Commercial Mortgage
A commercial mortgage is where a lender charges an asset of a company by way of security for a loan made to that company.
A commercial mortgage requires the formal transfer of title in the asset to the lender, subject to an automatic right for title to be transferred back to the borrower once the debt is repaid. This means that the lender actually owns title to the asset and can therefore sell it without reference to the borrower provided that the borrower is in default on repayments.
In order to offer a commercial mortgage, most lenders require a positive personal credit and clear evidence that the business is creditworthy. It is customary to apply a loan-to-value ratio and a lender will expect you to invest a proportion of your money. The more you are willing to invest, the greater the chance you will have of securing a loan for the remainder.
Lenders will investigate what other commercial mortgages attach to the asset. The priority of a commercial mortgage is determined by its date of registration. Consequently, it is imperative that a commercial mortgage is registered as soon as possible following completion. Furthermore, where there is an existing commercial mortgage, it is common for lenders to request that the other mortgagee enters into a deed of priority/postponement to ensure that their mortgage has priority.
Where a lender has concerns about the creditworthiness of a borrower, it is also common to ask for a guarantor.
It will be necessary to consider all the terms of a commercial mortgage carefully, particularly as the loan period is often in excess of 15 years. This is a complex area of law and it is essential to seek specialist commercial property advice.
If you would like legal advice on a commercial mortgage related issue, Contact Law can put you in touch with a local specialist commercial mortgage solicitor free of charge. So if you have any questions or would like our help in finding local commercial mortgage solicitors then please call us at 0800 1777 162 or complete the web-form above.
- Last Updated on 02/03/2010
