22 Apr Refinance of $5 Million Commercial Building Completed – April 2016
Martin + Colin, P.C. announces the successful refinance of a $5 Million commercial building in the Bronx, New York. The building is a classic commercial building containing, among other tenants: a laundromat, a pharmacy, a variety (5&10) store, a chinese restaurant, a jewelry store, a bakery and a check-cashing location. The owner sought refinancing to provide more flexibility in operations. The experienced real estate lawyers at Martin + Colin, P.C. were able to assist the owner in bringing the refinancing to a successful closing.
Among other important provisions, the real estate closing attorneys at Martin + Colin, P.C. successfully negotiated a clause permitting the future assignment of the mortgage. Here’s the valuable clause:
- Assignment of Mortgage. Upon Borrower’s written request, Lender shall permit an assignment of this Mortgage upon repayment of the Loan in full in accordance with the terms of the Note provided that the Borrower pays Lender an assignment fee of 0.25% of the Loan Amount in furtherance of the assignment at the time of assignment.
What is the significance? Well, here’s the explanation. Unlike home loans, commercial loans often last only five years. During the loan period, the borrower usually pays interest only. Thus, at the end of the five year loan period, the buyer will still owe $5 Million. The borrower will need to find another bank to lend him $5 Million for another five year loan period. When the borrower identifies that new lender, the closing is scheduled. Immediately after closing on the new loan, the new lender will want to record the new mortgage. The recording tax on that new mortgage could add $140,000 to the borrower’s closing costs. However, because we negotiated the “Assignment of Mortgage” clause into the loan documents, the cost to the borrower to record the next mortgage for the next five year loan will be more like $12,500 rather than $140,000. That’s a big savings.