Category: Commercial Property

A tenant taking a commercial lease must ensure that the landlord has obtained consent to the lease from any person having a mortgage over the freehold otherwise the lease cannot be registered at H M Land Registry (if it is subject to 1st Registration) and also the lease would not be binding on the lender if they repossessed the freehold.

The landlord, by getting consent, will have to let the lender see a copy of the lease and the lender will see all of the terms and may not give consent if the terms are what the lender may perceive as not being in their commercial interest and prejudicial to their security if they had to repossess.

Sometimes a landlord may try and circumvent lenders consent to some terms in a lease by issuing a side letter, consenting to terms not in the lease as consented by the lender (i.e. rent free periods or other concessions). Such a side letter may not be binding on a lender if the landlord defaults on their loan and therefore such side letters should be resisted by a tenant to protect their position and ensure the lease has all clauses consented by the landlord’s lender and therefore be binding on the landlord’s lender in the event that the landlord defaults on the loan and the lender repossesses the property.

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For a small to medium property developer, obtaining land to build houses on is not an easy task, due to the banks failure or refusal to lend money for development purposes.

The banks have in the past agreed to lend up to 70% for building projects but are now lending less than 50% – on a good day. This leaves property developers having to find the balance of the cost of building from their own resources, which is not easy. For the government to pretend that there is a pool of new houses being built in the Thames Valley is wrong.

Property developers are being forced to resort to more imaginative ways of producing land and finding development land, such as:

• Entering into joint development agreements with existing property owners and building on gardens and side plots for which the owner receives a share of the profits when sold.
  Joint developments with Local Authorities.
• Building in phases so that profits from the last property built helps fund the next property.
  Converting run down blocks of flats to provide refurbishments.
• Refurbishment of old houses to produce a larger property with extensions.

Our commercial property solicitors have vast experience of development land and developments and can assist any would be property developer with imaginative projects.

01753 486777