Mortgage for commercial real estate: registration methods, restrictions, rates and conditions

Mortgages on commercial real estate for individuals are associated with a number of difficulties in the registration process, since such offers have been practiced in banks not so long ago. Despite this, it is no less relevant than the usual option - buying residential premises with borrowed funds. Not only individuals, but also businessmen can apply for this type of loan. This is a real chance for most beginning entrepreneurs to realize their plans and increase profits, since commercial real estate in all its diversity can become a profitable investment.

How to get a commercial mortgage on favorable terms

When conducting any business activity, you cannot do without premises - they are needed to accommodate employees, production facilities, warehouses and trading areas. But often a beginning individual entrepreneur does not have available funds for such a purchase. Then you can take out a mortgage for commercial real estate. It is drawn up in almost the same way as other business lending products.

Receiving credit funds makes it possible not to withdraw money from circulation, but to use it for other work purposes. Despite the fact that such offers are available to both companies and individuals, it will be more profitable for the latter to take out a commercial mortgage. It has more favorable conditions and a lower interest rate. You can also count on benefits if you make a down payment of more than 20% of the declared amount.

The procedure for obtaining a business mortgage consists of several stages:

1. The borrower submits an online application on the lender's website.
2. The manager makes an appointment, introduces the list of required documents and answers all questions.
3. The client, together with a bank employee, fills out a loan application form.
4. The applicant collects documents and submits them to the bank.
5. After checking the provided documentation and analyzing the client’s financial and economic activities, the bank makes a decision on whether to issue a loan or refuse it.

No encumbrance is placed on a real estate property purchased with borrowed funds until the ownership rights are transferred to the borrower from the seller.

Popular methods of obtaining a mortgage for commercial real estate

The procedure for obtaining a loan for non-residential premises is not as well established as compared to issuing conventional residential loans. Commercial lending implies an increase in risks for both parties to the transaction (borrower and financial institution).

To protect themselves as much as possible, banks have developed several reliable lending schemes:

1. First, the borrower enters into a purchase and sale agreement, then a preliminary mortgage agreement with the bank. This is followed by the signing of the main mortgage agreement. Next, the transaction is registered in Rosreestr, including the collateral object. After this, the seller is finally settled.
2. The first step is to formalize the purchase and sale, then register the mortgage. After this, the entire amount due is given to the seller.
3. The transaction is concluded before the complete transfer of ownership of the purchased premises for an office, warehouse or other business facility. The collateral here will be other valuable property owned by the applicant: a car, real estate, precious papers, shares, etc. It is on him that the bank imposes an encumbrance.

Regardless of the option for obtaining a commercial mortgage, the bank conducts a thorough check of the company, co-borrowers, guarantors and the real estate itself.

What kind of real estate for business can citizens buy on credit?

Using borrowed funds from a commercial mortgage, you can purchase objects for:

• trade;
• production;
• office;
• warehouse;
• placement of catering establishments, consumer services, etc.

From the point of view of the law, not every premises can be considered real estate, but only those that meet certain criteria:

• has a strong connection with the earth;
• cannot be transported without harm to the condition.

For example, so-called “shell” garages are not included in the category of real estate unless they are built of brick and do not have a strong foundation. As for the land plot, it is real estate. If any permanent structure is purchased on it, the land is also subject to encumbrance by the bank (Article 35 of the Land Code of the Russian Federation).

Step-by-step instructions on how to sell a share

As a rule, owners of common property have shares in the property, expressed in the form of fractions, determining the size of each share in relation to the entire common property. In property rights documents it looks like this: for example, 1/3 of a share in common shared ownership or 69/100 shares in common ownership of real estate.

Isolation of a part, establishment of its commercial value

You can sell part of the real estate if its size is documented. It is allowed to sell both a share allocated in kind and a part of the premises, the size of which is determined in a shared ratio. If the property is in common joint ownership (i.e. the size of the shares of the co-owners is not established), then before the sale it is necessary to distribute the shares between the participants in the common property. The rules for allocation are provided for in Article 254 of the Civil Code of the Russian Federation.

