Commercial property refinancing replaces or restructures existing borrowing secured against a property. Harper James is a UK full-service commercial law firm advising businesses on the laws of England and Wales, including commercial property and banking and finance matters.
The first legal review compares the existing facility with the proposed refinancing. Key points include the redemption amount, early repayment charges, security release requirements, financial covenants, interest provisions, default events and any personal or corporate guarantees. The new facility agreement should be reviewed for borrowing limits, repayment dates, financial reporting duties, permitted disposals, insurance obligations and restrictions on further security.
The lender will usually require security over the property and related rights. This can include a legal charge, assignment of rental income, security over bank accounts and, where relevant, a debenture from the borrowing company. Existing charges must be released or subordinated, and priority arrangements between lenders must be recorded accurately.
The lender’s lawyers generally investigate title, planning permissions, building regulation compliance, environmental matters, insurance and occupational leases. Title defects, restrictive covenants, missing rights of access or unresolved registration matters can delay completion or affect the lender’s security. The refinancing also requires a valuation and may depend on the property meeting specified condition, use and insurance requirements.
For an income-producing property, lease terms receive particular attention. The legal review commonly covers rent payment history, rent deposits, guarantors, break clauses, rent reviews, assignment rights, repairing obligations and any arrears or disputes. Lenders may require notices to tenants, acknowledgements of the lender’s security or agreements giving the lender protection if the borrower defaults.
The transaction timetable should identify all required consents and documents at an early stage. These can include landlord or superior lender consent, board approvals, shareholder approvals, Companies House filings and evidence of insurance. The borrower also needs to confirm the treatment of VAT, stamp duty land tax and other transaction costs with its tax advisers.
Completion normally involves repayment of the existing facility, release or registration of security, execution of the new finance documents and satisfaction of the lender’s conditions precedent. A coordinated checklist covering title documents, searches, valuations, corporate authorities, certificates and registration steps helps prevent an avoidable delay between signing and completion.