Some Paved - Road Surfaces

Definition: Some Paved - Road Surfaces

In the context of commercial mortgages and real estate appraisals, the term "Some Paved" refers to a property access classification where the route leading to or within a commercial site consists of a hybrid of materials. This typically indicates that while a portion of the access road is surfaced with permanent materials like asphalt or concrete, other significant portions remain unpaved, consisting of gravel, crushed stone, or compacted dirt.

This classification is most commonly encountered in rural industrial zones, agricultural commercial properties, large-scale storage facilities, or properties located on the outskirts of developing urban areas. For a commercial lender, this designation provides a specific profile regarding the property’s accessibility and long-term maintenance requirements.

Detailed Description and Impact on Commercial Mortgages

When a property is listed as having "Some Paved" road surfaces, it triggers several specific considerations during the underwriting and appraisal process of a commercial mortgage:

• Valuation and Appraisal: Appraisers must adjust the property value based on the quality of access. Fully paved access is generally considered the gold standard for commercial utility. A "Some Paved" status may result in a lower valuation compared to identical properties with full paving, as it can limit the types of tenants or businesses that can operate effectively on the site.
• Logistics and Accessibility: Lenders evaluate the "Some Paved" status against the intended use of the property. For example, a distribution center requiring heavy semi-truck traffic may face challenges with unpaved sections, such as rutting, mud during wet seasons, or dust during dry seasons, which can impede operations and increase wear on vehicles.
• Maintenance Liability: Commercial mortgages often require a clear understanding of who is responsible for road upkeep. Unpaved sections require more frequent grading and material replenishment than paved surfaces. Lenders will look for Road Maintenance Agreements (RMAs) or easements that define the borrower’s financial responsibility for maintaining the non-paved portions.
• Drainage and Environmental Risk: Unpaved surfaces are more susceptible to erosion and runoff issues. During the Phase I Environmental Site Assessment or a physical property inspection, lenders may look for signs of poor drainage that could lead to property damage or restricted access during inclement weather.
• Lender Risk Profile: Some traditional banks may view "Some Paved" surfaces as an increased risk, potentially leading to slightly higher interest rates or lower Loan-to-Value (LTV) ratios. However, specialized agricultural or rural lenders may be more accustomed to this classification and offer standard terms.

Considerations for Borrowers

Borrowers seeking a commercial mortgage for a property with "Some Paved" access should be prepared to provide the following to their lender:

• Site Maps: Clearly highlighting which sections of the access road are paved and which are gravel or dirt.
• Easement Documentation: Proof of legal right-of-way over any unpaved sections that are not owned by the borrower.
• Cost Estimates: If the lender requires the road to be fully paved as a condition of the loan, the borrower may need to provide professional bids for the completion of the paving work.