Owner Occupied vs Investment Commercial Property Loans: What Changes
Property Lending Hub
Owner occupied against investment · Which credit test applies · Australian commercial property
Two buyers can pay the same price for the same building and be assessed under two completely different credit tests. What decides it is not the borrower's job title, it is where the money that repays the loan comes from. This guide sets out what changes across the file: the income assessed, the documents, the valuation basis, the maximum advance, the loan term and what happens if the occupancy changes later.
Quick Answer
An owner occupied commercial property loan is generally assessed on the trading cash flow of the business occupying the premises. An investment commercial property loan is generally assessed on the rent, the lease and the tenant. The building can be identical. What changes is the source of repayment, and that decides the documents, the valuation basis, the maximum advance, the loan term and the risks tested on exit.
The same split is also described as passive against owner operated: owner operated means the borrower still carries the trading risk, passive means repayment comes principally from a genuine third party tenancy. Related party leases, part tenanted buildings, manager run businesses and later changes of occupancy do not fit either label neatly, and most of this guide is about those.
The category page is commercial property loans, and the tenure question, freehold against leasehold, is a different one answered at freehold going concern against leasehold.
Also called: owner occupied commercial property lending, investment commercial property lending, passive against owner operated commercial property, lease doc against full doc.
| Where you are | What actually changes | Where to go on this page |
|---|---|---|
| Comparing two listings, one tenanted and one you would occupy | The two are assessed under different credit tests, so the deposit, the document list and the loan term are not comparable even at the same price | Which income is assessed, then valuation and LVR |
| Under contract, and the lender is asking for documents your deal does not have | The file has probably been classified differently from the way you assumed, and the document list is the fastest way to tell | What each path needs |
| Setting up a property entity and a trading entity | A lease between your own two entities does not make the building an investment property, and granting it can carry duty consequences | The internal lease question |
| Buying a trading business and planning to install a manager | Most lenders read a manager run asset as owner operated, because the trading risk transferred to nobody | The manager run case |
| The valuation came back on a different basis from the one your deposit assumed | A percentage was applied to a different number, which is not the same problem as a number coming in low | When the valuation lands on a different basis |
| The tenant has given notice, or has already gone | The income is the first issue and the valuation basis is the second, and the second is the one that moves the loan to value ratio | If the tenant has already left |
| You occupy it now and want to stop, by letting it out or by selling the business and keeping the freehold | This is a contract question before it is a credit question, and the order surprises people | Changing the occupancy later |
What is the difference between an owner occupied and an investment commercial property loan?
The difference is where the money that repays the loan comes from. If your business occupies the property and the debt is serviced from its trading income, the file sits on the owner occupied, or owner operated, side. If an unrelated tenant occupies the property and rent services the debt, it sits on the investment, or passive, side. The security might be the same warehouse, office or shop. The evidence and the failure modes are different.
This is not broker shorthand. The prudential guidance behind Australian commercial property lending draws the line in exactly those terms. The Australian Prudential Regulation Authority's practice guide on the standardised approach to credit risk says it "expects the primary source of cash flows for commercial property 'dependent' on property cash flows would generally be lease or rental payments, or the sale of the property", and that the classification "is not restricted to these borrower types". Source: APRA, Prudential Practice Guide APG 112, June 2024, paragraph 24, read live 3 September 2026.
The counter example in the same guide is the file most self employed borrowers are actually in: "An example of a commercial property 'not dependent' on property cash flows would be a small and medium size enterprise (SME) loan that is secured by commercial property, but is serviced using business revenue." Source: APRA, Prudential Practice Guide APG 112, June 2024, paragraph 26, read live 3 September 2026.
What that guidance does and does not do matters. It governs how an authorised deposit taking institution categorises the exposure for regulatory capital purposes. It is not a rule about which product you will be offered and it does not decide your application. What it explains is why two files on the same building read so differently: they are not two versions of one loan, they are two categories, separated by a cash flow test rather than by a borrower label.
| What changes | Owner occupied | Investment |
|---|---|---|
| Who occupies the property | Your own trading business, or a related operating entity | An unrelated tenant under a genuine commercial lease |
| Main repayment source | Business trading cash flow | Rent payable under the lease |
| Main credit question | Can the business service the debt, and keep doing so? | Can the rent service the debt, and is the tenancy durable enough? |
| Typical evidence | Business financial statements, tax returns, business activity statements and trading account conduct | The lease, a tenancy schedule, rental evidence and tenant information |
| Valuation focus | Mortgage valuation guidance directs a vacant possession basis for owner occupied property, including related entity occupied property, unless the valuer is instructed otherwise Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.3, read 4 September 2026. | The existing lease, the passing rent against market rent, the remaining term, the tenant and the re letting risk |
| Main future risk | The business weakens, closes or moves out | The tenant leaves, the lease expires, or the rent falls on re letting |
If you only need the broad mechanics of the product, start at our commercial property lending page. This guide is for the harder question underneath it: which credit test applies to your property, and what changes once it has been chosen.
