar floor area can carry different share values.
Ask for the MCST's accounts. The questions that matter: what is in the sinking fund, when were the lifts and the facade last done, is there a special levy pending, and how much is outstanding from other owners.
Permitted use
Commercial strata is not uniformly usable for any commercial purpose. Food and beverage requires grease traps, exhaust provision and licensing. Medical and TCM have their own requirements. Education uses can require approvals. Confirm the permitted use for the specific unit before assuming a fit-out is possible.
The collective sale question
Older strata buildings live under a permanent maybe. An en bloc can be a windfall or a forced exit depending on your position, and once the required majority is reached, minority owners have limited room. This cuts both ways and should be priced consciously rather than hoped about.
Tenanted or vacant
Buying with a sitting tenant gives you immediate yield and a rent record you can verify. Buying vacant gives you flexibility and a void period. Neither is automatically better; what matters is whether the passing rent is at, above or below market, because a unit let above market is worth less than the yield implies.
Costs beyond the price
Buyer's stamp duty, legal fees, agent commission where applicable, GST treatment on commercial property, fit-out, and the management fund contribution from day one. Commercial property is treated differently from residential on several of these and the differences are not small.
Who to ask
A conveyancing lawyer for the title and the MCST position. A licensed agent for comparables. A valuer if financing is involved. For anything about GST or tax treatment, an accountant — and there happen to be a great many of those in this building.