When Property Chains Break Down
A **chain break** occurs when a property transaction in a linked chain fails to complete on time, putting every other transaction in the chain at risk. In commercial property, chain breaks can be devastating — a collapsed deal may mean losing a property you have spent months negotiating, forfeiting deposits, or facing breach of contract claims.
Bridging finance **resolves** chain breaks by providing the funds to complete your purchase independently of your sale. Instead of waiting for your existing property to sell, you bridge the gap and deal with the sale separately.
How Chain Breaks Happen in Commercial Property
Commercial property chains are less common than residential ones, but they do occur — particularly when:
- You are selling one commercial property to fund the purchase of another. Your buyer's finance falls through, their survey reveals issues, or they simply pull out.
- A tenant vacates unexpectedly, reducing the value of the property you are selling and causing your buyer to renegotiate or withdraw.
- Planning or licensing delays affect the property your buyer is purchasing from you.
- Your buyer's lender withdraws their offer late in the process due to changed market conditions or policy adjustments.
- Probate or legal complications cause delays on either side of the chain.
In each scenario, you are left needing to complete your purchase but unable to access the funds from your sale. This is precisely where bridging finance steps in.
How Bridging Finance Solves Chain Breaks
A **chain break bridge** works as follows:
- You take out a bridging loan secured against your existing property, your new property, or both
- The bridge provides the funds to complete your purchase without relying on the sale proceeds
- You complete your purchase on time, protecting the deal
- When your sale eventually completes (or you sell through other means), you use the proceeds to repay the bridge
The key advantage is **independence**. Your purchase is no longer dependent on your sale completing simultaneously. This removes the single biggest risk in any property chain.
**Key Takeaway:** A chain break bridge typically costs a few thousand pounds in interest and fees. Compare this to the cost of losing a purchase you have spent months securing — potentially tens of thousands in lost value, legal fees, and wasted due diligence costs.
Types of Chain Break Bridging
First Charge Bridge on the New Property
If you have sufficient deposit without your sale proceeds, you can take a first charge bridge on the property you are purchasing. This is the simplest structure.
- LTV: Up to 75% of the new property value
- You need: 25%+ deposit from other sources
- Exit: Sale of your existing property or refinance
Second Charge Bridge on Your Existing Property
If you have equity in your existing property, a second charge bridge releases funds against that equity while your existing mortgage remains in place.
- Combined LTV: Your existing mortgage plus the bridge must not exceed 70-75% of your property's value
- You need: Sufficient equity above your existing mortgage
- Exit: Sale of the existing property repays both the mortgage and the bridge
Cross-Charge Bridging
Some lenders will take security across both properties — your existing property and the one you are purchasing. This can increase the total amount available.
- Benefit: Higher overall borrowing by combining security values
- Consideration: Both properties are at risk if you default
- Exit: Sale of the existing property, refinance, or a combination
A Worked Example
The Situation
You are selling a commercial property for £600,000 with a remaining mortgage of £200,000. You are purchasing a new commercial property for £750,000. Your buyer has pulled out 2 weeks before your planned completion date.
Without Bridging Finance
- You cannot complete your purchase
- You risk losing the property to another buyer
- You may lose your deposit if you have already exchanged
- You face potential legal costs and breach of contract
- Months of negotiation and due diligence are wasted
With a Chain Break Bridge
**Security**: Second charge on your existing property (value £600,000, existing mortgage £200,000 = £400,000 equity available)
**Bridge amount**: £300,000 at 70% of available equity
**Combined with**: A commercial mortgage on the new property for £562,500 (75% LTV)
**Total funds available**: £862,500 — more than enough to cover the £750,000 purchase plus costs
**Bridge costs over 4 months** (assuming it takes this long to resell your existing property):
- Interest at 0.85% per month: £300,000 x 0.85% x 4 = £10,200
- Arrangement fee at 1.5%: £4,500
- Legal and valuation: £3,000
- Total bridging cost: £17,700
**Outcome**: You complete your purchase, your existing property sells 3 months later for £600,000, and you repay the bridge from the proceeds. The £17,700 cost is a fraction of what you would have lost had the purchase collapsed.
When to Act
Timing is critical with chain breaks. Here is guidance on when to start considering bridging:
Your Sale Is Delayed but Still Likely
If your buyer is still committed but their timescale has slipped, a bridge lets you complete your purchase on time and wait for the sale to catch up. This is the most straightforward scenario.
Your Buyer Has Pulled Out
If your buyer withdraws entirely, you need the bridge to last long enough to find a new buyer. Allow 3 to 6 months for remarketing and completing a new sale. Discuss realistic timescales with your broker.
