Real Estate Law

Australian Commercial Real Estate Law & Market Trends

The recent volatility in the global financial environment has had far reaching implications including weak growth in the Australian commercial real estate market. However, the inherent strengths of the fundamentals of the country’s economy have countered the adverse effects of this trend to a certain extent.

This has been possible because of two factors. The first is that substantial investments have been made in the Australian commercial real estate market by overseas investors from Malaysia, China, Singapore, Canada and Hong Kong primarily in top end hotel deals and office assets. Returns have been high with assured occupancy rates and stable rental income. The second is that despite moderate growth in the retail sector there has been an improvement in retail property investments.

Commercial real estate law in Australia is founded on the Torrens principle that is largely based on registration of land. Each State in the country has a central register that clearly and categorically establishes the true “owner” of title to the land. Hence, for Melbourne property development, buyers and sellers of real estate in the State of Victoria have to approach the registry office in that State. The law thereby establishes that clear title is not through registration of title but through establishing title by registration. Once a right to title has been marked in the register, it cannot be defeated except in exceptional circumstances related to transfer of rights.

This switch to Torrens system from the Old Land System ensures that the possibility of fraud in title to commercial property by falsification of title deeds is drastically reduced. The system also facilitates for registration of other claims over real estate property such as mortgage that has to be created before land can be placed as collateral for a loan. Here too, the search for clear title has to be carried out in the central registry of that State before mortgage can be created. When banks or other lending institutions in the State of Victoria has to create charge on a particular parcel of real estate property, Melbourne conveyancing lawyers have to go through the rights records available in that State only. Only after it is seen that there is clear title to that property without any lien on it or other encumbrances will lenders proceed with establishing charge on that property and disburse loans.

The laws related to rental of commercial property and agreements and contracts between landlord and tenants too vary between different States and territories in Australia. While the quantum of rent payable is a matter of agreement between the landlord and the tenant, any increase or decrease in rent has to be externally referred. In all States except Tasmania, the matter has to be referred to a Tribunal that will adjudicate the matter. In Tasmania, any increase in rent is assessed by a Magistrate. However, any rent increase may be appealed against by the tenant to the Tribunal which will then assess various variables before deciding on it. These include the markets rents prevailing at that location for comparable premises, the extent of increase proposed, the state of the premises, the tenancy period and the period when the rent was last increased.

The law is very clear on the service notice for rent increase. Regardless of the type of tenancy, 60 days notice is required in NSW, South Australia, Victoria and Western Australia. The Northern Territory requires 30 days notice and the Australia Capital Territory requires eight weeks notice.

There are many other aspects of Australian Commercial Real Estate Law and the points made here are not all inclusive.