How does a lender decide whether a property is owner occupied or investment?
A lender looks through the ownership structure to the real occupancy and the real repayment source. A separate property company or trust does not automatically make a building an investment property if a related trading business occupies it, and hiring a manager does not make an operating business passive if you still carry the business risk and receive the trading profit.
| Real world structure | Likely lending reading | What to test next |
|---|---|---|
| Your company owns and occupies the building | Owner occupied | Business serviceability, property value and sector policy |
| A property trust owns the building and your related trading company occupies it | Related entity occupied, which is not automatically a lease doc investment | Business cash flow, the purpose of the internal lease, and lender policy on related party income |
| The building is leased to an unrelated tenant | Investment | The lease, rent cover, tenant quality, remaining term and the valuation basis |
| Your business occupies one part and unrelated tenants occupy the rest | Mixed occupancy, assessed on both income streams | How each income stream is treated, and what proportion of the floor space each represents |
| You own a trading business but employ a manager to run it | Still owner operated in most cases | Who carries the trading risk and who receives the business profit |
| You own the freehold and an independent operator runs the business under a genuine lease | Investment may apply | The actual legal agreement, the rent, the operator covenant and what the lender requires |
Does a related party lease make the property an investment?
Not by itself. Australian mortgage valuation guidance defines owner occupied property to include related entity occupied property, and directs that it "should be valued on a vacant possession basis (unless otherwise instructed)". Source: Australian Property Institute, ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, effective 1 January 2025, clause 5.3, read live 4 September 2026. Separately, one published lease doc product requires an active lease that is arms length and between independent parties, which a lease to your own entity is not. Source: Commonwealth Bank of Australia, Lease Doc loan, read live 3 September 2026.
An internal lease can still be important for legal, accounting and commercial reasons. It should just not be created in the belief that it will move the finance into a lease doc category, because on the two published tests above it does not.
What if you buy the business and put a manager in?
A manager does not transfer the trading risk away from you. If you own the business, receive its profit and carry the downside when sales fall, the file normally stays on the operating business side. Buyers reach for the word passive because they will not be behind the desk, but lenders are not measuring effort, they are measuring who carries the risk.
This is the single most common place the binary breaks down, and it is usually discovered late. A buyer told an asset is "fully managed" arrives expecting a lease doc style assessment and is asked for trading records, industry experience and a business plan instead. Nothing has gone wrong. The deal was always on the other path.
| What buyers usually assume | How a lender usually reads it | What that changes on the file |
|---|---|---|
| I will not work in the business, so this is passive | The trading risk sits with you, so the loan is assessed on the profit of a business you own | Trading records and experience evidence, not a lease and a tenancy schedule |
| The manager's track record supports the income | The manager can resign, and their record does not transfer with the keys | The asset's own trading history is assessed, not the manager's reputation |
| A management agreement is effectively a lease | A lease creates a tenant who owes a rent; an agreement creates a service arrangement you can be left holding | Different document, different counterparty, different position if it ends early |
| A guaranteed minimum return makes the income certain | A guarantee is only as good as the party standing behind it | The lender looks through to who gave it and what they are worth |
| Industry experience is the manager's problem | Experience is usually asked of the borrower, because the borrower repays | Experience, or a credible plan to acquire it, becomes part of the assessment |
There is machinery attached to this that buyers rarely see until it appears on a settlement checklist. Where a third party runs the asset under an agreement, a lender may want that relationship documented alongside the mortgage, through instruments such as a non disturbance agreement, which sets out what happens to the operator's position if the lender enforces, and a mortgagee step in deed, which sets out what the lender may do to keep the asset trading if the borrower fails. These are negotiated documents and they take time, so ask early whether either is required. The answer changes the settlement timetable rather than the pricing.
There is also a genuine middle ground. Some agreements pay the owner a fixed amount that behaves economically like a rent. Whether that makes the arrangement a lease is a legal question about the document rather than a marketing question about the brochure, and it is one for your solicitor before it is one for your broker.
Which income does the lender assess, business profit or rent?
On an investment file the lender starts with the rent and tests whether it can support the debt by a stated multiple. On an owner occupied file it starts with the operating business and tests whether its sustainable cash flow can service the facility. Published products make the investment test unusually visible, and the numbers behind it are not one number at all.
The owner occupied side is less tidy, because there is no single ratio to publish. Lenders analyse historical and current trading performance, normalise one off items, test existing commitments and apply sector policies. One published lending guide illustrates how far the shape can differ: it sizes some business lending on multiples of earnings before interest, tax, depreciation and amortisation, at "Up to 3.5x EBITDA or 70% of external valuation" in one sector and "Up to 3.75x EBITDA" in another. Source: Macquarie Bank, commercial lending guide, May 2026, read live 3 September 2026. Those are sector specific parameters, not a general rule. The point is the shape: the investment side is sized on a cover ratio, the operating side on a multiple of earnings.