Then you need to determine the market value of the property to be sold. This is an important stage, since the value of real estate is one of the main terms of the purchase and sale agreement, and the value must also appear in the notification sent to the co-owners, therefore, changing it in the future is quite problematic.

When setting the price for the part of the property being sold, it is necessary to understand that the circle of potential buyers is not too large, therefore, when determining the market value, it is customary to use various reducing factors. The final cost of the share will depend on several factors:

• The size of the share being sold.
• Object location.
• Year of construction, technical condition.
• Infrastructure.
• Number of co-owners.

A share that is expressed in kind, as a rule, is more expensive than one whose size is determined in a fractional ratio.

Professional appraisers use the following formula to determine the value of a share in a property:

SKV x D/2 x K, where:

• FCC – the value of real estate on the market;
• D – size of share in property;
• K – reduction factors.

How to issue a notice to other owners?

Respect for the rights of co-owners to common property is one of the basic rules when purchasing and selling a share of common real estate. The future fate of the transaction largely depends on the proper drafting of the notice.

The law provides for two possible ways of alienating part of an apartment or house in favor of third parties:

• If the co-owners do not agree to the offer to purchase the property. In this case, the transaction can be carried out 30 days from the date they receive the notification.
• If the co-owners refused to purchase. In this case, it is not necessary to wait a month.

The waiver of all co-owners must be notarized. Each refusal is issued and paid for independently, which significantly increases the costs of the transaction, especially if there are many co-owners.

The notice sent to the participants in the common property must indicate all the essential conditions under which the alienation of the share in the object is carried out. These conditions must include:

1. Price.
2. Information characterizing the property.
3. Share size.
4. Other information relevant to the specific property being sold.

An important point is the method of sending the notification. Simply sending a letter to a co-owner (even a registered one) is not accepted by notaries as evidence of proper notification.

To confirm the fulfillment of the obligation to offer a share to the remaining participants in the common property, you can send them a telegram in which you need to indicate all the points required for notification. In this case, it is important that the telegram must be delivered directly to the person to whom it is addressed. If the telegram is received by persons living together with the addressee, then the notification will need to be repeated.

The second way to send a notification is to send a registered letter by the notary himself. In this case, the text of the letter is drawn up by a notary and even if the addressee refuses to receive it, he will be considered duly notified. It should be noted that this path is the most convenient for everyone.

After sending a notification, the terms of the transaction cannot be changed, i.e. the share must be sold on the terms specified in the notice. The only exception is an increase in cost.

How to find a buyer?

The most common (and fastest and most profitable) option for selling a share of real estate is its alienation to one of the co-owners.

If there are no other participants willing to purchase the alienated part, you can search for a potential buyer by contacting a special agency (or a private realtor) or by posting an ad on portals specializing in real estate transactions. If the price for the share is adequate, then it will definitely find its buyer.

Preparation of documents

For the transaction to take place, it is necessary to prepare a package of documents characterizing the property and the parties to the transaction. These include:

• document confirming ownership;
• technical passport for the property;
• cadastral passport;
• an extract from the house register or other document confirming the registration of persons in the property;
• documents confirming the sending of a purchase offer to the co-owners and evidence of its receipt, or their notarized refusal to purchase;
• identification documents of all parties to the transaction;
• consent of the spouses to complete the transaction (if there is a marriage).

Conclusion of the DCT and certification by a notary

The execution of a share purchase and sale agreement is almost similar to a regular real estate purchase and sale agreement, the rules for concluding which are provided for in paragraph 7 of Chapter 30 of the Civil Code of the Russian Federation. In addition to the general provisions when alienating a share, the following points are indicated:

1. Information on compliance with the right of first refusal.
2. Information about the property in which the share is located.
3. Information about persons who have the right of ownership and the right to use the property.

