The contract lands on a Thursday, the agent mentions two other interested parties, and you have a fortnight to work out whether a seven-figure purchase is what the information memorandum says it is. Most commercial property losses are locked in right here — before signing, not after settlement. The IM is a marketing document. Every figure in it is somebody's best case. What follows is the verification work professional acquirers run on every deal: six areas, the documents to demand in each, and the traps that hide in them. It applies anywhere in Australia; we have written it from Victoria, naming the NSW and Queensland equivalents where the registries differ.
1. Is the "net" rent actually net?
Start with the most expensive trap in the market: gross rent dressed as net. An IM quotes "$85,000 net" and the number quietly assumes the tenant recovers every outgoing. Check who actually pays each line — land tax, council rates, building insurance, management fees, owners corporation levies. In Victoria, land tax cannot be passed on to a tenant under a retail lease at all (Retail Leases Act 2003), so a "net" figure that assumes otherwise overstates your income from the first day you own the asset. On a $1.4 million purchase, a $9,000 land tax bill you thought the tenant paid moves your real yield from 6.1 to 5.4 per cent.
The fix is documentary, not conversational. Ask for the last full financial year's outgoings reconciliation and trace every line to whoever paid it, then check the answer against the executed lease and the current rent schedule. No reconciliation available? Assume the leakage is real. Price it in.
2. The lease: read the document, not the summary
Tenancy schedules summarise; only the executed lease binds. Get the full signed document with every annexure, and read the review mechanism first: fixed percentage, CPI, market, or a hybrid — and if market, whether the rent can review downward or is protected from falling. This is where over-rented income hides. A property returning $100,000 against a market rent of $80,000 looks like yield. It is not. At renewal or the next market review the rent resets to what the market will pay, and if you capitalised the full $100,000 at purchase, you paid a lump sum for income that was never going to survive. Compare the passing rent with recent signed leasing deals for comparable space — signed deals, because asking rents on the listing portals are indicative only and verify nothing.
Then map the expiry profile. WALE — weighted average lease expiry, the income-weighted years of lease term remaining — is the headline number, but the calendar matters more: a single tenant paying most of the rent and rolling off in eighteen months is a different asset from three tenants staggered across six years, whatever the average says. Check every option to renew as well — an option belongs to the tenant, not to you, so it extends their certainty without extending yours. Finally, hunt for demolition and relocation clauses. A "ten-year lease" that either side can bring to an early end is not a ten-year income stream, and the next buyer will price it accordingly.
3. The covenant behind the lease
A lease is a promise to pay. The covenant — the entity making that promise — decides what the promise is worth. Run an ASIC search on the exact tenant entity named in the lease. Franchises are the classic miss: the signage says a national brand, the lease says a single-site proprietary company with $2 of paid-up capital and no parent-company guarantee. A commercial credit report from CreditorWatch or Equifax costs under $100 and shows defaults, court actions and payment behaviour.
Then verify the security actually held. "Bank guarantee — three months" in a schedule means nothing until you sight the instrument and confirm it carries over to you at settlement. Sight it.
4. Title and planning: what the property is allowed to be
Order your own title search rather than relying on the contract copy — LANDATA in Victoria, NSW Land Registry Services or Titles Queensland interstate. You are looking for anything registered that constrains use or value: an easement running under the loading bay, a restrictive covenant from a 1960s subdivision, a section 173 agreement (a deal with council, registered on title, binding every future owner — often capping development or restricting use), or a registered lease nobody mentioned.
Then planning, which is free and takes an evening. On VicPlan (the NSW Planning Portal or council systems such as Brisbane's Development.i elsewhere), confirm the zone and every overlay with its schedule, then ask the load-bearing question underneath all of it: is the current use lawful? Some uses run as-of-right in the zone; others need a permit. If a permit is needed, does one exist on the council register, and do its endorsed plans match what is physically trading on site? Older properties sometimes rely on existing use rights instead — lawful because the use predates the current controls — and those rights need to be evidenced, not assumed, because they can lapse if the use stopped for long enough. A medical suite operating in an industrial zone without a permit is income you cannot legally rely on, whatever the lease says. Before you go unconditional, hold four documents:
- a full title search and plan (LANDATA, NSW LRS or Titles Queensland);
- the planning property report from VicPlan or its interstate equivalent — zone plus every overlay;
- the planning permit for the current use, with endorsed plans, from the council register;
- the EPA priority sites (contaminated land) register entry, if the site has an industrial past.
5. The building and the carry
Commission a building condition report covering the roof, air-conditioning plant, lifts, façade and any combustible cladding — cladding rectification orders travel with the building, not the vendor. Read the make-good clause against reality: who reinstates what at lease end, and what would stripping the current fit-out cost? An unclear make-good position on a 400-square-metre office is routinely a six-figure surprise. Then build the holding-cost stack you will carry as owner: land tax at investor rates (the State Revenue Office calculator in Victoria; Revenue NSW or the QRO interstate), insurance at current reinstatement cost, council rates, plus every non-recoverable outgoing from section one. Income minus that stack — after stamp duty has already left your account — is what you actually earn.
6. Price: signed evidence, not asking prices
Every yield claim rests on comparable evidence, and comparables vary wildly in quality. Settled transactions are evidence. Asking prices on realcommercial.com.au or commercialrealestate.com.au are what vendors hope for, and verify nothing.
Correct the rents for incentives before you trust any of it. Leasing deals are struck with rent-free periods and fit-out contributions that never show in the face rent: $500 per square metre carrying a 25 per cent incentive is an effective rent of $375. If the building was recently re-let, ask what incentives were paid — a rent roll refreshed with incentive-propped deals shows income the open market would not repeat at renewal. Apply the same discipline to sales evidence. A comparable that traded on over-rented income is not evidence of value; it is evidence of someone else's mistake, and the market corrects those at your expense if you inherit them.
Before you sign
Everything above is knowable before contract, mostly from documents the vendor already holds and searches that cost less than a tank of fuel. A deal that cannot survive these six checks was never a deal.
If you want a second set of eyes, this verification discipline is exactly what our Quick Scan applies to any Australian commercial property — a structured desktop read of the income, lease, title and price evidence, from A$49.95 via our order page. And if you are not yet sure what kind of deal you are looking at, the free archetype finder will tell you in about two minutes.