What Legal Office Owners Should Know About Commercial Property Finance
Owning the office your firm works from is more within reach than many principals expect. The right lender funds the premises to around 80 per cent of value, so the deposit stays modest and capital stays in the practice. At Ardent Capital Group we speak with legal practice owners about this kind of purchase, and this guide covers how a lender reads it.
Ardent Capital Group is a specialist in commercial mortgages for legal office operators across Australia. Our team can help you move from tenant to owner, and give you clear lending advice on structure and strategy.
- Access finance from $100K to $10M+, tailored to legal practice needs.
- We have helped facilitate over $500M in funding across a decade for over 1,000 borrowers.
- We service Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra, Hobart and surrounding regional towns.
- Structures for owner occupiers, companies, trusts and SMSFs, arranged around how you hold and use the premises.
The case for owning your legal office premises
Legal practices invest heavily in rooms that work for confidential client meetings, mediation, witness prep and team collaboration. Fit outs include acoustic treatment, secure file storage, library shelving, boardroom AV, meeting rooms and compliant client access. These costs are real and repeat with each move. Owning locks in the benefit of that spend.
Location ties directly to revenue and reputation. Proximity to courts, chambers, transport, parking and your referrer network matters. If your practice is known in a specific precinct, shifting addresses can disrupt client flow and staff retention.
The sector is resilient. Matters continue through cycles, and established firms show stable billings that translate into bankable serviceability. Ownership turns rent into repayments on an appreciating, income producing asset over time.
Main drivers for legal office ownership:
- Control over premises: set your fit out once, expand or subdivide as your team changes, and avoid forced relocations at lease expiry.
- Cost visibility: swap rent escalations for a loan schedule, with interest potentially deductible where applicable to your structure.
- Capital retention: preserve the value of high-spec fit out inside your own asset.
- Asset building: repayments build equity that can support future growth or partner succession.
When buying may not suit: a short remaining lease with break costs, a planned relocation to a court precinct you are not yet ready to commit to, rapid headcount change, or capital that produces better returns in staffing, technology or WIP funding. The decision sits with you.
This is the kind of purchase we work on with principals, and our legal office property loan page sets out how the finance comes together.
Financing a legal office: how it works
Deposit and LVR Owner occupied commercial premises for a legal practice typically gear to around 80 per cent of value, so a deposit near 20 per cent. In some cases a lender can fund the full purchase where you add other property as security, and a broker can walk through how that works. Well located premises and owner occupation tend to attract the broadest lender appetite.
Loan term and structure Terms vary by lender: banks commonly run 10 to 15 years, while non-bank lenders stretch to 25 or 30. You can structure repayments as principal and interest for steady equity build, or interest only to prioritise cash flow during growth, refurbishment or relocation.
Security and serviceability The property is the primary security. Lenders assess the practice financials, historic billings, partner drawings and distributions, expense base and cash conversion from WIP. They review debt coverage ratios, interest cover and sensitivity to rate shifts.
Owner occupier treatment Lenders typically favour owner occupied commercial property. Occupation links the property to your operating revenue, which generally supports lower risk assessment and sharper pricing.
How the deal is put together
Many legal practices hold the premises in a separate entity and lease it to the trading firm at a commercial rent. A lender then reads the inter-entity rent as the serviceability line, alongside the practice financials that stand behind it. Common arrangements include a company or a unit trust that holds the title, with the firm paying market rent on a standard lease. This can separate the property from trading risk and give partners a clear rent line in the profit and loss.
Some practices look at holding the office inside a self managed super fund. Commercial premises usually qualify as business real property, so an SMSF can own the office and lease it back to the firm at market rate, held through a bare trust while the loan runs, subject to superannuation rules. Lenders price this with lower LVRs and tighter liquidity and documentation settings. Our work is the lending, and the tax, super and ownership questions sit with your accountant and, for a fund purchase, a licensed SMSF adviser to confirm before contracts are signed.
What credit teams weigh up
- Practice financials: three year billings, EBITDA, partner distributions, aged debtors and WIP management.
- Serviceability: debt service coverage ratio, interest cover, buffers for rate movement, and sustainability of fee income by practice area.
- Property and valuation: strata office versus freehold, floor plate efficiency, car parking, building quality, proximity to courts and chambers, vacancy data and market rent.
- Deposit and equity: cash, retained earnings, partner contributions, or the ability to leverage your equity from other property.
- Lease and occupancy: owner occupier intention, proposed lease if a holdco owns the property, and any tenancy diversification if part leased.
A specialist broker who understands legal sector revenue patterns and premises requirements helps you reach the right lender and structure.
A situation we could help with
This is an illustrative scenario that shows the kind of situation we can assist with, and how the thinking might run.
