Subject to finance in commercial property: What buyers miss
Most buyers treat “subject to finance” as a holding pattern. You make the offer, the bank does its thing, and once the approval comes through, you move forward. That’s the sequence. What gets lost in it is everything you should have been doing while the clock was running.
A subject to finance condition is a due diligence window. Not just a financing one. The two are supposed to run in parallel, and when they don’t, you can end up with an approved loan and an incomplete picture of what you’ve just committed to buying.
What the Finance Condition Actually Does
When you make an offer on commercial property subject to finance, you are creating a legal period during which the contract is conditional. If finance is declined, you can walk away. If it is approved, the contract becomes unconditional and the purchase proceeds.
Most buyers understand that much. What they underestimate is what that window also allows. During the same period, a competent buyer should be running a building inspection, reviewing any existing lease documents if the property is tenanted, checking the outgoings schedule, conducting a title search, confirming zoning and permitted use for their intended purpose, and reviewing any encumbrances or caveats on the title. None of this requires finance approval first. All of it should be started immediately.
Why Buyers Lose Time They Cannot Get Back
The typical finance condition in a commercial purchase runs 14 to 28 days. That sounds reasonable until you account for how long each check actually takes. A building inspector needs to be booked. A solicitor needs time to review the lease and title documents. A town planner may need to be engaged if the permitted use is ambiguous. Council may take days to respond to a zoning enquiry.
If you spend the first week of your finance window waiting to hear from your broker, you are already behind. By the time finance is approved, particularly in this economic climate, your bank or broker will generally require the entire due diligence period to do work. At that point, buyers face an uncomfortable choice: proceed without completing their checks, or request an extension and risk the vendor’s goodwill or a hardening negotiation position.
Neither option is where you want to be.
The Finance Condition and Due Diligence Should Work Together
These two things are not sequential, they are concurrent. Your solicitor should be reviewing the contract and title documents from day one. Your building inspector should be booked within the first 48 hours. If the property is leased, the lease should be in your hands and being reviewed before the end of the first week.
The finance condition protects your deposit if the bank says no. Due diligence protects you from committing to a purchase with problems the bank’s valuer would never catch, a lease with unfavorable holdover provisions, outgoings that run higher than the vendor disclosed, a permitted use that doesn’t actually cover what you intend to operate. These are conditions that need to be negotiated before signing the contract. These are not financing problems. They are property problems, and they do not show up in a loan approval letter.
What a 14 to 28 Day Window Actually Requires
If your finance condition is 28 days, treat it as 21. Build in buffer for delays you cannot control, a slow council response, an inspector who cannot get access, a lease that takes longer to review because it is complex or poorly drafted. If you need more time, negotiate for it before you sign, not after. A longer condition period costs you nothing if everything checks out. A short one can cost you significantly if it does not.
The other thing worth knowing: if your lender’s valuation comes back short or conditional, you may need to renegotiate the purchase price or reconsider entirely. That conversation is easier before you have pushed all your due diligence to the last two days.
Don’t wait for finance approval before starting due diligence. The window is the same window. Use all of it and make sure you’ve accounted for the conditional checks before you sign a contract.
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