Commercial Real Estate Loan Term Sheet Template for Hong Kong

A Commercial Real Estate Loan Term Sheet is your preliminary agreement that sets out the key commercial terms for property financing in Hong Kong. This document bridges the gap between initial credit approval and full legal documentation, providing clarity on facility structure, security arrangements, and conditions precedent before you commit to extensive legal costs.

When do you need this document?

You need this term sheet when you're seeking commercial property financing in Hong Kong, whether for acquisition, development, or refinancing purposes. Banks and financial institutions use this document to formalise their credit approval while giving you certainty about the proposed facility terms. It's particularly crucial for large-scale developments, investment property purchases, or when multiple lenders are involved in syndicated facilities. The document also serves as your roadmap for legal due diligence and helps you understand the full scope of security requirements and covenants before proceeding to formal documentation.

Key legal considerations

The term sheet must clearly define the facility amount, interest rate structure, and repayment terms to avoid disputes later. Your security package requires careful consideration, typically including first legal mortgages over the property, personal guarantees, and assignment of rental income. Pay particular attention to conditions precedent, which often include satisfactory due diligence, property valuation, and insurance arrangements. The document should specify material adverse change provisions, financial covenants, and restrictions on further borrowing or disposal of the property. While generally non-binding, certain provisions like confidentiality, governing law, and exclusivity periods are typically legally enforceable, so you must understand these binding elements.

Legal requirements in Hong Kong

Hong Kong's Banking Ordinance governs commercial lending activities and requires licensed banks to comply with specific prudential requirements when providing property financing. The Conveyancing and Property Ordinance governs the creation and enforcement of security over real estate, requiring proper mortgage documentation and registration with the Land Registry under the Land Registration Ordinance. You must consider stamp duty implications under the Stamp Duty Ordinance, particularly for loan documents and security instruments. The term sheet should reference these governing laws and ensure compliance with Hong Kong Monetary Authority guidelines on property lending, including loan-to-value ratios and debt servicing requirements. For non-bank lenders, the Money Lenders Ordinance may apply, though licensed banks are generally exempt from its provisions.