A commercial mortgage does not end with making the monthly payment. The facility letter, mortgage conditions and security documents may require financial tests, regular information, property standards and written consent before important changes. This guide helps you identify those obligations before signing and manage them throughout the loan.
A covenant is a promise in the loan documents; lender consent is permission for a specified action
Commercial mortgage covenants can require the borrower to do something, provide information, maintain an agreed financial position or avoid certain actions. A consent clause can require written lender approval before a lease, sale, further charge, major alteration, ownership change or another specified event. The exact wording in your signed documents is what matters.
Commercial mortgage covenants usually fall into four practical groups
The labels vary between lenders. Separate each obligation by what the borrower must do, how compliance is shown and what could trigger a problem.
Financial covenants
These may test loan-to-value, debt service, interest cover, leverage or another measure defined in the facility. Some loans have no ongoing financial covenant; others have one or several.
Information covenants
The borrower may have to provide annual accounts, management figures, rent schedules, leases, tax or compliance information, insurance evidence and prompt notice of material events.
Property covenants
These can cover repair, insurance, valuation access, planning and licensing, lawful use, environmental matters, occupation, letting and compliance with title or lease obligations.
Negative or consent covenants
These restrict specified actions without approval, such as granting security, disposing of property, changing ownership, varying leases, taking more debt or making material alterations.
The agreement is normally made up of more than one document. Lloyds Bank’s current Commercial Loan Servicing Account conditions, for example, tell customers to read the facility letter because it sets the borrowing terms and conditions. This is a useful reminder to review the complete document set rather than a product summary alone.
How should you check a commercial mortgage financial covenant?
A familiar label can hide a lender-specific formula. The definition, testing date, source accounts and adjustments can be as important as the headline threshold.
Atom bank’s current commercial lending criteria state that financial covenants are included for its loans of £1 million and over. That is one lender’s published position, not a market-wide rule. Smaller loans can still have covenants, and a lender may apply different requirements according to the transaction.
What information might a commercial mortgage borrower have to provide?
Agree responsibility for every reporting duty before completion. The person running the business, the accountant and the property manager may each hold part of the evidence.
Accounts and management figures
Annual statutory accounts may not be enough where the facility asks for quarterly management information, cash-flow forecasts, aged debtor or creditor data, covenant calculations or explanations of material variances.
Investment property information
A commercial investment borrower may need current leases, rent schedules, arrears, break dates, expiries, incentives, voids, service-charge information and notice of a tenant problem or proposed lease change.
Owner-occupied business evidence
The lender may monitor trading performance, debt service, business continuity, key contracts, licences, tax position and changes that could affect the borrower’s ability to occupy and repay.
Insurance and property compliance
Keep suitable buildings and other required insurance in force, note the lender’s interest where required, pay premiums and retain certificates. Maintain planning, licensing, fire, safety and environmental records relevant to the property and use.
Valuation and inspection access
The documents may allow the lender or its valuer to inspect or revalue the property. Check when this can happen, who pays and whether a valuation can affect a financial covenant or further advance.
Material-event notices
The borrower may have to report litigation, insolvency concerns, missed payments, serious property damage, licence loss, covenant breaches, ownership changes or another event that could materially affect the business or security.
When might you need commercial mortgage lender consent?
Consent requirements protect the lender’s agreed security and credit position. They are document-specific, but these are the changes most worth checking before you commit time or money.
Granting or changing a lease
Consent may be needed before granting a new occupational lease, renewing, surrendering, varying, assigning or underletting. The lender may review tenant quality, rent, term, breaks, incentives, repairing duties and security of tenure.
Sale, transfer or part disposal
Selling the property, transferring it to another entity, disposing of part, changing boundaries or releasing rights can affect the security. The lender may require valuation, repayment, substitute security or legal documentation.
Further debt or security
A later mortgage, debenture, asset-finance arrangement, invoice-finance facility or shareholder security can conflict with an existing negative pledge or first-ranking charge. Priority and consent should be resolved before signing the new finance. Our commercial mortgage legal charge and debenture guide explains how property and company security can interact.
Change of use or major works
Material alterations, demolition, conversion, development or a new use may change value, insurance, planning, letting and saleability. Planning or landlord approval does not automatically replace mortgage-lender consent.
Ownership or control change
A sale of shares, new controlling shareholder, group reorganisation, partnership change or transfer of the business may trigger a change-of-control or borrower-structure clause even if the property title does not change.
Insurance or operating change
A material change to occupation, vacancy, licence, operator, insured use or policy may require notice or approval. Tell the lender and insurer early where the property or business risk is changing.
For a clear real-world example, Allica Bank explains that it can consent to leasing a mortgaged commercial property in many cases. HM Land Registry also explains that a lender’s title restriction can require consent to register a disposition; see Practice Guide 30 and its reference to the standard restriction used where the charge holder’s consent is required.