So do not compare a rent cover test and a business serviceability test as though they were the same formula. If the rent is doing all the servicing work, the product is covered in full at how a lease doc loan is assessed.
Where do management rights and letting pools sit?
In a third category, and lenders read it narrowly. A management rights purchase is a real estate purchase and a business purchase stapled together, and the income comes from neither a lease nor a business the manager owns outright. The industry body defines the model as "a business that a resident manager conducts in a property that operates under body corporate, strata or community titles legislation", built on a written caretaking contract with the body corporate, a written authorisation to operate a letting business on site, and a written appointment from each owner who puts a unit into the pool. Source: Australian Resident Accommodation Managers Association, read live 3 September 2026.
That is why remaining agreement term is the variable assessors keep returning to. Maximum terms are set by state body corporate legislation and differ by the regulation module a scheme operates under, so the number for a given complex is a question for the scheme's documents and a strata lawyer. We do not publish one, and any page quoting a maximum without naming the module is guessing.
The same hybrid logic reaches serviced apartments, and the valuation profession has noticed this asset class by name. Its mortgage security guidance states that chattels are not normally included in a valuation of real property, and where they are included it would only be on lender instruction, giving as its example "a serviced apartment in use subject to a management agreement". Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 7.0, read live 4 September 2026. If your unit comes furnished and the furniture is part of what makes it lettable, ask whether the valuation includes it, because the default is that it does not. The deeper reads are at management rights as a business, how a lender reads a management rights purchase, serviced apartment finance and the money page at management rights finance.
What documents do you need for each type of commercial property loan?
The document list follows the repayment source. An investment file needs evidence of the lease and the property income. An owner occupied file needs evidence that the trading business can service the debt. If the lender is asking for documents your deal does not seem to have, that is usually the first sign the file has been classified differently from the way you assumed. Work out the classification before chasing documents at random.
| What the lender asks for | Tenanted investment | Owner occupied |
|---|---|---|
| Primary income document | The signed lease and any variations, plus a tenancy schedule where there is more than one tenant | Business financial statements and tax returns where full documentation assessment applies |
| Supporting income evidence | Rental statements or other evidence of rent received, and information about the tenant | Business activity statements, business bank statements and management accounts |
| What limits the term | The remaining lease term, which on some published products caps the loan term outright | No document caps it directly, though licence and approval life can do the same job |
| Borrowing entity | One published product requires a standalone, non trading special purpose vehicle set up only to hold the property Source: Commonwealth Bank of Australia, Lease Doc loan, read 3 September 2026. | The trading entity, with entity documents, guarantees and evidence of industry experience |
| Personal documents | On one published product, no payslips and no tax returns at all Source: Commonwealth Bank of Australia, Lease Doc loan, read 3 September 2026. | Details of existing debt and commitments, and where the price includes goodwill, the records behind those earnings |
| What the valuer is sent | Lease agreements and property documents, since the value is derived from the income in place | Licences, planning consents, financial statements and plant and equipment schedules where relevant Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 4.0, read 4 September 2026. |
Do you need a lease between your own two entities?
If the property sits in one entity and the business trades from another, a lender will commonly want a written lease between them, and that lease has consequences well beyond the loan file. This is the part of the structure conversation that gets set up quickly on advice and understood slowly afterwards, and it is worth understanding before the entities are formed rather than after.
The valuation consequence is the one nobody mentions. As set out above, mortgage valuation guidance treats related entity occupancy as owner occupation and directs a vacant possession basis unless the lender instructs otherwise. The internal lease does not, by itself, produce a value derived from its own rent.
The duty consequence is the one that arrives by post. Duty on lease transactions is a live head of duty in at least one Australian state: Victoria publishes a dedicated set of lease duty provisions, including guidance on duty on the grant, transfer or surrender of a lease. Source: State Revenue Office of Victoria, Duty on lease transactions, page last updated 2 February 2026, read live 4 September 2026. We read the Victorian position and did not read the other seven jurisdictions, so treat that as evidence that the question exists in your state rather than as an answer for it. Whether anything is payable on your lease depends on the terms, the consideration and the jurisdiction, and it is a question for your solicitor and the revenue office where the land sits.
The rest of the consequences are your accountant's and, where a self managed superannuation fund owns the property, your superannuation adviser's, because related party leasing of business real property is governed by a separate and stricter set of rules. What a broker can usefully tell you is which of those people needs to be in the conversation before the entities are registered.
How do valuation and LVR change what you can borrow?
The loan to value ratio is only half the equation. The other half is the value the percentage is applied to, and the two paths are not applied to the same number. A buyer can have the same purchase price and the same nominal ratio and still need materially more cash, because the lender's value came in lower or on a different basis.