Transactions related to the alienation of a share in common property are subject to mandatory notarization. Failure to comply with this rule will lead to the invalidity of the purchase and sale agreement.

Registration of transfer of rights

The process of registering ownership of a part in a real estate title is no different from registering the right to an object as a whole. The registration procedure is provided for by the Federal Law “On State Registration of Real Estate” and is carried out by the bodies of the Federal Registration Service of Russia.

Documents can be submitted to the MFC and there you can receive a document confirming the transfer of rights. If all the documents are in order, then there will be no problems or difficulties with state registration.

Receiving payment

The purchase and sale of real estate is a paid transaction; the procedure and conditions for its payment are determined in the contract by agreement of the parties. Payment can be made both in cash and in non-cash form.

What type of borrowers can get a mortgage for non-residential real estate

You can apply:

• IP;
• small and large business owners;
• leading company managers;
• major shareholders.

Can an individual take out a mortgage on non-residential premises?

Commercial real estate mortgages are available to individuals subject to their registration as individual entrepreneurs. Managers or owners of a certain business, shareholders, and founders can also receive such a loan. In addition, the borrower must be a Russian citizen aged 21 to 65 years.

The bank pays attention to the credit history of the entrepreneur. It is important that the company has an unblemished reputation, pays taxes on time and keeps accounting records correctly. Otherwise, the chance of getting your application approved is significantly reduced.

Features of non-residential premises

When applying for a loan to purchase a property from a non-residential property, individuals will have to face some features relating to the property being purchased:

• real estate purchased with mortgage funds will become collateral;
• You cannot register in the apartment;
• payments for utility services in non-residential premises are many times higher, so an individual may experience financial difficulties;
• you cannot use maternity capital or other subsidies from the state to repay the loan debt;
• There is no tax deduction for this loan offer.

Expert opinion
Irina Bogdanova

Expert in the field of mortgage lending.

It is impossible to obtain a loan for the construction of non-residential real estate without a large down payment, since there is a high risk of freezing or stopping construction.

Loan for the purchase of a garage

Individual entrepreneurs with the status of an individual have the opportunity to take out a mortgage for a garage. Borrowed funds can be used to purchase a finished garage or build one. An example is an offer from Sberbank, which also applies to the purchase of a parking space.

Since such a mortgage is not available at all financial institutions, an alternative may be a standard consumer loan.

Thus, Sberbank offers such a product under the following conditions:

• limit – up to 5 million rubles;
• interest rate – from 9.9%;
• Installment plan – up to 5 years.

Details can be found directly on the website.

A garage is not real estate unless it has a solid foundation.

Property with land

The land plot on which the building purchased with a mortgage is located automatically becomes collateral (Article 69 102 of the Federal Law “On Mortgage”). An exception will be land owned by municipal or state property. Also, the bank cannot impose an encumbrance on plots that have an area less than that established in a particular region (for example, the minimum is 2 acres) and owned by the right of permanent use.

Expert opinion

Irina Bogdanova

Expert in the field of mortgage lending.

If the land plot, which the applicant owns by lease, becomes collateral with the bank, then even when a penalty is imposed on it, the creditor does not have the right to dispose of it as the owner. He will be able to act exclusively as a tenant.

Other properties for exclusively commercial purposes

It is more difficult for individuals to buy commercial real estate with a mortgage than for legal clients. The bank offers the latter to purchase warehouse, office or retail space at an inflated rate, which is unprofitable for individuals. Therefore, such loans are issued exclusively to citizens conducting business activities. Then they take into account the company’s profit and the prospects for business development. The borrower must submit for review, in addition to the standard package of documents, the company’s financial statements.

Typically, such loan offers imply stricter conditions for the client.

Conditions and requirements for borrowers

You can take out a commercial real estate loan on the following standard conditions:

• the maximum amount issued is up to 200 million rubles. (depending on the bank);
• installment period – from 5 to 15 years;
• annual interest – from 11.5%;
• down payment – ​​within 20-30% of the property value;
• the bank issues a loan secured by the property being purchased or any other liquid property owned by the borrower (the encumbrance can be removed only after the debt is fully repaid).

