New commercial mortgage applications affected by energy regulations

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From April 2018, landlords that arrange new tenancies for residential and commercial property must have an energy performance certificate of E or higher. Investors applying for a new mortgage for rented property before, or after the new regulations come into force may find it difficult to have the application approved if they are purchasing a low energy rated building without firm plans to improve energy efficiency.

If the acting solicitor discovers that

the building being purchased has less than an E rating, they should inform the lender who may then add a condition to the mortgage agreement that stipulates that the property needs energy improvement work. A leader will usually specify that the work needs to be done within a period of a few months after the completion of the purchase.

Lenders do not want to prohibit landlords from gaining a commercial mortgage on low energy efficiency property. If a building has a low energy efficient rating, then the landlords cannot issue a new tenancy agreement. A lack of rental income could make it more difficult to keep up with mortgage repayments. There may still be landlords unaware of the new regulations, which is why some lenders are telling them about the changes before they commit to a commercial mortgage.

Mortgage brokers are up to date with the new energy efficiency rules and can raise awareness of them with landlords when they seek to mortgage or remortgage commercial or residential property.

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