01
Prior approval before drawdown
Most lenders will want the permitted development prior approval, or full consent, in place before funding the works. Buying ahead of that is usually a bridging case at lower leverage.
Development
“I want to convert a commercial building into flats”
Commercial to residential conversions are funded either with a refurbishment bridge for light work or a development facility where the scheme involves significant structural change and multiple units. The planning route — permitted development with prior approval, or full consent — largely determines which.
An illustrative situation, not a client case study. It describes the kind of enquiry this market sees. Any figures are examples, not a quotation, and no credit check or lender decision is involved in reading this.
Sound familiar?
- You have found a vacant commercial building with conversion potential
- You are relying on permitted development rights, or have applied for full planning
- The value as flats is materially higher than the value as commercial space
- Lenders have asked whether prior approval has been granted
The situation
Vacant commercial buildings are often cheap because the occupier market has moved on, while the residential market in the same street has not. Converting captures that difference, which is why this has been one of the most active parts of UK development for a decade.
The finance depends heavily on the planning route and the depth of the works. A straightforward office-to-flats conversion under permitted development is a very different proposition from a structural reconfiguration of a listed building.
Why the usual lenders say no
- Commercial mortgage lenders want income, and a building bought for conversion has none.
- Residential lenders cannot lend on a building that is not yet residential.
- The value is created by the change of use, which no term lender will fund speculatively.
What usually works
02
Matching the product to the works
Light conversions can sit on a refurbishment bridge. Multi-unit schemes with a build programme need staged drawdowns and a monitoring surveyor.
03
Evidencing the end values properly
Flat values in a converted commercial building are not always the same as flats in a purpose-built block nearby. Use genuinely comparable evidence.
04
A warranty from the outset
New dwellings created by conversion need a building warranty, and your buyers’ mortgage lenders will insist on it.
Roughly how the numbers look
| Day one advance | Typically up to around 70% of current value |
| Works funding | Released in arrears against inspected stages |
| Loan to gross development value | Usually capped around 65% to 70% |
| Term | Commonly 12 to 18 months |
| Exit | Sale of units, or refinance onto buy-to-let if retained |
Where units are retained and let, the exit is a portfolio buy-to-let refinance. That should be tested before the scheme starts, not after. These are examples to show the shape of a deal, not a quotation. Work out your own figures in the bridging calculator.
What we would need from you
- Prior approval or full planning consent for the change of use
- Existing and proposed floor plans
- A costed schedule of works and build programme
- Comparable evidence for the finished units, for sale or rent
- Confirmation of any article 4 direction affecting the property
- Your track record on similar conversions
Things that catch people out
- Article 4 directions remove permitted development rights in some areas. Check before you buy.
- Permitted development rules change periodically and vary by location and building type.
- Minimum space standards and natural light requirements have scuppered otherwise viable schemes.
Questions we get asked
Do I need planning permission to convert offices to flats?
Often it can be done through permitted development subject to prior approval, but the rules vary by location and building type, and an article 4 direction can remove those rights entirely. Confirm the position for the specific building before committing.
Is this a bridge or a development facility?
It depends on depth. A light conversion with modest works can sit on a refurbishment bridge. Significant structural change, multiple units and a real build programme belong on a development facility with staged drawdowns.
How are the finished flats valued?
On comparable evidence for similar flats in the area, adjusted for the nature of the building. The valuer will test your comparables, so choose them honestly — an optimistic gross development value simply shrinks the facility.
The product that usually fits
Development financeEvery case is different. A specialist will confirm what actually fits yours.
Keep reading
Related situations and guides
“I have a site under offer and planning is not granted yet”
The site is available now but the consent that makes it viable has not been granted.
Read the scenario“I want to buy a commercial unit but it is empty and lenders want a tenant”
The building is vacant, so a commercial mortgage lender has nothing to underwrite.
Read the scenarioBridging vs development finance: which do you need?
The real dividing line between a bridge and a development facility, how each is drawn down and priced, and which one your scheme needs.
Read the guideAll situations
Eighteen situations across bridging, development, commercial and buy-to-let.
Browse them allAmram Finance Ltd is a credit broker, not a lender. We do not lend our own money and we do not approve or issue loan offers.
Your property may be repossessed if you do not keep up repayments on a loan secured on it. Some forms of bridging finance and buy-to-let lending are not regulated by the Financial Conduct Authority.