The mortgage rate for individual entrepreneurs will be lower (about 10%) if you take out a loan in foreign currency.

Due to the high cost of non-residential properties purchased for commercial activities, it is unlikely that a mortgage can be obtained without a down payment. The bank may make concessions if the collateral is significantly more expensive than the property being purchased.

The requirements for borrowers are almost identical for all banks:

• registration of organizational and legal status (individual entrepreneur, LLC and others);
• the location of the company and the registration of the borrower must be in the same region where the lending bank is located;
• Russian citizenship;
• age limit – from 21 to 65 years;
• availability of a working telephone number (this may be a valid mobile number).

Bank requirements for purchased real estate

Depending on the bank, the requirements for borrowers for a mortgage loan for the purchase of commercial real estate for legal entities and individuals may differ, but not significantly.

But we can highlight some general points:

• the facility must be located within the Russian Federation - the same region as the bank (no more than 100 km from the branch);
• Any restrictions on access to collateral are unacceptable (for example, a security facility);
• It is mandatory to have all the documentation necessary to evaluate the premises;
• absence of encumbrances, arrests;
• the building must not be state owned.

The selected building must have the status of a capital building. When taking out a commercial mortgage, the property is subject to compulsory insurance.

The bank will refuse to issue a loan if the proposed building is in disrepair and is subject to demolition, does not have a registered address and its internal layout differs from that indicated in the technical passport.

Necessary documents for execution of the contract

To obtain a commercial mortgage, you must provide the following documents:

• passports of all participants in the transaction;
• statement;
• questionnaire;
• documents indicating the type of activity of the applicant;
• income certificate (tax return 3-NDFL);
• certificate of registration in the Unified State Register of Legal Entities and tax registration;
• company charter;
• license (if required due to the specific nature of the activity);
• minutes of the general meeting confirming the appointment of the borrower to a managerial position;
• order on the appointment of a chief accountant;
• financial statements;
• documentation for the purchased property.

Duration and procedure for registering the purchased property

The final stage in the process of obtaining a commercial loan is registration with Rosreestr. This procedure takes no more than 15 working days.

You will first need to pay a state fee of 1000 rubles. – Individual entrepreneur, 4000 rub. – a legal entity.

What if one of the co-owners is against it?

The alienation of owned property cannot be influenced by the opinion of a third party, even if he is the owner of part of the same object. In other words, if the owner decides to sell a share in the common property, then the opinion of the other co-owners does not matter, it is only important to respect their right of pre-emption.

The only exception may be the sale of a share in joint ownership (where shares are not defined). In this case, the transaction must be completed with the consent of all participants in the property. If a compromise is not reached, the share should be allocated and its alienation should continue according to the rules described above.

When does the pre-emptive right not work?

It is not necessary to notify co-owners of the sale in the following cases:

• If a share in the premises is sold at auction (for example, as a result of foreclosure on it as part of enforcement proceedings).
• If shares in real estate are alienated by all owners at the same time.
• If the share is sold to one of the co-owners.

Alternatives to the deal

Compensatory contracts require prior notice, i.e. requiring payment. There are several ways to avoid lengthy preliminary registration of the sale of a share:

• You can donate a share. However, if the notary has doubts about the validity of the transaction, he can help certify it.
• Transfer as compensation.
• You can enter into a loan agreement with security in the form of a pledge of a share, then transferring it into the ownership of the lender as payment under the loan agreement.

List of banks that issue commercial mortgages

List of the most popular banks issuing loans for business:

Typically, banks do not provide mortgages for commercial real estate without a down payment. But this does not mean that it is impossible to reach an agreement on an individual basis. The likelihood of approval will increase if you offer collateral that is worth more than the amount requested.