You Have Not Yet Found a Buyer
Some investors deliberately use bridging to acquire a new property before selling the old one, giving them flexibility to sell at the right price rather than being forced into a quick sale.
You Have Exchanged on Your Purchase
If you have already exchanged contracts on your purchase, you are legally committed to complete. A chain break bridge is not optional in this scenario — it is essential to avoid breach of contract.
**Key Takeaway:** Do not wait until your completion date to arrange bridging finance. If there is any doubt about your sale completing on time, start the bridging application process immediately. Most bridging applications take 5 to 15 working days.
Costs and Considerations
Interest Rates
Chain break bridges typically attract rates of **0.55% to 1.0% per month**, depending on:
- The LTV and security offered
- Whether it is a first or second charge
- The strength of your exit strategy
- The property types involved
Fees
- Arrangement fee: 1% to 2% of the loan amount
- Valuation: £500 to £1,500 per property
- Legal fees: £1,500 to £3,000
- Exit fee: 0% to 1% (not all lenders charge this)
Tax Implications
If you own two commercial properties simultaneously (even temporarily), consider the **Stamp Duty Land Tax** implications. The additional property surcharge of 5% (from October 2024) may apply if the properties are mixed-use with residential elements. Take professional tax advice for your specific situation.
Insurance
You will need buildings insurance on both properties while you own them simultaneously. Ensure your existing policy remains valid and arrange cover for the new property.
Choosing the Right Lender
Not all bridging lenders are equally suited to chain break scenarios. The ideal lender will:
- Accept second charges: Not all bridging lenders will lend behind an existing mortgage
- Move quickly: Chain breaks are time-sensitive by definition
- Offer flexible terms: You may not know exactly when your sale will complete
- Be comfortable with the property types involved: Commercial property requires specialist lenders
Working with a broker who understands chain break funding is invaluable. We regularly arrange chain break bridges and know exactly which lenders can deliver. [Speak to us today](/contact).
Alternatives to Bridging for Chain Breaks
Before committing to bridging finance, consider whether any alternatives could work:
Negotiate a Delayed Completion
Ask the seller of the property you are purchasing to extend the completion date. If they are not under pressure, they may agree — particularly if you offer a small financial incentive.
Request an Extension From Your Buyer
If your buyer's issue is temporary (e.g., their mortgage offer is delayed), negotiate an extension to the completion date on your sale.
Use Existing Cash Reserves
If you have sufficient cash to complete without bridging, this avoids the cost entirely. However, tying up large amounts of cash may not be the best use of your capital.
Sell at a Reduced Price
Reducing your asking price to attract a quick buyer may cost less than bridging finance. However, this only works if a reduced price sale can complete within your required timeframe.
In most chain break situations, bridging finance is the most reliable solution because it gives you certainty and control.
How to Apply for a Chain Break Bridge
The application process is the same as any [commercial bridging loan](/knowledge-hub/how-to-apply-commercial-bridging-loan), with particular emphasis on:
- Your exit strategy: Evidence that your existing property will sell (comparable sales, agent appraisals, marketing plan)
- Equity position: Clear documentation of your existing mortgage, property value, and available equity
- Timeline: How long you expect to need the bridge
- Both properties: Full details of both the property you are buying and the one you are selling
Frequently Asked Questions
Can I get a bridging loan if I have not yet sold my existing property?
Yes. This is the primary purpose of a chain break bridge. The lender takes security against your existing property (or the new one) and your exit strategy is the eventual sale. You do not need a buyer in place, though having one strengthens your application.
How quickly can chain break bridging be arranged?
Most chain break bridges complete in 7 to 14 working days. If your legal work is already underway and you have documents ready, completion can be faster. In urgent cases where exchange has already happened, some lenders can complete in 3 to 5 days.
Will bridging affect my ability to get a commercial mortgage later?
No. A bridging loan that is taken and repaid cleanly has no negative impact on future mortgage applications. Lenders understand that bridging is a legitimate short-term financing tool.
Can the bridge cover my SDLT and legal fees as well?
Some lenders will advance funds to cover transaction costs in addition to the property purchase price, provided the total does not exceed their maximum LTV. Discuss this with your broker when structuring the application.
What if my existing property takes longer to sell than expected?
Most bridging lenders will consider extending the loan term, usually for an additional fee and potentially a higher interest rate. It is important to factor in contingency time when choosing your initial loan term. Taking a 12-month bridge when you expect to sell in 6 months gives you a comfortable buffer.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*