Refinancing commercial property: what owners need to know

Refinancing commercial property is a common step for business owners and investors looking to release capital, restructure borrowing, or secure more favourable lending terms. Whether you hold a single asset or a wider portfolio, refinancing can form a key part of your long-term property strategy.

However, refinancing is not simply a financial exercise. The legal process involves reviewing existing security, satisfying lender requirements, and ensuring the structure supports your ongoing plans for the property. Delays or issues often arise where legal considerations are not addressed early.

Taking advice at the outset helps ensure the refinancing proceeds smoothly and avoids complications that can affect both timing and cost.

What refinancing commercial property involves

Refinancing typically involves replacing an existing loan with a new facility, either with the same lender or a different one.

The process often includes:

• Repaying or restructuring an existing loan.
• Granting new security to a lender.
• Reviewing title and property documentation.
• Ensuring compliance with lender conditions.

Where multiple properties are involved, the structure can become more complex, particularly where cross-collateralisation or portfolio lending is used.

Why refinance commercial property

Refinancing can serve a range of commercial objectives, depending on the owner’s circumstances.

Common reasons include:

• Releasing equity for reinvestment or business use.
• Securing improved interest rates or lending terms.
• Consolidating existing borrowing across multiple properties.
• Funding refurbishment or development works.

Understanding the purpose of the refinance helps shape the legal structure and lender requirements.

Alternatives to refinancing

While refinancing is a common route, it is not always the most appropriate solution depending on your objectives.

Other options may include:

• Bridging finance: short-term bridging loan to cover a gap before longer-term arrangements are put in place.
• Sale and leaseback: selling the property while retaining occupation under a lease.
• Additional borrowing: further lending secured against the property without replacing the existing facility.
• Joint venture or equity investment: introducing a partner to inject capital in return for a share in the asset.

Each option carries different legal and commercial implications, and advice should be taken to ensure the chosen structure aligns with your wider objectives.

Lender requirements and legal security

A key part of any refinancing is satisfying the lender’s legal requirements. This will typically involve:

• A legal charge over the property.
• Review of title, commercial leases, and occupational arrangements.
• Due diligence on the borrower and any guarantors.
• Compliance with specific conditions set out in the facility agreement.

Where the property is let, lenders will also review lease terms and tenant covenant strength.

Refinancing property with tenants in place

Where a commercial property is let, refinancing requires careful consideration of the lease structure.

Points to consider include:

• Whether lease terms meet lender expectations.
• Rent levels and review provisions.
• Break clauses and tenant stability.
• Any side agreements or informal arrangements.

Lenders will assess the reliability of rental income, which can directly impact the terms offered.

Refinancing multiple properties or portfolios

For portfolio landlords, refinancing may involve multiple properties under a single facility.

This can introduce additional complexity, including:

• Cross-collateralisation of assets.
• Interdependent security arrangements.
• Restrictions on disposal or further borrowing.

A clear legal structure is essential to ensure flexibility is not unnecessarily restricted.

Common risks and issues

Refinancing can appear straightforward, but it often raises issues where the legal position is not fully understood.

• Existing restrictions: title restrictions or historic agreements may limit refinancing options.
• Lease issues: non-standard or informal lease arrangements can cause delays or require renegotiation.
• Timing pressures: refinancing often needs to complete within tight deadlines linked to existing loans.
• Personal guarantees: lenders may require guarantees, increasing personal exposure.
• Costs: legal, valuation, and lender fees can be higher than anticipated.

Identifying these issues early helps avoid delays and unexpected costs.

Why legal advice matters

Refinancing commercial property involves more than replacing one loan with another. It requires a clear understanding of the property, the existing legal position, and the lender’s requirements.

Early legal advice helps to:

• Identify issues affecting title or security.
• Align lease arrangements with lender expectations.
• Ensure conditions are satisfied efficiently.
• Avoid delays that could impact funding timelines.

This is particularly important for portfolio landlords or where multiple properties are involved.

FAQs on commercial property refinancing

Below are some of the most common questions raised by property owners considering refinancing.

1. How long does commercial property refinancing take?
   
   Timescales vary, but delays can arise where title, lease, or lender requirements are complex.
    
2. Can I refinance multiple properties at once?
   
   Yes, portfolio refinancing is common, but it requires careful structuring and coordination.
    
3. Will I need to provide a personal guarantee?
   
   In many cases, lenders will require personal guarantees, particularly for smaller or higher-risk transactions.
    
4. Can I refinance a tenanted property?
   
   Yes, but lenders will review lease terms and tenant strength as part of their due diligence.
    
5. Do I need a solicitor to refinance commercial property?
   
   Yes, lenders will require legal representation to put security in place and complete the transaction. Furthermore, where the lender require a personal guarantee, you will also need a solicitor to provide independent legal advice on the guarantee. 

Guidance from our commercial property solicitors

Refinancing can be a valuable tool for unlocking value and improving the performance of a commercial property portfolio, but it requires careful planning and execution.

Thomas Jones, commercial property solicitor, comments:

“Refinancing is often driven by commercial objectives, but the legal details are critical to ensuring the transaction completes smoothly. Issues with title, leases, or lender requirements can quickly delay a refinance if not identified early.”

Our commercial property team advises business owners, investors, and portfolio landlords on refinancing transactions, including single assets and multi-property portfolios. We work closely with lenders, advisers, and our real estate finance team to ensure transactions are completed efficiently and in line with commercial objectives.

Get in touch to speak with our commercial property solicitors.