The valuation profession sets the bases out itself. For owner occupied property, including related entity occupied property, the mortgage security guidance directs a vacant possession basis unless the valuer is instructed otherwise, and it notes that some lenders may request a vacant possession value where a lease is close to expiry and that figure may differ materially from the leased value. Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.3, read live 4 September 2026. On a tenanted investment the exercise is different, and the profession's rental guidance defines the terms: passing rent is "The rent specified and paid by the tenant under the terms of a lease. (Sometimes known as contract rent)", market rent is what a willing lessor and willing lessee would agree at arm's length, and where one exceeds the other the gap is profit rent, "The amount by which the passing rent is greater than the market rent." Source: Australian Property Institute, AVGP 301 Rental Valuations and Advice, effective 1 July 2023, read live 3 September 2026.
Two clauses in that rental guidance explain the divergence. Clause 5.5 states that "The rent may be market rent or some other basis other than market rent. This must be clearly detailed in the instructions", so the basis comes from the instruction rather than from the asset. And on specialised property, clause 6.4.2 states that "The goodwill of the tenant is normally excluded when providing rental advice". That is why a leased motel and a going concern motel produce different numbers on the same building: one exercise deliberately leaves out what the other is buying.
Specialised buildings can carry two numbers. Where a property is purpose designed for an occupier and is not suitable to an alternative occupant, the mortgage security guidance directs that both the value for that occupant and the alternative use value be reported, so the lender is fully informed. Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.5, read live 4 September 2026. On a childcare centre, a service station or a purpose built medical suite, the lender may not be lending against the number you are looking at.
And one clause settles an argument the market keeps having. On recommendations to lenders, the same guidance states that "it is not generally appropriate for the Member to recommend a maximum or minimum loan percentage or amount or recommend a loan period". Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.8, read live 4 September 2026. The valuer supplies the base. The lender supplies the percentage. Anyone telling you the valuer set your ratio has the roles the wrong way round.
How can the same LVR need more cash after valuation?
Because the ratio is applied to the lender's value, not to your contract price. The arithmetic below is illustrative only and uses a round percentage purely to isolate the effect of the base.
| Scenario | Purchase price | Value used by the lender | Ratio applied | Indicative loan | Cash before costs |
|---|---|---|---|---|---|
| Value supports the contract price | $2,000,000 | $2,000,000 | 70 per cent | $1,400,000 | $600,000 |
| Value comes in lower, or on a different basis | $2,000,000 | $1,800,000 | 70 per cent | $1,260,000 | $740,000 |
A $200,000 gap between contract and value increases the cash required by $140,000, before duty, legal fees, valuation costs and other transaction expenses. The ratio never changed. The number underneath it did. That is the entire reason this page keeps insisting that a percentage without its base is meaningless.
What if the valuation lands on a different basis from the one you assumed?
The number is not wrong, it is answering a different question. Establishing which basis was instructed is the first move, before any conversation about contributing more, contesting the report or renegotiating, because those three responses fix three different problems and only one of them is yours.
There is a formal mechanism here and it helps to know its name. Where a lender asks for a value on a basis other than the ordinary one, for example subject to vacant possession or subject to a proposed lease, that is a special assumption, and the guidance directs that the report carry the market value "as is", the details of the special assumption, the value subject to it, and supporting evidence linking both. It adds that "Any material difference between the value 'as is' and the value subject to the special assumption should be commented upon". Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.4, read live 4 September 2026. If two numbers exist in your report and the gap between them is doing the damage, the commentary explaining that gap should already be in the document. Ask for it.
Before anyone reaches for more debt, the cheapest levers are usually contractual: an extension, a price adjustment, or vendor terms, all questions for your solicitor. And where additional property is offered to bridge the gap, understand what that does before agreeing rather than after, because it ties assets together in a way that is harder to unwind than to create, as set out at cross collateralisation in commercial finance and getting off cross collateralisation. The mechanics of how the two valuations are built are at how a going concern valuation is built and, for accommodation, bricks value against going concern value. The term itself is defined at loan to value ratio.
What published maximums exist on the investment side?
Five lenders publish a maximum advance against a lease, and they do not agree with each other. Read live on 3 September 2026, the published maximums sit at 65, 70, 70, 75 and 75 per cent, one steps down as the loan gets larger, and one is higher for owner occupied property but only in a single sector.
Now notice what is not there. Five lenders publish the most they will advance against a lease. Not one of them publishes the most they will advance against a trading business. That is not an oversight. A lease is a document with a number in it and a counterparty behind it, which is a thing a policy can be written about. A trading business is an assessment made file by file on records, experience and sector. It is also why any figure you read for the owner occupied side comes from a broker rather than a lender, including ours.
Does any Australian authority publish a deposit or LVR difference?
No, and we went looking specifically to find out. On 4 September 2026 we ran a targeted search across the prudential regulator, the corporate regulator, the central bank, the banking industry body, the valuation profession and the national statistical agency, asking whether any of them publishes a systematic difference in deposit requirement, maximum advance or pricing between owner occupied and investment commercial property lending. Nothing on point was located from any of them.