Attracting a reliable guarantor will also have a positive effect on the decision, especially when the state acts in this capacity (under a special program). If the bank takes such a risk, it will be necessary to make a down payment exceeding 40% of the loan amount.

To choose the most profitable offer for yourself, you should use an online calculator.

The nuances of selling simultaneously by all owners

A situation in which shares are sold by all owners at the same time is ideal for both sellers and buyers.

In this case, sellers have the opportunity to sell an apartment or house at the most attractive price, avoiding the obligation to notify each other of the pre-emptive right. The buyer acquires the entire object and registers ownership of a single object. However, such a transaction still requires notarization.

Pros and cons of commercial real estate mortgages for individuals and businesses

Advantages of a commercial mortgage for individuals:

• there is an opportunity to promote your business by expanding the area;
• the lender provides a deferment on the payment of the first installment for a period of 6 months to a year, which allows the entrepreneur to increase production turnover and begin to receive income from the purchased property;
• The businessman immediately receives a substantial amount in cash.

The disadvantages include:

• high loan rates;
• a large list of required documents;
• the need to make a down payment of at least 30%, otherwise the interest will be even higher;
• more stringent requirements for the applicant than for a regular residential mortgage;
• short loan term – up to 15 years.

When choosing a mortgage program for the purchase of non-residential real estate, you must first calculate the benefits of lending. The conclusion is made based on a comparison of the following indicators:

• interest rate;
• repayment period;
• the amount of the monthly contribution.

If loan payments are less than rent, then it is easier to buy a non-residential property.

Sample agreement concluded with a bank

The clauses of the mortgage agreement may vary depending on the terms of the loan. However, as standard, the document should contain the following information:

• information about the applicant;
• full name of the creditor bank;
• terms of provision of borrowed funds;
• rights and obligations of the parties to the transaction;
• method of loan repayment (the option of early repayment of the entire amount is also stipulated).

A full sample of a mortgage agreement can be found at the following link:

Possible difficulties during registration and registration

Today, banks are not very willing to issue loans for the purchase of non-residential premises. This is due to the riskiness of the transaction, which is why more stringent requirements are imposed on applicants. Failure to comply with at least one item from the standard list leads to refusal.

Reasons why a bank may reject an application:

• false information was provided;
• the borrower is already heavily financially overburdened with other unclosed loans;
• there are arrears on past loans;
• there is no possibility to make a down payment;
• the organization's profit is seasonal;
• "youth" of the business.

Expert opinion

Irina Bogdanova

Expert in the field of mortgage lending.

Credit will be denied to persons whose business is related to the production of alcohol and tobacco products, as well as goods whose production causes environmental damage.

The bank's decision may also be influenced by the property chosen for purchase. For example, a novice businessman wants to take out a loan to purchase premises to open a store. The building is located on the outskirts of the village, far from transport routes and other points of trade. The lender will refuse such a borrower, since the business is not initially promising and does not guarantee stable payments on the loan in the future.

Pitfalls and bottlenecks

If the procedure for buying and selling a share is carried out in accordance with the law, then the parties to the transaction will not have any problems in the future.

• You need to carefully consider the issue of notifying co-owners, since violation of this rule entails the possibility of a dissatisfied co-owner demanding the transfer of the buyer's rights to him (a three-month period is established for this).
• You need to be especially careful with the alienation of real estate acquired during marriage.
  Sometimes situations arise when a share in the premises is sold by one of the spouses after the divorce. In this case, the former spouse, if he was not aware of the transaction, has the right to demand recognition of its invalidity. To protect yourself from such a turn of events, it is necessary to compare the periods during which the seller was married with the time of acquiring ownership of the property.
• Sales and purchases involving minor children also require close attention. It is necessary to involve the guardianship and trusteeship authorities in such transactions.

Thus, if you follow the letter of the law, carefully prepare for the transaction and observe all the nuances of its completion, then the sale of a share in a real estate property or its acquisition will certainly be successful.