Development

“I have a site under offer and planning is not granted yet”

Land without planning consent is generally funded with a bridge at a low loan to value, not with a development facility. Once consent is granted, the site is refinanced onto a development loan that funds the build.

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 a site under offer or an option agreement
A planning application is submitted, or about to be
Development lenders have told you they cannot help until consent is in place
The vendor will not wait for a planning decision

The situation

Sites are usually sold on a timetable that does not respect the planning system. A vendor with a willing buyer rarely waits eight months for a committee date, and sites bought subject to planning trade at a premium precisely because the risk sits with the seller.

Buying unconditionally and taking the planning risk yourself is how most value is created in development — but it needs funding that will lend against land in its current state.

Why the usual lenders say no

Land without consent has no income and a highly uncertain value, so mainstream lenders will not touch it.
Development lenders fund construction against a consented scheme; without consent there is nothing to draw against.
Valuation of unconsented land is difficult and conservative.

What usually works

A land bridge at conservative leverage

Expect a materially lower loan to value than on a built property. The lender is pricing planning risk as well as property risk.

Evidencing the planning case

A positive pre-application response, a planning consultant’s opinion, or nearby approvals for similar schemes all reduce the perceived risk and improve terms.

Refinancing onto development finance on consent

Once consent is granted, the site’s value usually rises sharply. The development facility refinances the bridge and funds the build, often releasing some of the uplift.

Roughly how the numbers look

Illustrative figures for this situation
Loan to value on unconsented land	Typically well below what a built property attracts
Loan to value on consented land	Often 60% to 70% of site value
Term on a land bridge	Set against the realistic planning timetable, with headroom
Exit	Development facility on grant of consent, or sale of the consented site

Planning timescales are outside everyone’s control, so the term needs genuine headroom. A refusal and an appeal can add many months. 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

The planning application, or the pre-application advice received
A planning consultant’s view on prospects and timescale
Evidence of comparable consents nearby
Your development appraisal on the consented scheme
Proof of your cash contribution
Your exit: development lender appetite, or evidence the consented site would sell

Things that catch people out

Do not set the term against the best-case planning timetable. Assume it takes longer.
If consent is refused, the exit becomes a sale of unconsented land, usually at a loss. Be sure you can live with that.
Check for article 4 directions and any local policy that could scupper the scheme.

Questions we get asked

Can I get development finance before planning is granted?

Generally no. Development lenders fund construction against a consented scheme. Before consent, the route is a bridge secured on the land at a conservative loan to value.

How much can I borrow against land without planning?

Considerably less than against a built property, because the lender is pricing planning risk as well. The exact figure depends on the site, the planning prospects and the evidence supporting them.

What happens to my loan if planning is refused?

The facility still has to be repaid on its redemption date. That is why the exit needs to work even in the refusal case — usually a sale of the site, and usually at a lower figure.

The product that usually fits

Development finance

Every case is different. A specialist will confirm what actually fits yours.

Rather talk now?

020 4525 4876

9:00am – 5:30pm, Monday to Friday

Keep reading

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