What should a lender consent request include?
A vague request creates more questions. Give the lender enough information to understand the proposed change, its effect on value and repayment, and the legal steps required.
A simple covenant-management process can prevent avoidable breaches
Turn the loan documents into an operating checklist. The aim is to identify a pressure point while there is still time to provide evidence, seek consent or discuss a solution.
Create a covenant schedule
List every test, information deadline, property duty, consent item, notice requirement and responsible person. Record the document and clause so the source wording is easy to find.
Monitor before each test
Update the calculation and supporting evidence before the formal date. Track rent collection, voids, trading performance, interest costs, loan balance and property events relevant to the covenant.
Ask before committing
Check the consent clauses before agreeing a lease, works contract, new facility, ownership change or disposal. Obtain written approval in the form required by the lender.
Keep a complete record
Retain submissions, calculations, accounts, valuations, approvals, waivers and legal documents. Make sure directors, accountants, property managers and advisers work from the same current position.
What should you do if a commercial mortgage covenant may be breached?
The right response depends on the documents, the cause and the lender. Early, accurate information normally gives all parties more options than a late or incomplete disclosure.
1. Confirm the actual calculation or obligation
Use the definitions in the signed agreement, not a generic online formula. Check the testing period, valuation basis, permitted adjustments, group entities, cure rights, notice wording and whether the issue is already a breach or only a forecast risk.
2. Build an evidence-based explanation
Identify what changed, whether it is temporary or structural, the effect on repayments and security, and the actions already taken. Support the explanation with current management figures, rent data, forecasts and professional evidence where relevant.
3. Follow the notice requirement
The documents may require prompt notice to a named lender team or address. Speak to the appropriate legal and financial advisers where the wording, timing or consequences are unclear. Do not conceal or inaccurately describe the position.
4. Discuss the realistic routes
Depending on the case, the lender may ask for more information, agree a waiver or amendment, require extra equity or security, change pricing, restrict distributions, set an action plan or require repayment. Refinancing is one possible route, not an automatic cure.
HMRC’s guidance on third-party loan agreements notes that financial covenant definitions can determine how ratios such as debt-to-equity or interest cover are calculated. See HMRC INTM522010. This is tax-manual guidance rather than borrower advice, but it illustrates why the contract definition should be checked before deciding whether a covenant has been met.
Lender consent may be only one approval you need
A proposed change can engage several contracts and authorities. Receiving one approval does not imply that the others have been obtained.
Mortgage lender
Checks the effect on its borrower, security, value, income and legal position under the facility and security documents.
Landlord or superior landlord
A lease can require consent for assignment, underletting, alterations, signage, use or charging. The mortgage lender cannot waive the landlord’s separate rights.
Planning, licensing and regulators
A lawful change may require planning permission, building control, sector licensing or another statutory approval. Commercial finance approval does not establish regulatory compliance.
Insurer
Occupation, vacancy, works, storage, processes or tenants can change the insured risk. Tell the broker or insurer and meet any policy conditions before the change occurs.
Other secured creditors
A debenture, asset financier, invoice financier or second lender may have consent or priority rights. Check the complete security and intercreditor position.
Company approvals
Board, shareholder, partnership, trust or group approval may be needed for a material transaction, guarantee, disposal or new borrowing. The solicitor should confirm the correct authority.
For leasehold property in England and Wales, HM Land Registry Practice Guide 19A explains that many leases restrict assignment or underletting without landlord consent and that a title restriction can require a consent or certificate before registration. This is separate from any mortgage-lender requirement.
Sources used for this covenant and lender-consent guide
These sources illustrate how facility documents, lender criteria, consent requirements and property restrictions can work. The signed agreement and case-specific written decisions always take priority.
- Lloyds Bank: Commercial Loan Servicing Account conditions — a current lender example showing that product conditions form only part of the agreement and that the facility letter contains the borrowing terms. It is not a universal commercial-loan template.
- Atom bank: commercial mortgage lending criteria — a current lender example of financial covenants being applied according to loan size and underwriting. Other lenders and individual offers can use different thresholds, definitions or no ongoing financial ratio.
- Allica Bank: leasing a mortgaged commercial property and HM Land Registry Practice Guide 30 — examples of lender consent and registered-charge restrictions. Separate lease, planning, licensing and insurance approvals may still be required.
- HMRC INTM522010 — tax-manual material describing common features of third-party debt agreements, including financial definitions, reporting duties, operational restrictions and default clauses. It is contextual evidence, not borrower, accounting or legal advice.
- HM Land Registry Practice Guide 19A — professional guidance for England and Wales on lease covenants, consent and title restrictions. It does not establish the mortgage lender’s decision or apply unchanged across other UK jurisdictions.