What came back instead is itself the finding. Almost every institutional document surfaced was residential: residential mortgage lending practice guidance, a residential mortgage lending policy page, central bank research on housing investors and housing lending policy, and lending indicator statistics methodology. Australia publishes a great deal about how much you can borrow against a house and close to nothing about how much you can borrow against a shop, a shed or a motel.
| Body | What it does publish that touches this | Whether it answers the question |
|---|---|---|
| Australian Prudential Regulation Authority | Capital and credit risk guidance, including the cash flow dependency test this page is built on, plus lending statistics | Categorises exposures for capital purposes. No deposit or maximum advance published for either model |
| Australian Securities and Investments Commission | Guidance for consumers and a pathway for disputes about commercial loans | Nothing on point located on deposit, maximum advance or pricing by occupancy model |
| Reserve Bank of Australia | Research and financial stability material on lending standards | The material located was residential and housing investor lending, not commercial |
| Australian Banking Association | An industry code of practice covering small business lending conduct | Nothing located that sets a commercial deposit or advance by model |
| Australian Property Institute | Professional valuation guidance, including for mortgage and loan security purposes | It goes the other way. The guidance states it is not generally appropriate for a valuer to recommend a maximum or minimum loan percentage or amount Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.8, read 4 September 2026. |
| Australian Bureau of Statistics | Lending indicator statistics and their methodology | Measures lending flows after the fact. Does not publish policy thresholds |
That is what we searched for and did not find, stated as a method rather than as a claim about the universe. Something may exist that we did not locate. What can be said is that every deposit and maximum advance figure circulating on this topic traces back to a broker, a lender or a comparison site, including every figure on this page and including ours.
What moves your contribution under each model?
We do not publish a deposit band, and the two sections above are the reason. What can usefully be said is which levers move the contribution in each direction, because those are the same whoever the lender turns out to be.
| Lever | On a tenanted investment | On an owner occupied purchase |
|---|---|---|
| Loan size | One published ladder reduces the maximum as the loan grows, so a bigger deal can need a bigger proportional contribution | Set file by file, because no lender publishes a maximum against a trading business |
| Repayment type | One product reduces its ceiling where the loan is interest only | Assessed against whether the business can service principal as well as interest |
| Security type | Standard commercial is a narrower category than it sounds, and specialised security is assessed differently | Specialised security is common, and a purpose designed building may carry a second, alternative use value |
| What the value includes | A value derived from the rent passing under the lease | A vacant possession value on plain premises, or a going concern value on a trading asset, so the same percentage leaves a different dollar gap |
| Document life against loan life | The remaining lease term can cap the loan term, and an imminent expiry can also move the valuation basis | No lease caps it, but a licence, approval or supply arrangement can do the same job |
| Additional security | Can bridge a gap, and ties assets together in a way harder to unwind than to create | The same, and more often reached for, because the base being funded is larger |
For how the generic maximum on commercial property is actually set, see 80 per cent LVR on commercial property.
How do the tenant and remaining lease term affect the loan?
On a tenanted property the lender is not only asking how much rent is paid. It is asking how long that rent is likely to survive relative to the loan. Tenant quality, remaining firm term, options, rent level, incentives, vacancy risk and the ease of re letting all matter, and the framework says so.
In determining whether an exposure is standard or non standard, the prudential guidance says an authorised deposit taking institution "is required under APS 112 to assess the tenancy profile relative to the maturity of the loan", and that where a property is leased by multiple lessees the assessment "may consider whether the weighted average lease expiry (WALE) sufficiently exceeds loan maturity". Source: APRA, Prudential Practice Guide APG 112, June 2024, paragraph 25, read live 3 September 2026. Lease term against loan term is not a lender preference. It is written into the framework.
Can the lease expiry cap the loan term?
Yes, on some published products, and directly. The clearest statement in the published set reads: "Maximum loan term is the lesser of the remaining term of the lease (excluding options) or maximum interest only term for single tenant properties." Source: Bank of Queensland, Lease Doc Business Loan, read live 3 September 2026. Another product expresses the same idea as a term of up to five years or lease expiry, whichever is shorter. Source: Commonwealth Bank of Australia, Lease Doc loan, read live 3 September 2026.
Note what those sentences exclude: options to renew. An option belongs to the tenant, not to you. A three year firm term with a five year option is not eight years of bankable income, and a ten year lease with two five year options may be a three year lease for loan term purposes.
Why does a short lease matter again at refinance?
Because a property can settle comfortably today and become a harder refinance later. If the lease and the facility approach expiry together, a new lender sees a property whose supporting income is about to disappear, and the valuation can move at the same time: the mortgage security guidance records that some lenders may ask for a vacant possession value where a lease has an imminent expiry and that figure is, or is likely to be, significantly different from the value subject to the existing lease. Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.3, read live 4 September 2026.
