Example - Banks have no wish to lend ...
Individual approached a Bank (Barclays) for a mortgage (£100k) to purchase a commercial property - they already had two other commercial properties and had paid off a previous mortgage of <£200k (same bank) over the last 10 years, providing a demonstrable repayment record. Existing properties yielding £28K pa (excluding rent on new one), so current income available
Banks response - yes will provide a loan in principle including following terms:
- 1st Legal charge over all commercial units (2 existing & 1 new)
- Valuer to have sight of new 10 year commercial lease confirming unexpired term of 10 years, with no downward rent reviews or BREAK CLAUSES evident
- All rental income to be mandated to the bank
Needless to say bank were told to 'stick it' because no way forward on these terms - however, does raise interesting issues:
- What planet are these people on?
- Excessive security over & above reasonable >£400k cover for £100k loan!
- Why should existing tenants agree to brand new 10 leases with no break clauses - hardly to their advantage. Apart from costs of having to cover both parties legals?
- When was the last time anyone had this length of lease & no break clauses?
Clearly the banks are only paying lip service to Governments wish for them to lend and one way of achieving their 'no lending' policy is to make an offer that is impossible to meet - job done because no one can say they have not made the offer!