Buying the building your business leases

There’s a particular kind of phone call that only tenants get. The landlord is selling. Sometimes they want to offer you first. Sometimes your lease gives you a right of first refusal, and a letter arrives with a third party’s offer and a short deadline to match it. Either way, the building your business depends on is about to change hands, and you have weeks to decide whether it will be yours.

Owning your premises can be one of the best decisions a business makes: no rent reviews, no relocation risk, an asset that grows with the business. The obstacle is usually timing. A bank’s commercial credit process may not fit inside a first-refusal window. A private first mortgage can, with a bank refinance once the purchase is done.

Why buy the building you already trade from?

The reasons are practical:

• Security of tenure. No risk of a new landlord declining to renew, or redeveloping.
• Control over the fit-out. No negotiating with a landlord to upgrade, extend or alter.
• Rent becomes loan repayments. Over time, you’re paying down your own asset rather than a landlord’s.
• No make-good when you leave. And no fight over the bond.
• Knowledge. You know the building’s quirks, its tenants (if any) and the area better than any outside buyer.

The risks are just as real: capital tied up in property instead of the business, maintenance and outgoings now yours, and concentration of business and property risk in one place. Talk them through with your accountant.

How does a right of first refusal work?

Every lease is different, but most first-refusal clauses share a pattern:

1. The landlord receives an offer it’s willing to accept, or decides to sell.
2. It must give you notice, often with the price and terms.
3. You have a set period, sometimes only two to four weeks, to accept on the same terms.
4. If you don’t, the landlord can sell to the third party, usually on terms no better than those offered to you.

The window is the problem. Inside it, you may need to sign a contract, pay a deposit and show you can settle. A bank may want weeks for an owner-occupier commercial assessment. Have your solicitor read the clause the day the notice arrives, and start funding conversations the same day.

How a private first mortgage gets you to settlement

1. Get the notice or offer to your solicitor and confirm the deadline and terms.
2. Ask your accountant two questions: which entity should buy, and will GST apply (more below).
3. Enquire with the premises’ details, any other property you can offer, the price, deposit and duty, and the exit.
4. Structure the security. A private first mortgage over the premises is the core. A second mortgage or caveat over your home or another property can cover the deposit and duty. For industrial sites, see industrial property loans.
5. Exchange, then settle within the contract’s timeline.
6. Refinance to a bank as an owner-occupier once settled, typically within six to twelve months.

A first-refusal deadline running? Send a premises purchase enquiry today; it takes about a minute.

Will GST be added to the purchase price?

This question changes the funding by a large amount, so ask it first. The ATO sets three conditions for a GST-free sale of a going concern: the sale is for payment, the purchaser is registered or required to be registered for GST, and both parties agree in writing that it’s a going concern. The ATO also says a sale of property by itself isn’t regarded as a going concern, while a fully tenanted building can be sold as one if the property and all leases are included.

When the buyer is the sitting tenant, whether the sale can be a going concern depends on the facts, so get your accountant’s view before you sign. If GST applies, it is usually added to the price and must be funded at settlement. A GST-registered buyer using the premises in its business can generally claim it back later as a credit. Our page on funding GST on a commercial property purchase covers how to bridge that.

Stamp duty, and Victoria’s new system

Duty is the other large cost, and it varies by state.

• New South Wales. Revenue NSW says transfer duty is paid by the purchaser, by the earliest of settlement or three months after the contract date.
• Victoria. The State Revenue Office’s commercial and industrial property tax applies to contracts from 1 July 2024. An eligible purchase is an entry transaction that still attracts duty. Ten years later, an annual tax based on site value starts, charged on top of any land tax, and later sales of that land are generally duty-exempt while it stays in commercial or industrial use.
• Victorian transition loan. The SRO says eligible purchasers can borrow the entry duty from the government, repaying over 10 years. That loan is secured by a first-ranking statutory charge on the land. If you take it, any private or bank lender will factor that charge into its position, much as it would a first mortgagee ahead of it, so tell us at the start.

Other states have their own duty rules and timing. For help funding duty itself, see funding stamp duty on a property purchase.