A short lease tail therefore does two things at once: it shortens the loan and it can change the number the loan is measured against. If you are buying with only a short firm term remaining, ask before exchange whether the lender counts options, whether the lease needs to outlast the facility, what happens to the valuation if it does not, and whether extending the lease before settlement would materially change the file. Those questions matter more than chasing a slightly higher headline ratio. There is also an order to it that people get backwards: a tenant who knows your loan matures with their lease negotiates from a stronger position, so start the finance conversation before the renewal one.
What should you work out before signing the contract?
Before the contract goes unconditional, work out which lending path applies, who will own the property, what valuation basis is likely, what cash must remain after settlement, and whether the contract allows enough time for commercial finance and due diligence. In that order, because each answer changes the next.
- Occupancy. Will your business occupy all of it, part of it, or none of it? That single answer selects the credit test.
- Ownership entity. Have your accountant and solicitor agreed who should buy, before the contract is signed rather than after?
- Lease. If there is a tenant, what is the firm remaining term, who pays outgoings, are there incentives or side agreements, and are options being relied on?
- Valuation basis. Is the lender likely to instruct vacant possession, subject to lease, going concern, or something else, and do you know which before you commit?
- Finance condition and timing. Does the contract allow enough time for credit assessment, valuation, legal review and documentation? Commercial finance is not a home loan timetable.
- Cash after settlement. After the contribution, duty and transaction costs, is there enough working capital left to move in, fit out and keep trading?
Two tax points sit alongside these and neither is a finance question. Structure, duty and land tax consequences depend on the entities and the jurisdiction, so they belong with your accountant and solicitor. And the phrase going concern means different things in different rooms, which catches people out on exactly this kind of purchase.
The going concern trap, stated plainly. In valuation, a going concern basis includes the trading business. In GST law it is a supply test, and the Australian Taxation Office states that property in a sale of a going concern can include "a fully tenanted building, where the property and all leases, agreements and covenants are included in the sale", while "The sale of a property by itself isn't regarded as a going concern". GST-free treatment additionally requires that the sale is for payment, that the purchaser is registered or required to be registered for GST, and that both parties have agreed in writing that the sale is of a going concern. Source: Australian Taxation Office, Selling a going concern, QC60250, last updated 15 December 2022, read live 4 September 2026. So a tenanted investment property with no trading business attached can be a going concern for GST and is not one for valuation. Those two meanings pull in opposite directions on the same contract, which is why the written agreement clause matters and why this is a question for your accountant and solicitor rather than an inference from the loan structure. The valuation meaning is unpacked at what a going concern actually is and defined at going concern.
If you are buying premises from your current landlord, the sequence from offer to settlement is covered at buying your premises from your landlord and buying the premises you currently lease.
What happens to the loan if the occupancy changes later?
Changing who occupies the property changes the repayment income, the lender's risk view, the valuation assumptions and the refinance path, even though the building has not changed at all. Check the facility terms and speak to the lender before the arrangement changes, not after.
| Change after settlement | What changes in the credit story | What to do before the change |
|---|---|---|
| Your business moves out and an unrelated tenant moves in | Trading cash flow is replaced by third party rent the lender has never assessed | Check consent requirements and lease terms, and ask whether a new valuation or serviceability review is needed |
| A tenant leaves and your own business moves in | Rental assessment is replaced by business serviceability, and the valuation basis may move to vacant possession | Show how the operating business will service the debt, and confirm any facility variation required |
| The tenant leaves and the property stays vacant | The income supporting the facility disappears and vacant possession value becomes more relevant | Plan cash flow support, re letting and refinance early rather than waiting for maturity |
| You sell the trading business but keep the freehold | The property moves from your trading income to rent paid by the buyer of your business | Design the lease with the business sale, lender consent and the future refinance in mind at the same time |
| You sell the property but stay on as tenant | The property debt is repaid on sale and your business takes on a new lease obligation instead | Model it as a business funding transaction rather than simply a property sale |
Do you need lender consent before leasing the property out?
Check your own facility agreement, because this is a contract question and the answer sits in your documents. Facility documents typically deal with it expressly. One major bank's published standard mortgage and security provisions, dated 30 July 2026, list the dealings that require written consent, and renting out the secured property is on the list: "Unless you first get our written consent... you must not... rent out The Property or agree to a surrender or variation of any rental agreement we consent to." The same clause carves out leases to an individual for residential purposes and then lists exceptions that pull cases back in, including where the term and any option together reach three years or more, where the rent is less than the borrower told the bank to expect, or where the tenant is a relative or a director. Source: Commonwealth Bank of Australia, standard terms and conditions for mortgage and security provisions, 30 July 2026, clause A11, read live 3 September 2026. A commercial letting does not sit inside that residential carve out.