Evidence boundary
The facility letter, mortgage conditions, legal charge, debenture, guarantee, lease, title entries, lender correspondence and any written waiver or consent control the case. Count Ready can help organise the mortgage questions and explore finance routes, but cannot calculate a contractual covenant, interpret legal wording, grant lender consent or confirm that another approval is unnecessary.
How to use these sources: Lloyds Bank, Atom bank and Allica Bank are lender-specific examples, not market-wide rules. HM Land Registry Practice Guides 30 and 19A apply in England and Wales. HMRC INTM522010 explains third-party debt-agreement features for HMRC thin-capitalisation work; it does not define a mortgage lender’s contractual consent process. The signed facility and security documents, together with the lender’s written case-specific decision, control the case.
Last reviewed: 22 July 2026. All six linked sources were checked on this date.
Tell us about the covenant, consent request or proposed refinance
Share only your contact details and outline financial, property and timing information, together with the current lender, the type of clause or condition involved, the proposed change and any deadline. Count Ready can review the commercial mortgage position, explain which finance questions need clarifying and discuss lender routes where a new facility may be appropriate. Do not use the form to upload facility documents, financial records or identity evidence. Your solicitor and accountant should advise on the legal wording and financial calculation for the actual agreement.
Before you send: This form is for outline covenant, consent, reporting and timing information, not document upload or a formal consent or waiver request. Submitting it does not calculate a covenant, amend the facility, grant consent, waive a breach, extend a deadline, pause lender rights or confirm that a transaction or change may proceed. Do not send passwords, security codes, original identity documents, bank statements, management accounts, compliance certificates, facility agreements, security documents, leases, valuations, lender correspondence or other unrequested files. Count Ready will use the outline details to discuss the mortgage route and coordination questions; agree a secure transfer method before sharing documents. Keep the instructed solicitor and accountant responsible for legal wording and calculations, and rely on written case-specific lender confirmation before acting.
Commercial mortgage covenant and lender consent questions
Direct answers about financial tests, reporting duties, permissions, waivers and potential breaches.
What is a covenant in a commercial mortgage?
A covenant is a contractual promise or restriction in the commercial mortgage documents. It may require the borrower to maintain a financial ratio, provide information, insure and maintain the property, notify the lender of material events or avoid specified actions without consent. The facility letter, mortgage conditions and security documents must be read together to identify the actual obligations.
Do all commercial mortgages have financial covenants?
No. Financial covenant requirements vary by lender, loan size, property, borrower, repayment structure and risk. A loan may have no ongoing ratio, one test such as loan-to-value or interest cover, or several tests. Information, property and consent covenants can still apply even where there is no formal financial ratio.
What financial covenants can a commercial mortgage include?
Examples can include loan-to-value, interest cover, debt-service cover, leverage, net worth or another lender-defined measure. The name alone is not enough: check the formula, accounting adjustments, valuation basis, test date, threshold, evidence and consequences in the signed agreement.
When do I need lender consent for a commercial property?
The documents may require consent before granting or changing a lease, selling or transferring the property, disposing of part, making major alterations, changing use, taking further debt or security, or changing control of the borrowing business. Obtain the lender’s written decision before committing where the agreement requires prior consent.
Can I lease a mortgaged commercial property?
Potentially, but first check that the mortgage product permits letting and whether the lender must approve the tenant and lease. The lender may examine rent, term, breaks, repairing obligations, incentives and tenant quality. Leasehold property can also require separate landlord consent, and planning, licensing and insurance requirements still apply.
What happens if a commercial mortgage covenant is breached?
The consequences depend on the agreement and lender. The lender may request information, agree a waiver or amendment, require a remedy, apply revised pricing, restrict certain actions, seek extra security or require repayment. Some breaches can be events of default. Confirm the position promptly with the appropriate professional advisers and follow the notice requirements.
Can a commercial mortgage covenant be waived?
A lender can choose to waive a particular breach or test, but it is not obliged to do so. A waiver may be limited to one date or event and may contain conditions, fees, revised reporting or other requirements. It does not necessarily remove the covenant for the rest of the loan, so obtain and understand the written terms.
Can I refinance if I cannot meet a commercial mortgage covenant?
Refinancing may be possible, but a new lender will still assess the property, current performance, reason for the breach, affordability, valuation, credit profile and exit position. It can take time and involve valuation, legal and lender fees. Review the existing lender dialogue and realistic refinance evidence early rather than assuming another mortgage will automatically solve the issue.
Understand the documents and decisions around your facility
These guides cover the stages that most often sit alongside covenant monitoring and lender consent.
This page provides general information, not legal, accounting or tax advice, a lender waiver, a consent decision or a mortgage offer. Commercial loan documents are transaction-specific. Ask the acting solicitor and accountant to advise on the wording and calculations that apply to your agreement. Some commercial mortgages and business buy-to-let cases are not regulated by the Financial Conduct Authority; the position will be explained where relevant.