How to get that cash flowing from your property

The United Kingdom and the rest of the World continues to deal with the COVID-19 pandemic, with different countries using various techniques to not only take control but keep their economies as stable as possible. Whilst the UK Government has passed emergency legislation on a number of measures including the Business Interruption Loan Scheme, many businesses are either struggling to access this through their lender or have their reservations about using it.

One of the main issues for companies is maintaining their cash flow whilst the economy is virtually remaining on hold for the foreseeable future with no certain timeframe for things getting back to normality. If you or your company has cash tied up in its assets such as property, then there are a number of ways that you can release this cash to help get you through this intense and uncertain time.

Selling property

Whilst most of the residential conveyancing market is on hold due to the issues of moving families during the lockdown period and lenders appearing to withdraw most of their higher percentage mortgages, many investment companies will still be looking to increase their portfolio with more buy-to-let properties. These companies commonly have interest only mortgages which require a much greater percentage of the purchase price to be deposited by the company before the mortgage offer is granted. There is still a market available for these types of purchasers.

Alternatively, if you have enough equity in your property and the buyer does not have enough disposable cash to be a cash buyer, you could sell the property at the market value and take the percentage of cash available from the buyer with the remainder being protected by way of a legal charge over the property for a negotiated period. This would then give the buyer time to seek a mortgage or bridging loan whilst allowing the sale to proceed and improve your cash flow at the same time.

Re-financing or additional security

Whilst many institutional lenders are restricting their availability of products, a number of finance companies are still offering mortgages or bridging loans. Whilst these are likely to be more short term and have higher interest rates, they may allow you to release the cash tied up in your property allowing you to get through this period of economic uncertainty. You may then be able to access a better product and remortgage once the economy has settled. If you have enough equity in the property, a finance company may be willing to take a second legal charge over the property subject to your primary lender giving consent to the same.

Sale of freehold with leaseback

If you own the freehold of a commercial property then you can potentially release any cash available from the equity in the property by selling the freehold reversion to an investor. There are still a number of investment companies with monies readily available such as a pension investment schemes. The freehold can then be sold with a simultaneous lease back of the premises to your company. This allows the company to receive the monies from the sale of the freehold yet still have the occupational benefit of the property. Terms of the leaseback would need to be negotiated with the buyer and further advice should be taken on this to ensure that you are adequately protected.

These options will vary depending on your circumstances and so will the implications of the same. You should take advice from your Accountant or Financial Advisor before proceeding to ensure that you do not have any unwanted tax consequences and that it benefits your business as a whole.

If you need any advice or assistance in relation to these transactions then Franklins are here to help. Please contact Reece Chapman, Solicitor in our Bespoke and Commercial Property team on 01908 660966 / 01604 828282 or by email at reece.chapman@franklins-sols.co.uk.