What to Check Before You Sign Private Finance Documents for a Commercial Property Purchase

Why Lenders Insist on Independent Legal Advice

Private credit facility documents are dense, heavily weighted in the lender’s favour, and rarely negotiable on the big-ticket items. In our experience, borrowers who skip a proper review often only discover the sting in the tail once they are trying to repay early or draw down urgently.

• Lenders require independent advice to confirm you understand your obligations, not just to tick a compliance box
• A rushed sign-off can mean missing conditions that affect when and whether the facility is ever funded
• This applies whether you are a property developer, an SPV borrower, or a guarantor

Get the Commencement Date Right

The commencement date sets the clock running on your facility term, which means it also sets your repayment deadline and the point at which default interest can kick in. Most borrowers assume it is the date funds actually land in their account. It often is not.

• The commencement date may instead be the earlier of the funding date and a fixed number of days after execution or issue of the loan documents
• A facility can technically “commence” before a single dollar has been advanced
• This detail should be confirmed and, where needed, negotiated before signing

Understand Every Condition Precedent

Condition precedents are the boxes that must be ticked before a lender will advance funds. Some are standard, some are specific to your deal, and all of them need to be achievable in the time you actually have.

• Some condition precedents can take weeks to satisfy
• Many facility documents include a sunset period, after which the lender is no longer obliged to advance the facility at all
• Borrowers should review these conditions early, ideally before signing a letter of offer, not after

If timing is tight because of settlement or development deadlines, this is exactly where a solicitor experienced in commercial leasing and property development timelines earns their fee.

Know the Early Repayment Notice Period

Facility documents commonly require written notice, often at least 30 days, before you repay the loan. Miss that window and you can end up paying for a month you did not need the money.

• Check the exact notice period required under your facility documents
• Understand what happens if notice is given late or is defective
• Put a reminder in your own diary well ahead of any planned repayment date

Watch the Fees, and Know When to Involve Your Accountant

Private finance can come with a long list of fees, including establishment, processing, due diligence, funding and settlement fees. Reviewing when each one becomes payable is a legal task. Working out the tax treatment of those fees is not, and that is a conversation for your accountant.

• Some fees become payable simply on execution of the documents, before any funds are advanced
• You may remain liable for certain fees even if the lender ultimately decides not to fund the facility
• We can identify what triggers each fee under your documents, but we always recommend confirming the tax and accounting treatment with your accountant

Funding Is Not Always Guaranteed

It surprises a lot of clients that meeting every condition precedent does not always guarantee the money will actually arrive. Some facility documents leave the final funding decision entirely up to the lender.

• Lenders may retain discretion not to fund, even after conditions are met, due to a change in valuation, market conditions or the lender’s own cost of funds
• The key distinction is whether that discretion is unfettered or limited to specific, defined circumstances
• This is one clause worth losing sleep over, because it can leave a settlement exposed at the worst possible moment

Representations, Warranties and Undertakings

These clauses look repetitive at first glance, and then very much stop looking that way the moment one of them is breached. A breach of a representation, warranty or undertaking is usually an event of default in its own right.

• Understand the practical difference between a representation, a warranty and an undertaking in your document
• Flag early if any representation or warranty may not remain true, or any undertaking may become difficult to comply with, during the life of the facility
• Where that risk exists, the facility documents should be amended before signing, not after

Practical Takeaways

• Confirm the true commencement date before you sign, not after
• Map out every condition precedent and realistic timeframe for satisfying it
• Diarise the early repayment notice period the moment the facility is funded
• Get clarity on which fees are payable and when, and check the tax treatment with your accountant
• Read the funding discretion clause carefully, particularly for development or settlement-critical finance
• Understand what triggers an event of default under the representations, warranties and undertakings

Get in Touch

If you have been asked to obtain independent legal advice before signing loan or facility documents, or you are about to commit to private finance for a commercial property purchase or development, we can help. As a commercial property lawyer in Sydney and across NSW, Jaide Law reviews, advises on and negotiates these documents so you know exactly what you are signing. Get in touch for a complimentary property call to talk through your facility documents before you sign.

Disclaimer — We know most of you get this, but just to be clear, the information above is general and doesn’t consider your unique situation. Please don’t rely on it as a substitute for professional advice. We strongly encourage you to seek appropriate guidance for your specific needs.