Proving You're Serious to a Lender

One of the facts about buildings that is becoming paramount to lenders is that buildings require maintenance, repair, and replacement, in order to maintain use. No lender wants to foreclose on a wreck about to be condemned by the Building Department, but it is their primary security. They could always sue the owner for "waste", which is prohibited by any mortgage or deed of trust, but that takes time, and you have to know the owner has assets before undertaking a trial.

How do you demonstrate to lenders that your building is going to be taken care of?

By creating, and offering for review, a maintenance plan based on a reserve study.

A quick outline of a reserve study requirements can be found here, created in the context of a condo association. The commercial variation on this study is not significantly different, but any reserve study also contains estimated lives on building parts and replacements. If you break out the estimated lives and plot them on a calendar, you've got the first step of a maintenance plan in place. Then comes the more important part: collecting from manufacturers or engineers descriptions of the maintenance expected of major building components, safety components, and appearance components to keep them on course to their maximum lifespan, typically done in conjunction with an engineer, an expert in HVAC, and experienced maintenance people. An example maintenance plan for a school building (Microsoft WORD format) shows the range of issues, and levels, appropriately dealt with.

Now you have something to base the "maintenance" line of your proforma on -- and a reason to keep reserves at a level that will support the maintenance program, with dates of expected use. That last allows the bank to plan how they might be invested, and to feel secure about their loan with you.

Do you want the loan? Look like you deserve their trust.