Commercial Property Newsletter - March 2018 Having trouble getting property finance? We can help you!! Written by Mike Parker - Partner (Property) There’s no doubting that over the last couple of years it has become harder to obtain bank funding to carry out property developments or to buy commercial investment properties. We understand the hurdles and can help you through the process. We have already written about the challenges borrowers are facing in the current environment and the reasons why (“Borrowing against commercial property – an update”). It seems the things we talked about then have become the new norm in the world of commercial property finance, for now at least anyway. So, if you are looking to borrow to fund a property development or a commercial property purchase, you need to understand the hoops that you will need to jump through in order to secure that funding. For instance, if you are attempting to secure finance to complete a residential or commercial development, it is likely you will have heard of things like pre-sale (or pre-leasing) coverage, quantity surveyor “cost to complete” certificates, fixed-price construction contracts, and so on. Similarly, if you have attempted to secure finance for purchase or refinance a commercial property investment, you may have encountered loan to value covenants, interest cover ratios, weighted average lease expiry profiles, and so on. Additionally, you may have found the bank asking for forms of security that you have not come across before, such as assignments by way of security over pre-sales agreements, leases, or construction contracts. If this all sounds like a foreign language, rest assured, we can help you. Here’s how we can help …. The Property Finance experts in the Cavell Leitch Property Team are well versed at helping our borrower clients navigate over the hurdles and past the obstacles that have become the more stringent criteria banks are placing in front of them, and can help you secure that property finance you need. Here are just a few reasons why: FAQs - When entering a new Lease (as a Tenant) Written by Emma Ferguson - Associate (Property) If you are about to enter into a new lease, you probably have a few questions about your rights and obligations under the lease. It is always best to approach your lawyer early in the leasing process and definitely before you sign an Agreement to Lease or a Deed of Lease to ensure your expectations are reflected in the legal document. We have set out a few of the frequently asked questions we receive and have provided some general answers for you to consider. Will the Landlord be able to increase the rent during the term of the Lease? You will need to look at the rent review terms in the lease and consider any potential increases in future rent. For example, if the Landlord has offered the lease for a significantly reduced rent, then the rent may jump considerably on the first market rent review date. You will need to look at whether the rent reviews are market, Consumer Price Index (CPI) or fixed rent reviews, together with the frequency of the review dates. Market rent reviews are based on a market valuation, whereas CPI rent reviews will increase rent by the same percentage as CPI. Fixed rent reviews increase the rent by the percentage set out in the lease. The Landlord can only increase rent in accordance with the lease terms, so it is important to discuss your expectations for rent reviews with your lawyer and make sure this is reflected in the terms of your lease. Can my rent ever decrease to reflect market rates? The standard Auckland District Law Society lease includes a ratchet clause that prevents rent from decreasing below the rental amount payable on the commencement date of the lease on a review of the rental. This means that the rent might go up but never go below the starting rent. Accordingly, if market rents drop then you will be stuck paying a higher than market rent. Meet two members of our commercial property team:
Stephen Brent - Partner Stephen manages our Queenstown office and prides himself on providing exceptional advice that exceeds clients expectations. Stephen’s main areas of speciality are business and commercial property. He acts for numerous large landlords and businesses throughout the lower South Island. Stephen is recognised in Queenstown as one of the leading commercial lawyers and often receives referrals from other professional service providers in town. Emma Ferguson - Associate Emma is a member of the Property Team. She brings her unique commercial legal experience gained from both her time in Cavell Leitch’s business team and her previous role in WME│IMG’s in house legal team. Emma specialises in the sale and purchase of commercial and industrial property, leasing (acting for both landlord and tenant), property financing and residential property. Our commercial property experts; (front row) Stephen Brent, Janine Ballinger, Emma Ferguson, Ann Maria Buckley, Emily Nind and Lauren Jerard. (back row) Mike Parker, David Fitchett, Elliot Scott, Jeroen Vink and Tim Stevens. |