Scope matters and it is easy to get wrong. A different clause in the same document, A6.3, deals with the separate case where the borrower holds the property under a lease, or where a lease forms part of the security, and requires consent before surrendering, cancelling or varying that lease. Source: Commonwealth Bank of Australia, standard terms and conditions for mortgage and security provisions, 30 July 2026, clause A6.3, read live 3 September 2026. Two different situations, two different clauses. Neither is a statement that your lender requires consent. They are an example of the kind of clause facility documents carry, and the only document that answers the question for your loan is your own. The statutory position underneath varies between states, so that is a question for your solicitor and we do not state a section number here.
What if you sell the business and keep the freehold?
That converts an owner occupied loan into an investment one in a single step, and the lender is usually the last party told. It is the reverse of a sale and leaseback: there you sell the property and keep operating, here you keep the property and stop operating. It is the standard exit on accommodation, hospitality and childcare assets, and from a credit desk it is a substitution of the entire income source.
Three things get looked at. The lease term against the remaining loan term, because the term rule above applies to your new lease exactly as it applies to anyone else's. Whether the lease is genuinely arms length, given that you and the buyer wrote it on the same day you agreed the price. And whether the rent could be read as set high to support that price, which is precisely what the market rent test in the valuation guidance exists to detect. A rent above market is not a secret you keep from a valuer. It is the first thing the rental assessment is designed to find. The transaction structures are at selling and leasing back your premises.
What if the tenant has already left?
If the tenant has already gone, the first conversation is about the plan rather than about the loan, and the order of moves matters more than the speed of them. Most of what helps in the first fortnight costs nothing and involves no new borrowing at all.
- Read what the facility actually requires of you. Notification obligations, review triggers and covenant tests are in your own documents, and knowing which of them a vacancy touches is the difference between a disclosure and a surprise.
- Work out how long other cash flow can carry the debt. That number, not the vacancy itself, is what the lender is really asking about.
- Get the premises genuinely on the market, so you can say who is marketing it, at what rent and on what terms. A plan with names and numbers in it reads completely differently from an intention.
- Understand that the valuation basis, not the empty building, is what moves the loan to value ratio, and that the guidance ties a lender's request for a vacant possession figure to an imminent lease expiry.
- Only then is a restructure, an interest only period or a refinance a useful conversation, because by then you can describe the problem in the terms a credit team will assess it in.
One practitioner warning that runs against the instinct. The temptation is to fill the space quickly at whatever rent is on offer. The rent you sign is the income the next valuation adopts, and a lease signed cheaply in a bad month can sit under your reported value for years. A short term arrangement and a vacancy are sometimes a better position than a long lease at a rent you will regret, and that is a conversation to have before the ink dries.
From our broking, indicative
Across the commercial property files we place, the thing that separates a clean approval from a slow one is the same on both paths: whether the income the loan is being assessed on can be evidenced without argument. What that means in practice differs by path.
- On deposit, we do not publish a band, and the section above is now the reason we can point to. A percentage without its base is the error, and no Australian regulator or industry body publishes a figure for either model, so anyone quoting you one is quoting a broker, a lender or a comparison site.
- On timing, the owner occupied file is consistently the slower of the two, and the reason is documentary rather than discretionary. It needs trading records that reconcile, experience evidence and any licence or compliance approval, and each of those is a document somebody has to produce. We do not publish a time band we would stand behind, because the variance sits in the borrower's paperwork rather than in the lender's queue.
- On the manager run case, the assumption that hiring a manager makes a purchase passive is the most common mistaken assumption we see on this topic, and it is usually discovered at the document request stage rather than at enquiry. Settle it on day one, because it changes what the buyer needs to have ready.
- On structure, the two entity question comes up on most owner occupied files and is almost always framed as a tax decision. It is also a valuation decision and, in at least one state, a duty decision. Get the accountant and the solicitor in the room before the entities are registered.
- On declines, the two paths fail differently. The investment side falls over on a related party or unregistered lease, a tenant with no financials behind it, a lease with less term remaining than the loan, and a rent that looks above market. The owner occupied side falls over on no industry experience, trading records that do not reconcile to the business activity statements, a compliance or licensing gap, and a purchase price built on an operator's earnings the buyer cannot repeat.
Indicative and general only, based on deals we have placed, as at 4 September 2026. Not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
The same building can be a very different credit file depending on who occupies it. If your business operates from the property, the lender follows the business cash flow. If an unrelated tenant occupies it, the lender follows the rent, the lease and the tenant. The difficult cases are the ones between those two clean examples: related entities, mixed occupancy, manager run businesses, short lease tails, valuation basis changes, and properties that switch model after settlement. And the most telling thing in the published record is what is missing from it. Five lenders will tell you the most they will advance against a lease. Not one publishes a maximum against a trading business, and no Australian regulator or industry body publishes a figure for either.
Key takeaway: classify the occupancy before you compare deposits or ratios. The repayment source selects the credit test, and the credit test decides every number downstream.Frequently Asked Questions
The difference is which income repays the loan. An owner occupied file is assessed on the trading cash flow of the business occupying the premises. An investment file is assessed on the rent an unrelated tenant pays under a lease. That single split then drives the document list, the valuation basis, the maximum advance and the loan term, which is why two files on the same building behave so differently. Start with the commercial property loan mechanics.
