Is Your Property Let? Commercial

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Where the property is let for business use, the leases drive its value and often the exit. The lender’s solicitor will review every lease, and the valuer will value on the basis of what is actually in place. The sooner the lender has the full picture, the sooner your loan can complete.

Leases and supporting documents

The lender will need a signed copy of every lease, underlease, licence and agreement for lease, together with every side letter, rent deposit deed, licence to alter or assign, rent review memorandum, deed of variation and guarantee. Please also provide a schedule of tenants showing rents, terms, breaks, reviews, deposits and any arrears. If anyone occupies part of the property without a formal lease, please tell us.

Security of tenure

For each lease, the lender will want to know whether the tenant has security of tenure under the Landlord and Tenant Act 1954. If a lease has been contracted out, it will need the warning notice and the tenant’s declaration. This affects both the value and the exit strategy.

Breaks, expiries and income

Please list every break date, lease expiry and rent review, together with any notices served or received. A break or expiry that falls within the loan term is an exit risk that lenders will want to understand before completion. The lender will also usually ask for six months of rent receipts, details of any rent deposits, and details of any arrears, rent-free periods or concessions.

Registration

Leases granted for more than seven years must be registered at HM Land Registry, so please provide the leasehold title numbers.

Compliance

Please have the following ready:

• a non-domestic EPC rated E or above for each unit, or a registered exemption (it is unlawful to continue letting commercial property rated F or G);
• a current fire risk assessment for the premises and common parts;
• for buildings built before 2000, the asbestos management survey and plan;
• electrical inspection, gas and plant servicing records, a legionella risk assessment, and inspection reports for any lifts; and
• confirmation of the lawful planning use of each unit, with any relevant planning permissions and Building Regulations certificates.

VAT, rates and tax

Please tell us whether you have opted to tax the property, and provide the option and HMRC’s acknowledgement. The lender will also want confirmation of who pays the business rates on each unit, and that they are up to date. If the borrower is a company and any part of the property is a dwelling, it will want confirmation of your Annual Tax on Enveloped Dwellings position.

Mixed-use property

If the building also contains flats, the lender will need confirmation that neither you nor anyone connected to you lives in any residential part (see our Occupancy guide). Any residential units that are let should follow our Residential or HMO guide. Buildings of 18 metres or seven storeys or more that contain two or more residential units must be registered with the Building Safety Regulator, and the lender will need the registration details.

Insurance and the valuation

Buildings insurance must cover the full rebuild value, with the lender’s interest noted, and include loss of rent cover and property owner’s liability. Where a tenant insures the property, the lender will need their policy. Please arrange access for the valuer to every unit.