Leasehold Commercial Mortgages in the UK: A Practical Guide

Yes, you can get a commercial mortgage on a leasehold property in England. But lenders treat a leasehold interest as weaker security than a freehold, so the terms depend on the lease: how many years remain, what the rent review clauses say, and what the landlord can do if things go wrong. Get those points straight before you approach a lender and the deal is far easier to place.

This guide is for investors, owner-occupiers and developers weighing up a leasehold purchase or refinance. It covers what lenders examine, how the numbers tend to move, where energy-efficiency rules now bite, and how to prepare a case.

TL;DR

• A leasehold commercial mortgage is secured on your tenancy interest, not the land, so the unexpired lease term is the single biggest factor in what a lender will offer.
• There is no universal minimum lease length in commercial lending. Lenders look at whether the lease comfortably outlasts the loan term, and assess each case on its own facts.
• Expect more scrutiny than on a freehold: the lease terms, the landlord’s covenant, ground rent, service charge and forfeiture risk all feed into the valuation and the pricing.
• EPC ratings and Minimum Energy Efficiency Standards now belong in the funding plan, not the post-completion to-do list.
• A broker with access to specialist lenders can place leasehold cases that high-street banks decline.

Table of Contents

• What a leasehold commercial mortgage actually secures
• The lease terms lenders examine
• Freehold or leasehold: how the loan changes
• Who lends on leasehold commercial property
• Deposits and loan-to-value
• EPC and MEES: the cost lenders now price in
• Our view: how we approach leasehold cases
• How to prepare a leasehold commercial mortgage application
• Where we can help
• FAQ
• Sources

What a leasehold commercial mortgage actually secures

With a freehold you own the building and the land beneath it outright. With a leasehold, you own the property for the period set by the lease, but not the land, and a landlord holds the superior interest. A commercial mortgage on a leasehold is therefore a loan secured by a legal charge over your lease.

That matters to a lender for one blunt reason: a lease is a wasting asset. Every year the unexpired term shortens, and so does the period over which the lender can sell the security if you default. A freehold does not decay in this way.

The lender also sits under your landlord. If you breach the lease, the landlord may be able to forfeit it, which would wipe out the lender’s security. This is why lenders read the lease closely, and why they usually want to see that forfeiture protections and notice provisions work in their favour.

The lease terms lenders examine

Unexpired term

A headline “125-year lease” is not what the lender measures. A lease granted 90 years ago for 125 years has 35 years left, and that unexpired figure is the number that counts. Ask your solicitor to confirm it early, from the lease itself and the Land Registry entry, rather than relying on agent particulars.

There is no single minimum. Broadly, lenders want the unexpired term to run well beyond the end of the mortgage, leaving a margin in which the property stays saleable and financeable for the next buyer. A 15-year loan on a lease with 18 years left is a hard sell. The same loan on a lease with 60 years left is a different conversation. Exact thresholds vary by lender and property type, so treat any rule of thumb as a starting point.

Rent reviews and the passing rent

If you are the tenant paying a rent, upward-only reviews or turnover-linked rents change your affordability. If you are an investor who has bought a leasehold that you sublet, the lender will focus on your subtenants’ rent against the head rent you pay. Expect them to stress-test the margin between the two.

Ground rent, service charge and repairing obligations

The lender will want to see what you owe the landlord on top of the mortgage: ground rent, service charge, insurance recharge and any obligation to repair. Unusual or escalating ground rents can reduce valuation and shrink the pool of lenders. A full repairing and insuring lease is common in commercial property, and it puts costs on you that need to be covered by the income or trading figures.

Alienation, user and alterations

Restrictions on assignment, subletting, change of use and alterations all affect how easily the lender can realise its security. A narrowly drawn user clause limits the number of buyers, which limits value. If you plan works, check the alterations clause before the valuer does.

Forfeiture and lender protections

Lenders look for a clause giving them notice of any breach and a chance to remedy it before the landlord forfeits. Where this is missing, a specialist lender may still proceed, but it may price in the risk or reduce the loan-to-value.

Freehold or leasehold: how the loan changes

The table below summarises the usual direction of travel. Individual lender policy varies, so treat it as a guide to what to expect rather than a quote.

For context on cost, the Bank of England reported that the effective rate on new bank loans to UK SMEs was 6.26% in October 2025, up from 6.18% in September. That is a market-wide average across loan types, not a leasehold commercial mortgage rate, and it will have moved since. Pricing on any given case depends on the lender’s view of the borrower, the trading history, the property’s income and, for a leasehold, the lease.

Who lends on leasehold commercial property

Mainstream banks and building societies do lend on commercial leasehold, but their appetite is typically narrower: longer unexpired terms, conventional property types and strong, documented trading. The British Business Bank sets out the general route to commercial property finance: a deposit, then repayments over an agreed term, with the lender’s valuation and your business finances deciding the offer.

When a case falls outside the high-street box, other lenders become relevant: specialist and private-credit lenders, family offices and challenger banks that will look at the asset and the story rather than a tick-box score. A shorter lease, a mixed-use building, a company with a newer trading record or a tight timetable are common reasons to go this way. These lenders may price higher, so the question is whether the structure works for the whole project, not just the headline rate. Our commercial mortgage lender panel is one place to see the range of lender types we work with.

Deposits and loan-to-value

The question readers ask most is how much deposit they need. There is no fixed answer, because the lender sets it against the valuation, the property type, the borrower and the lease. Owner-occupiers with a strong trading record usually get better terms than speculative or heavily vacant investments. For a leasehold, assume the deposit requirement will be at the higher end of what a freehold of the same type would need, and rises as the unexpired term falls.

