Common terminology in buying a strata office off-the-plan in Victoria

Investing in a strata office off-the-plan can be an exciting opportunity to own a commercial property in one of Melbourne's fast-growing business hubs such as Williams Landing. However, to make an informed decision, it's important to familiarise yourself with the common terminology used in commercial property investment. This blog will help you navigate the language specific to strata office purchases in Victoria. 

Strata title

A strata title is a type of property ownership where individuals own a specific unit (such as an office suite) within a multi-unit development and share ownership of common areas like lobbies, elevators, and car parks.

Off-the-plan

Buying off-the-plan means purchasing a property that has yet to be built or is under construction. Investors review detailed plans and specifications to understand what the finished property will look like and how it will function. This type of purchase often allows buyers to lock in today’s prices for a property that will be completed in the future.

Owners Corporation (OC)

Also known as a body corporate, the owners corporation is responsible for managing the common property within a strata development. This includes maintenance, repairs, insurance and ensuring compliance with regulations. As an investor, you will be required to pay owners corporation fees to cover these expenses.

Owners Corporation fees

These are the fees payable by each strata owner to cover the costs of maintaining and managing the common areas of the property. Fees can vary depending on the size and value of the property, the facilities provided, and the complexity of the development.

Net Lettable Area (NLA)

Net Lettable Area (or NLA) is used for calculating tenancy areas in office buildings. As defined by the Property Council of Australia, NLA is broken down into the following definitions and means of calculation:  

NLA for whole floors: Taking measurements from the internal finished surfaces of permanent internal walls and the internal finished surfaces of dominant portions of the permanent outer building walls.  

NLA for sub divided floors: Measure to the centre line of inter-tenancy walls or partitions except where the walls or partitions adjoin public areas such as lobbies and corridors, in which case measure to the line of the dominant portion of their public area faces.  

 Pre-sales

Pre-sales refer to the number of units sold in a development before construction is completed. Developers often require a certain percentage of pre-sales to secure financing and begin construction. As an investor, participating in pre-sales may offer you the chance to purchase at a lower price.

Capital growth

Capital growth is the increase in the value of a property over time. Investors in off-the-plan strata offices often aim for capital growth as the property’s value appreciates from the initial purchase price to its market value upon completion.

Depreciation schedule

A depreciation schedule outlines the deductions an investor can claim for the wear and tear on a commercial property’s structure and assets over time. Buying a strata office off-the-plan may allow you to receive depreciation benefits, as the property and its fixtures are brand new, dependent on your situation. Your lawyer or conveyancer will be able to determine if you are eligible and the extent to which depreciation benefits may apply based on your personal situation. Speak to them directly for further information.

Rental yield

Rental yield measures the annual rental income as a percentage of the property’s value. It’s a critical metric for assessing the profitability of a commercial investment.

Fit-out

A fit-out refers to the interior design and customisation of a commercial space to make it ready for occupation. For strata offices, developers may offer a base build, leaving the fit-out to the buyer or tenant, or they may provide turn-key solutions with completed fit-outs.

GST (Goods and Services Tax)

In Australia, GST applies to the purchase of commercial properties, including off-the-plan strata offices. Typically, the advertised price will exclude GST, but it’s important to confirm with your accountant or legal team and seek tax advice based on your personal situation.

Section 32 Statement

Also known as a Vendor’s Statement, this is a legal document that provides prospective buyers with key details about the property. For off-the-plan purchases, the Section 32 Statement will include information about the proposed plan of subdivision, land use and planning, financial matters and any associated contracts or restrictions. 

In Victoria, a cooling-off period allows buyers to cancel their purchase contract within a specified timeframe, however this doesn’t always apply to off-the-plan purchases, so be sure to check the terms of your contract.

Settlement

Settlement is the process of finalising the purchase of a property. For off-the-plan purchases, settlement occurs once the property is completed, and the title is registered in your name. This is also when the balance of the purchase price is paid. 

If you’re purchasing a strata office as an investment, understanding commercial lease terms is critical. These may include lease duration, rent reviews, and options for renewal. 

Car parking is often a significant factor in strata office investments. Ensure you understand how car park spaces are allocated, whether they are on title or shared among the strata owners.

Default interest

Default interest is the penalty interest charged if you fail to meet payment obligations under the contract terms. It’s important to review your contract to understand the applicable default interest rate and avoid unnecessary financial penalties. Your conveyancer or lawyer will be able to assist you with this. 

Investing in a strata office off-the-plan in Victoria can be a lucrative venture, but it requires a clear understanding of the terminology and processes involved. Always conduct thorough due diligence, consult with legal and financial experts, and review the contract terms carefully. By being well-informed, you’ll be better equipped to make a sound investment decision. 

Disclaimer: The information used in this document is indicative only and may not represent the final detail or accurately represent personal circumstances of each person. Cedar Woods gives no warranty concerning the accuracy of the material or information displayed in this blog. Prospective buyers should make their own enquiries and rely on their own investigations and independent advice. All information in this blog is subject to Terms of Use accessible at www.cedarwoods.com.au/Terms-of-Use.