Buying a commercial property

General information, not tax or legal advice. Rules and rates change, and every situation is different. Talk to your lawyer and accountant before you act on anything here.

The problem

Buying commercial property is a large, hard-to-undo decision. The common traps: trusting the seller’s income numbers, missing a weak lease or a tenant about to leave, skipping environmental or building checks, or underestimating closing costs like property transfer tax and GST.

What I do about it

I work for you as the buyer: the search, checking the income and leases, the conditions that protect you, and the negotiation. You see the real numbers before the subjects come off.

What the seller wants

A seller wants a fair price, a buyer who’ll close, and a clean, predictable process. Many care about timing as much as price.

Where everybody wins

A clean offer with sensible conditions and a timeline the seller can count on often wins over a higher, messier one, and you still buy at a price that works.

Two kinds of buyers, two sets of questions

Owner-users are buying a place to run their business. The questions are about fit, financing, zoning for your use, and whether owning beats renting for you. Investors are buying income and growth.

The questions are about net operating income, lease quality, tenant risk and the cap rate.

Why a property is for sale tells you a lot. Owners usually sell because something has changed: a problem (debt, a vacancy, a tired building), a change in their life (retirement, an estate, a move), an opportunity elsewhere, or a price they can’t refuse. Knowing which one you’re dealing with shapes the offer.

What I do

1. Search listings from every brokerage, and reach out about properties that fit but aren’t advertised.
2. Rebuild the numbers: actual rents, actual expenses, lease terms and when they end. The brochure’s pro forma is a starting point.
3. Structure the offer with conditions for financing, inspection, environmental review, title, leases and zoning.
4. Coordinate with your lender, lawyer, accountant and inspectors during due diligence.
5. Negotiate any issues that due diligence turns up, through to completion.

Costs buyers forget

Property Transfer Tax (as of 2026, 1% on the first $200,000, 2% up to $2 million and 3% above that for commercial property), GST on some commercial purchases, legal fees, appraisal, environmental reports and financing costs. Budget for them from the start.

Checking the numbers and the paperwork

• Work out the NOI yourself. Net operating income is the rent the property should collect, minus vacancy and bad debt, minus operating expenses. Mortgage payments and income tax don’t go in. When a seller gives you an expense statement, ask what’s missing, such as management, reserves or repairs the owner does himself.
• Find the real vacancy. Compare the rent the property would collect fully leased with what it actually collected over a year. The difference captures free rent and tenants who don’t pay. A quoted vacancy rate may only count empty units.
• Map the lease expiries. If a big share of the leases end in the same year, the income is at risk, and lenders and future buyers will see it that way too. Know the dates before you make an offer.
• Get signed copies of every lease. Check them against title. A lease of three years or less binds you as the new owner if the tenant is in occupation, even if it isn’t registered, so unsigned drafts and verbal deals aren’t enough. You can order title searches through the LTSA.
• Search the contaminated sites registry, then go further. The Province keeps a site registry, but having no record doesn’t mean a site is clean. For industrial property, or anything next to or downhill from it, plan on a Phase I environmental assessment, which most lenders want anyway. A Phase II with soil testing follows if the Phase I raises a concern.
• Know how the lender will size the loan. Lenders look at the loan-to-value ratio and the debt service coverage ratio and lend the lower of the two amounts. Work out both before you set your price. For a building your own business will occupy, the Business Development Bank of Canada is one option alongside the banks and credit unions.
• Re-price on what you find. Inspection results, the true vacancy and missing expenses are all fair grounds to renegotiate before you remove conditions.
• Planning to occupy a tenanted building? The leases stay in place after you buy. Check them first, and price in a lease surrender if you need the space.

Subject clauses to consider

Your subjects are how you get out of the deal if something doesn’t check out. Depending on the property, think about:

• Financing on terms you can accept.
• Title review, including charges and any registered leases.
• Inspection of the building systems, roof and structure.
• Review of the financial statements, rent roll and leases, with tenant estoppels where there are tenants.
• Zoning that allows your intended use.
• Environmental review.
• A list of the equipment and contents included in the sale.

Give yourself enough time for each one. Your lawyer drafts the wording. More in subject clauses and how to read a rent roll.

Buy on actual numbers

Marketing packages often mix actual income with projected income. Projections show what the building could earn; the price should rest on what it does earn. Ask for the current rent roll, the last 12 months of income and expenses month by month, and the last full year’s statements, then build your own numbers from those.

Add the lines a seller often leaves out: a vacancy and bad-debt allowance even when the building is full, a management fee even if the owner manages it, and a reserve for roofs, boilers, windows and other big items that wear out.

Questions people ask

How much is Property Transfer Tax on commercial property in BC?

As of 2026: 1% on the first $200,000, 2% on the portion up to $2 million and 3% above $2 million. On a $3 million commercial purchase that works out to $68,000. Confirm the current rules with your lawyer or accountant, since rates and exemptions can change.