Your options compared

Option	Speed	Security	Suits	Limitations
Bank owner-occupier loan	Weeks	The premises, plus guarantees	Strong financials and a deadline with room	May not fit a short first-refusal window
Non-bank commercial lender	Weeks	The premises	Businesses outside bank policy	Still a full assessment process
Seller or vendor finance	Depends on the seller	Usually a mortgage back to the seller	A landlord happy to be paid over time	Seller keeps a stake; see vendor finance payouts
Private first mortgage, then bank refinance	Within 24–48 hours possible once documents are in	The premises, plus other property if needed	Tight deadlines, timing gaps, ATO debt or credit issues considered case by case	Short term; costs more than a bank loan
Decline and keep leasing	n/a	n/a	When owning doesn’t suit the business	New landlord; tenure risk at renewal

Who it suits

• Manufacturers and workshops whose plant is hard to move. See manufacturing and industrial.
• Automotive businesses with hoists, booths and approvals tied to the site. See automotive.
• Medical and dental practices with expensive surgeries fitted out.
• Retailers with an established location that customers know.
• Any tenant with a first-refusal deadline shorter than their bank’s process.

When this isn’t the right move

• Your bank can meet the deadline. If the bank can approve in time, that is usually cheaper. Use it.
• The building doesn’t suit you long-term. Don’t buy premises you’ll outgrow in two years just because you have first refusal.
• Buying drains the business. If the deposit and duty would leave the business short of working capital, add property security or don’t proceed.
• There’s no refinance path. If no bank is likely to refinance within 24 months, think carefully about how the private loan will be repaid.
• The price is above what the building is worth to you. Matching a third party’s offer is optional.

What it costs (without the guesswork)

There’s no price list. A premises loan is priced on the security, the amount borrowed against it, the term and how solid the bank refinance looks, and we work to the sharpest pricing that deal can carry. You’ll see:

• Interest, which can be prepaid or capitalised, so the business isn’t paying both rent and loan repayments during the transition.
• An assessment fee, varying per loan and shown on the Letter of Offer.
• Legal and registration costs for the mortgage and any second security.

There’s no formal valuation required, which is often what makes a first-refusal deadline achievable. A first mortgage over the premises is generally cheaper than a second-ranking loan, which is why the structure usually puts the bulk of the borrowing on the premises.

Documents you’ll need

• Identification for borrowers, directors and guarantors.
• The lease, the first-refusal notice or the landlord’s offer, and the contract once issued.
• Details of any other property offered as security, with statements for loans on it.
• Your accountant’s note on GST and the buying entity.
• Evidence of the refinance plan, such as recent financials or a broker’s indication.

How fast

Once documents are in, funding is possible within 24 to 48 hours for up to $5m. The contract’s settlement date, not the lender, is usually what sets the pace. The commercial property purchase timeline guide walks through each step.

Illustrative example: a tenant matches a third-party offer

Illustrative example: A Campbellfield precision engineering business has leased its factory for 12 years. Under its right of first refusal, it receives notice of a $1,600,000 offer and has 21 days to match. The contract adds GST, and the business, which is GST-registered, will claim it back. Victorian entry duty is estimated at about $90,000. The directors’ home is worth about $1,500,000 with $500,000 owing. Illustratively, the factory supports a first mortgage at a 65% band, about $1,040,000, and the home supports a second mortgage at a 70% band on total debt, about $550,000 of headroom.

Purchase funding	Amount
Price	$1,600,000
GST added under the contract	$160,000
Entry duty (estimate)	$90,000
Legal and other costs	$20,000
Total to fund	$1,870,000
Business’s own cash	$300,000
Private first mortgage over the factory	$1,040,000
Second mortgage over the home	$530,000
Interest, capitalised over 12 months	depends on the deal
Exit	GST credit on the next BAS repays part of the second mortgage; bank owner-occupier refinance at month 9

The business accepts within the 21 days and settles on time. The GST credit arrives after the next BAS and reduces the second mortgage. At month nine, a bank refinances the factory and the home security is released. For Victorian notes, see our Melbourne private lending page.

Related situations

Buying a building with a business attached, such as a motel or childcare centre? See freehold going concern purchases. Buying commercial property you don’t occupy? Read buy commercial property fast. Moving rather than buying? See fit-outs and new premises. If a bank approval collapses late, bank finance fell through is the urgent version of this page.

See if you qualify before the first-refusal deadline

A first-refusal window is short, and the landlord’s other buyer isn’t going anywhere. Enquiring carries no credit check, and only one direct lender, fundU, sees your details. A specialist reviews the premises and your plan personally. Accurate figures on the price, the property you’re offering and the loans already on it will get you a firm answer the first time.

Find out if you can buy your premises in time, or read the overview of secured business loans.