A 100% commercial mortgage is rare on a standalone basis. When higher leverage is needed, it is normally built from layers: a senior loan plus junior or mezzanine debt, or a joint venture equity partner. We cover that stacking approach in our guide to how to structure a development finance deal when margins are tight, and the same logic applies to acquisitions.

EPC and MEES: the cost lenders now price in

Energy efficiency used to be a footnote in a commercial deal. It is now part of the credit decision. Under the Minimum Energy Efficiency Standards regime, privately rented non-domestic buildings in England and Wales face minimum EPC requirements, and government has confirmed its intention to move higher, with a proposal that larger buildings (over 1,000 square metres) reach a higher standard from 2031. Check the current consultation outcome for the exact dates and thresholds that apply to your building.

For a leasehold borrower, this lands in several places:

• Lettability. If you sublet, a building that cannot lawfully be let is a building without income, and lenders will value it accordingly. Some may decline poor-rated stock altogether.
• Who pays for the works. Under a full repairing lease, the upgrade bill may fall on you, not the landlord. Read the repair and alteration clauses, and agree consent for works before you complete.
• Funding structure. Build the retrofit cost into the initial facility, through a capex line, a retention or a staged drawdown, rather than treating it as a surprise after completion.
• Rating liability. An EPC is triggered by selling, renting or constructing, and existing occupiers do not need one until they sell, assign or sublet. Plan for that moment at the point you take on the lease.

Fit-out is the other cost that catches tenants out. Specification, procurement and timing all affect when a space is usable and income starts, which is why it helps to understand the Cat A and Cat B fit-out distinction before you commit to a leasehold office and its funding.

Our view: how we approach leasehold cases

We see leasehold as a structuring question, not a barrier. Most leasehold cases that stall do so because the lease has been read too late, not because the deal is poor. By the time a valuer flags a restrictive user clause or a short unexpired term, the buyer has already paid for searches and surveys.

Our approach is to read the lease first, then match the case to lenders. Because we work with specialist lenders, private credit funds and family offices as well as conventional sources, we can put a short-lease or mixed-use case in front of the right funder rather than collecting declines from the wrong ones. Where the lease is the obstacle, we look at what can change it: a lease extension agreed with the landlord before completion, a shorter loan term, a lower loan-to-value with a mezzanine layer, or a bridge to buy now and refinance once the lease position is cured.

Our honest advice is to involve your solicitor and a broker together, early. The lease needs a legal reading and a lending reading, and they are not the same thing.

— James William Dawes

How to prepare a leasehold commercial mortgage application

1. Get the lease and title. Obtain the full lease, any deeds of variation, licences and the Land Registry entries. Have your solicitor confirm the unexpired term.
2. Check the landlord. Who is the freeholder, what is their track record, and are there head leases above yours? A chain of leases adds layers of lender comfort required.
3. Map every cost. Rent, ground rent, service charge, insurance recharge, repairs and any planned upgrade works.
4. Check the EPC. Find the current rating, the cost of improving it and who is responsible under the lease.
5. Decide your exit. Sale, refinance or hold, and what the remaining term means for each.
6. Gather the financials. For owner-occupiers, trading accounts and projections. For investors, tenancy schedules and rent roll. For companies, the director and shareholder picture.
7. Take advice on structure. Speak to a broker before you instruct valuers, because the choice of lender decides which valuation basis applies.

If the timetable is tight, a bridge can secure the property while a longer-term commercial mortgage is arranged. Our overview of bridging finance explains when that route makes sense.

Where we can help

We arrange commercial mortgages for investors, owner-occupiers and professional practices, including cases involving leasehold interests, and can bring in bridging, mezzanine or joint venture equity where one loan will not do the job. If you are looking at a leasehold acquisition or refinance, talk to us about commercial mortgages with the lease and a short summary of the deal to hand. We also advise on the ground in the South West, through our Bath and Bristol pages.

FAQ

What is the minimum lease length for a leasehold commercial mortgage?

There is no universal minimum. Lenders generally want the unexpired term to extend comfortably beyond the end of the mortgage, and each assesses the case individually. Your solicitor should confirm the true unexpired term, since the original grant length can mislead.

How much deposit do I need for a leasehold commercial mortgage?

It depends on the lender, the property type, your trading record and the lease. As a working assumption, expect the deposit to be no lower than on a comparable freehold and higher as the lease shortens. A broker can tell you where your case is likely to land before you pay for a valuation.

Is a 100% commercial mortgage possible?

Rarely as a single loan. Higher leverage is usually achieved by combining a senior loan with mezzanine debt or equity, which means more cost and more lender conditions. Whether it makes sense depends on the asset’s income and your exit.

Will the EPC rating affect my ability to borrow?

It can. Lenders may decline or reduce lending on buildings that cannot lawfully be let, and future standards are intended to rise. Check the rating and the upgrade cost before you exchange, and fold it into the funding.

Sources

• Bank of England, Money and Credit, October 2025
• GOV.UK, MEES in the non-domestic private rented sector: interim response
• GOV.UK, Rating Manual: MEES and rating
• British Business Bank, How to finance a commercial property purchase
• BTG Eddisons, Freehold vs leasehold commercial property

Recommended

• Bridge to let: a UK investor’s guide to the two-stage strategy
• Specialist Property Finance