Commercial Property Finance Term-Sheet Checklist
Commercial property finance must be tested against the property’s leases, operating costs, vacancies and legal ownership, not only the quoted repayment. A term-sheet checklist helps a business or investor compare Islamic structures before incurring valuation and legal costs.
This checklist is general information, not property, credit, tax, legal, investment or Shariah advice. Review the final documents and property facts with qualified professionals.
1. Identify the property and purchaser
Record title details, zoning, use, purchase price, VAT or transfer-duty assumptions and the proposed legal owner. Explain why an individual, company, trust or partnership is the applicant.
2. Name the finance structure
State whether the proposal uses Murabaha, Ijarah, Diminishing Musharakah or another arrangement. Map ownership and security through acquisition, operation and exit.
3. Reconcile the full capital requirement
List price, deposit, tax, conveyancing, valuation, registration, renovations, tenant installation, working capital and contingency. Identify what the provider funds and what the customer must pay.
4. Analyse lease income
Record each tenant, rental, escalation, expiry, deposit, arrears, break clause and renewal risk. Avoid treating a headline gross rent as dependable net cash flow.
5. Calculate net operating cash
Deduct rates, levies, insurance or Takaful, maintenance, management, utilities, vacancies and capital expenditure. Compare stressed net cash with the finance payments.
6. Test vacancy and tenant failure
Model the loss of the largest tenant, a letting delay and a rent reduction. Record how long reserves cover property and finance costs.
7. Review variable payments
State benchmarks, review dates, caps, floors and notice. Model higher-rate scenarios on the same lease assumptions.
8. Allocate ownership costs
For lease or partnership structures, identify responsibility for structural repairs, ordinary maintenance, insurance, rates and damage. Ensure the signed allocation matches the Shariah rationale.
9. Review covenants and security
List guarantees, cessions, deposits, financial ratios, information duties and events of default. Note which breaches allow acceleration or enforcement.
10. Test sale and refinance
Request settlement examples, consent requirements and distribution of sale proceeds. Include cancellation, legal, tax and transfer costs.
11. Verify Shariah evidence
Retain product approval, named adviser or board, contract set and treatment of ownership, rent or profit, late payment, maintenance and early exit.
12. Build the approval file
Store due diligence, leases, valuation, environmental or building reports, tax advice, cash-flow model, term sheet, contracts and decision record.
Official starting points
Practical outcome: the applicant should be able to reconcile the property’s stressed net cash flow to the total funding need, payments, ownership obligations and exit costs.Required stress table
Show base, moderate-stress and severe-stress cases. Vary occupancy, collection, operating costs, benchmark-linked payments, renovation delay and sale value. For each case record net cash, payment coverage, reserve months and covenant breaches. State which assumptions come from signed leases, which come from the valuation and which are management estimates.
Decision gate
Do not approve the term sheet while title, zoning, largest leases, total acquisition cost, ownership structure or Shariah evidence remain unresolved. Record every condition and closure document.Preserve approvals.Review annually.
