Commitment Fee


Also found in: Dictionary, Financial.
Related to Commitment Fee: Management fee, Upfront Fee

Commitment Fee

Compensation paid to a lender by a borrower for the lender's promise to give a mortgage at some future time.

A commitment fee, frequently employed in real estate transactions, is an expense separate from interest charged on the loan to be secured by the mortgage. The controversy surrounding nonrefundable commitment fees arises when a borrower decides not to proceed with the loan and then demands return of the fee on the premise that the lender has performed no services to earn it. The courts have consistently rejected this contention and held that the lender is entitled to the commitment fee either as Liquidated Damages for breach of contract or as compensation for earmarking the funds for loan to the borrower.

References in periodicals archive ?
became liable for a commitment fee (and related legal fees).
Lim said the RM80.92 billion took into the account land acquisition costs (RM2.5 billion), working capital (RM50 million), other operating costs (RM500 million), interest (RM7.444 billion), Sukuk bond coupon (RM3.192 billion), commitment fee (RM238 million) and management fee (RM216 million).
In conjunction, RXi has issued shares of its common stock to LPC as a commitment fee. The agreement may be terminated at any time, at its sole discretion, without any additional cost or penalty.
Once an initial draw has been made under a tranche, the drawn amounts accrue interest at 14 and 12 percent per annum under the $50M Tranche and the $150M Tranche, respectively, and the undrawn amount under the tranches accrues a commitment fee of 8 percent per annum.
The Republic of Serbia paid out EUR 2.04 mln in respect of the commitment fee for the above arrangement under which no funds were disbursed and which expired on 28 March 2013.
The Lender charged a no commitment fee and the loan has a yield maintenance penalty in the case of prepayment.
The credit facility has a four year term, bears interest at LIBOR plus 140 basis points and carries a 20 basis point unused commitment fee (reduced to 15 basis points if more than USD 100m has been drawn).
Norse said that the loan will be collateralized by the assets of the US subsidiaries, bear interest at 12% per annum payable at maturity, have a maximum term of nine months and have a 6% commitment fee assessed on the unused portion of the DIP loan facility.
The commitment fee of GBP3bn is based on 1.1875 percent of the size of the rights issue, while the underwriting fee is 3.5625 percent, the report said.
Commitment Fee (CF) is a fee paid to a bank in exchange for the bank's agreement to grant a loan at a later date.
The Company has agreed to pay a US$20,000 commitment fee on maturity and, in addition, to issue to the lenders, as a bonus for making the Loan, warrants exercisable to purchase up to 3,000,000 shares of the Company for $0.05 each until the first anniversary of the date of the Loan advance, subject to earlier termination in the event of any loan extension or renewal, in accordance with the policies of the TSX Venture Exchange (the Exchange).
This facility has a 1% commitment fee, a 1% non-use fee and pays interest at a fixed rate of 8% on any drawn portion of the line.