Generally owner occupied, and putting a lease between your two entities does not by itself change that. Australian mortgage valuation guidance defines owner occupied property to include related entity occupied property and directs that it should be valued on a vacant possession basis unless the valuer is instructed otherwise. Source: Australian Property Institute, ANZVGP 112 Valuations for Mortgage and Loan Security Purposes, effective 1 January 2025, clause 5.3, read 4 September 2026. Separately, one published lease doc product requires an active lease that is arms length and between independent parties, which a related party lease is not. Source: Commonwealth Bank of Australia, Lease Doc loan, read 3 September 2026. There are still good legal and accounting reasons for an internal lease, covered at the internal lease question.
Yes, and the file is then assessed on both income streams rather than on one. Your business occupying part of the building and unrelated tenants occupying the rest is a mixed occupancy case, and the lender will want to understand each income stream separately, how much of the floor space each represents, and what happens to the whole if either half changes. It is a common structure and it is not a problem, but it is not a lease doc file either. See how a lender classifies the property.
You can, but most lenders will still assess the file as owner operated rather than passive. The trading risk stays with you, the manager is a cost rather than a tenant, and the money repaying the loan is still the profit of a business you own. A management agreement is not a lease: a lease creates a tenant who owes you a rent, an agreement creates a service arrangement you can be left holding if the manager resigns. Expect trading records and experience evidence rather than a lease. See how a lender reads a manager run asset.
On at least one published product, no. A major bank states that its lease doc product requires no payslips or tax returns, because it is assessed only on the rental income the property earns. Source: Commonwealth Bank of Australia, Lease Doc loan, read 3 September 2026. That is one lender's published product rather than a market rule, and the same product carries structural conditions in exchange, including an active arms length lease between independent parties and a standalone non trading borrowing entity. See what a lease doc file asks for instead.
It is applied to whichever basis the valuation was instructed on, and establishing that basis is the whole point of the question. Australian mortgage valuation guidance directs that owner occupied property, which it defines to include related entity occupied property, should be valued on a vacant possession basis unless the valuer is instructed otherwise. Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.3, read 4 September 2026. On a tenanted investment the value is derived from the rent passing under the lease instead, and on a going concern purchase it includes the business. See what a going concern valuation measures.
There is no published Australian answer, and the reason is the point of this whole page: a deposit is a percentage, and a percentage means nothing until you know what number it is applied to. We checked the prudential regulator, the corporate regulator, the central bank, the banking industry body, the valuation profession and the statistical agency, and none of them publishes a deposit, maximum advance or pricing difference between the two models. Every figure in circulation comes from a broker, a lender or a comparison site, including ours. See what moves your contribution under each model.
No. A home loan is residential lending, and a commercial property is assessed under a different framework with a different income test, a different valuation basis and different maximum advances. The confusion is understandable, because most published Australian lending guidance is residential, so searching on deposit or loan to value ratio returns home loan material even when the question is commercial. Using equity in a home as part of the contribution is a separate question with real consequences, covered at cross collateralisation in commercial finance.
Often not, and this is one of the most expensive assumptions a buyer can make. One published product states that the maximum loan term is the lesser of the remaining term of the lease, excluding options, or the maximum interest only term for single tenant properties. Source: Bank of Queensland, Lease Doc Business Loan, read 3 September 2026. An option belongs to the tenant, not to you, so a three year firm term with a five year option is not eight years of bankable income. Ask before exchange whether your lender counts options. See how the lease term affects the loan.
The valuation basis usually moves before the loan does. Australian mortgage valuation guidance records that some lenders may ask for a vacant possession value where a property is subject to a lease with an imminent expiry and that figure is, or is likely to be, significantly different from the value subject to the existing lease. Source: Australian Property Institute, ANZVGP 112, effective 1 January 2025, clause 5.3, read 4 September 2026. Lenders do not automatically call a loan the moment a vacancy occurs, provided the debt can still be serviced from other cash flow, and the first conversation is normally about the plan to re let. See what to do if the tenant has already left.
Two things change at once, and the contract one usually comes first. Facility documents commonly treat renting out the secured property as a dealing that needs the lender's written consent, and separately the income the loan was approved against is replaced by a rent the lender has never assessed. Both are conversations to have before the lease is signed rather than after the tenant has moved in. See what changes when the occupancy changes.
It is not one number, because it is not one asset. A management rights purchase is a real estate purchase and a business purchase stapled together, the two halves gear differently, and the deals are commonly written as blended facilities rather than as one loan. The variable assessors keep returning to is the remaining term of the caretaking agreement and the letting authorisation, and maximum terms are set by state body corporate legislation and by the regulation module a scheme operates under. Any page that quotes you a maximum without naming the module is guessing. See where management rights and letting pools sit.
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