- The situation: a two principal suburban litigation and family law firm, 12 staff, renting 220 square metres near the District Court with 10 months left on the lease. Annual rent runs near $195,000 gross, cash reserves sit around $600,000, and each principal holds residential equity.
- Options to weigh: buying a 230 square metre strata office at $2.40M nearby, or a freestanding converted terrace at $2.10M with on site parking, with timing aligned to lease expiry to avoid double occupancy.
- Structure paths: the property held in a unit trust with the practice as tenant, or part ownership through an SMSF where retirement horizons differ. We would map how each arrangement changes the rent setting, the tax position to confirm with the accountant, and the lending terms.
- Funding ranges: around 80 per cent LVR for the owner occupied strata on principal and interest over 20 years, or a lower LVR on the terrace given the asset class and valuation. Interest only for two to three years could support fit out spend and hiring.
- Equity options: using cash toward the deposit and costs, or the ability to leverage your equity from a principal's residential property to preserve cash for fit out and working capital.
- How we would approach it: we would map the ranges, structures and repayments and present them, then the decision would sit with the firm. The figures above are illustrative, not confirmed outcomes.
Other finance we arrange for legal office operators
- Asset finance: fund practice essentials such as servers, secure document storage, dictation and transcription systems and boardroom AV without draining cash. Fit out works often sit alongside this, and office fit-out finance can cover acoustic treatment, partitions, reception and library shelving.
- Working capital: working capital for a law firm supports lumpy cash flow from WIP heavy matters and staged billing tied to settlements or court timetables.
- Business overdraft: smooth timing differences between disbursements, expert reports and client collections, with limits sized to recurring billings.
- Refinancing and debt consolidation: reset rates and terms, simplify multiple facilities and align repayments with matter cycles.
- Construction and renovation: fund strata amalgamation, internal stairs, end of trip facilities or extensions to a freestanding office.
- Premises acquisition finance: buy in or buy out a partner, purchase an adjacent suite for growth, or acquire freehold linked to a merger.
These facilities interact. Owning the premises can free equity for future expansion, while a refinance can consolidate facilities and reduce cash leakage.
Why legal office owners work with Ardent
Ardent Capital Group arranges and structures commercial mortgages for legal practices. We set the finance around how you intend to hold and occupy the property, with clear advice on entity, leaseback and repayment strategy.
We are a specialist commercial mortgage broker servicing Sydney, Melbourne, Brisbane, Gold Coast, Perth, Adelaide, Canberra and surrounding metro and regional areas.
Ardent Capital Group is a specialist in commercial mortgages and our team can help you today. Talk to us about a direct path to optimal financial outcomes. We have helped facilitate over $500M in funding over a decade for over 1,000 borrowers.
Legal Office Finance FAQs
How much deposit does a legal practice typically need to buy its office? Most lenders look for a deposit near 20 per cent for owner occupied legal office property, with LVRs for standard commercial premises reaching around 80 per cent. Owner occupied files tend to see the strongest lender appetite.
Can my SMSF buy our legal office and lease it back to the practice? Yes, commercial premises usually meet business real property rules. The SMSF can own the property and lease it back at market rent, subject to super laws. Expect lower LVRs and tighter liquidity settings.
How do lenders view WIP and partner drawings in serviceability? They look at historic billings, cash conversion from WIP, aged debtors, stability of practice areas, and the consistency of partner drawings or distributions through cycles.
Is strata office preferred over freestanding premises for lending? Both are financeable. Well located strata near courts and transport often attracts broader lender appetite. Freestanding assets can be attractive where parking, signage and land value support valuation.
Should we fix or float the rate on a commercial mortgage for a legal office? Fixed rates provide cost certainty for a defined period. Variable rates offer flexibility for early repayments or refinance. Many firms split the loan to balance certainty and flexibility.
Can we buy through a trust or company and lease back to the firm? Yes. A separate entity holding the property and leasing it to the trading practice at commercial rent is common. Lenders assess both the holdco income and the practice serviceability.
What settlement timeframe should we plan for, given lease expiry? Allow 6 to 10 weeks from approval to settlement for a standard strata purchase, longer if construction risk, complex fit out or SMSF trustees are involved. Align contracts and notice periods to protect business continuity.
Written by
Nick Chong
Managing Director, M.AppFin, Dip. Mortgage Mgmt
Nick holds a Bachelor of Agricultural Economics, a Master of Applied Finance and an Advanced Diploma in Financial Planning. He founded Ardent Capital in 2016 after more than a decade in financial planning and mortgage broking. For the past ten years he has led a team of finance specialists, mortgage advisers, brokers and credit analysts, all working to secure optimal outcomes for clients and always acting in their best interests. The team brings both a qualitative and a quantitative approach to every deal.
