Commercial Property Refinancing

This article will answer some commonly asked questions about commercial property refinancing. We will also summarise a complex matter that was recently completed by one of our commercial property solicitors, Manish Patel.

Please call us on 01707 329333 or email law@crane-staples.co.uk if you have any queries about the content of this article.

 

What is commercial property refinancing?

Commercial property refinancing is when an existing loan on a commercial property is replaced with a new loan.

Commercial property refinancing can be helpful for commercial property owners. For example, you may be able to acquire a new deal with lower interest rates and monthly repayments or change the term of your loan to pay it off more quickly. You may also seek to refinance your commercial property if you wish to secure funds to pay for property refurbishments, or purchase additional properties to expand your portfolio.

A solicitor can assist you with your commercial property refinancing matter because they will make the process as smooth as possible. This will include carrying out extensive due diligence to meet all of the lenders’ specific requirements, and also protect your funds and assets. Additionally, a good commercial property solicitor will have excellent relationships with mortgage brokers and lenders. This will help the matter proceed in a way that is both timely and cost-effective.

What does commercial lending mean?

Commercial lending refers to the process by which a lender (financial institution, bank or private investor) provides funding to property investors or businesses for various purposes, such as starting a new venture, expanding operations, buying inventory, or investing in equipment or more real estate.

Can I borrow money against my commercial property?

Yes, you can borrow money against your commercial property. Most lenders can accommodate between 60% to 70% loan to value. However, some can stretch as high as 75% loan to value, subject to interest coverage ratio (ICR) stress testing.

Crane & Staples have built up great relationships with commercial brokers who can assist with your development needs, should you require.

Why refinance in commercial real estate?

You may wish to refinance in commercial real estate if you want to retain an asset for the long term. Usually, property investors make most of their returns over the long term. By refinancing, you can hold on to the property for longer. In some cases, you can take advantage of special lender discounted rates that are on offer. A commercial mortgage broker can provide expert advice on this.

How long does a commercial refinance take?

In optimal circumstances, a commercial refinance matter can be as quick as 4 weeks. However, the most cost-effective lenders are very popular, and turnaround times usually average 8 weeks. Post pandemic, turnaround times could be as long as 16 weeks.

What are the stages of refinancing?

In a standard commercial property refinancing matter, the stages are:

• Submit application.
• Know Your Client/Anti-money laundering checks.
• Credit approval.
• Legal work and due diligence to satisfy the lender and their underwriters.
• Loan drawn down.
• Transaction completed.

How do you pull equity from a commercial property?

If you have a property that has sufficient equity (more than 25% to 30%) a lender can provide you a loan using the property as collateral. Consequently, this gives you the needed liquidity you are looking for.

How easy is it to refinance an investment property?

It can be relatively easy to refinance an investment property if you have the right broker and solicitor to assist in finding the right lender. In this case, all parties can action the legal work in an efficient, collaborative, and proactive manner.

What is an example of a commercial loan?

A summary of a recent commercial property refinancing matter at Crane & Staples is below. In essence, this case shows the expertise and due diligence required by solicitors in these transactions.

Commercial Property Refinancing: Case Summary

Manish Patel and Malcolm Hemmings-Portas recently completed on a complex commercial refinance matter with a deal value of £1.27 million. This case summary has been shared with the kind permission of all parties.

Manish Patel acted for a longstanding client in refinancing a commercial freehold property using commercial lending. The property was previously used as a hotel and the client sought to turn it into flats.

The transaction included extensive property, utilities, planning, and due diligence for the lender’s solicitor.

Manish Patel advised on a large volume of security documents including a legal charge, third party legal charge, debenture, corporate guarantees, company resolutions, board minutes, and loan agreement.

Manish Patel also reviewed the proposed planning approvals, conditions, contractors risk policies, construction agreements, and various surveys to ensure they meet the lender’s criteria.

The client was advised on a Judicial Review indemnity policy.

Special resolutions were prepared and submitted to Companies House to amend the client’s Articles of Association.

The transaction involved review, approval and reporting of a s106 Agreement by Malcolm Hemmings-Portas so as to ensure the client and lender were satisfied.

The matter was significantly time sensitive, to ensure valuation and existing loan deadlines were met.

How to do due diligence on a commercial property

Due diligence on a commercial property will begin with checks on the borrowing owners of the property. This will include identity checks, proof of funds, source of funds, and source of wealth checks. A commercial property solicitor will also carry out full company searches, which include solvency checks on company clients. Notably, these extend to all directors and persons of significant control, as most often these individuals will be giving personal guarantees to the lender.

Thereafter, title investigations are carried out on the property. These will include a full set of searches, i.e. the local authority search, environmental search, water & drainage search, highways search, and, if appropriate a mining search.

Furthermore, your solicitor will complete various commercial property enquiry forms. These forms deal with planning permissions, statutory consents, use of the property, tenancies, taxation, energy performance, boundaries, disputes etc.

The lender’s solicitor will always raise a vast number of enquiries, based on the nature of the transaction and property. Your solicitor will carefully deal with all of these enquiries.

Your local Commercial Property Solicitors

We are specialist commercial property refinancing solicitors in Welwyn Garden City, Hertfordshire. As a result, we have excellent relationships with commercial brokers, so we can work together to secure the best terms. Our friendly and helpful team would be pleased to assist with your commercial property matters.

We are ranked for Commercial Property in the Legal 500 and Chambers & Partners Solicitors ranking guides. This places us as one of the best commercial property solicitors in Hertfordshire.

Please get in touch with Manish Patel and our commercial team if you have any queries about a commercial property refinancing matter. You can call us on 01707 329333 or email law@crane-staples.co.uk. We look forward to hearing from you.