Can I buy a strata title commercial property with a loan?

Beyond the usual valuation and lease review, lenders order or request a strata report. They look at the sinking fund balance against the building's age, any planned or recent special levies, disputes or litigation involving the owners corporation, building defects and cladding issues, insurance, and the by-laws affecting use of the lot. A building with a depleted sinking fund and a looming facade repair is a risk to the value of every lot in it.

Many lenders apply a minimum lot size, often 50 square metres, below which they either decline or reduce LVR, because very small suites have a thin resale market. Lenders also check that the intended use is permitted under the by-laws and the planning scheme, and that the lot has the parking or amenities a tenant would expect. Serviced office suites and lots subject to a management agreement are sometimes treated as specialised.

Commercial lots in a tower with residential apartments above are common in city centres. Lenders finance them, but they assess the building as a whole: a residential-dominated tower with a few ground floor shops is treated differently from a commercial building with a few apartments. The residential component, the retail vacancy in the podium and the owners corporation's governance across both uses all feed into the assessment.

Strata levies are an outgoing. On a leased lot they are usually recoverable from the tenant under a net lease; on an owner-occupied lot they are a cost to the business. Lenders include them in the assessment and will note high levies relative to rent, because they reduce the net income the valuer capitalises.