Permitted development exit finance

What lenders test before the facility draws

Exit lenders are comfortable once a permitted development conversion has reached practical completion, because the construction risk that priced the development loan has been removed. The scheme will usually have been delivered under Permitted Development Rights, most often the Class MA prior approval granted by the Local Planning Authority under the General Permitted Development Order, and lenders want the prior approval decision with any conditions discharged. They then test the sign-off and warranty position: a completion certificate from Building Control confirming the works meet Building Regulations, a 10-year structural warranty from NHBC, LABC Warranty, Premier Guarantee, CRL or Checkmate, or a Professional Consultant's Certificate where no warranty was taken out, an Energy Performance Certificate for each flat, and on taller blocks an EWS1 form. They also confirm whether any Community Infrastructure Levy is settled and whether the freehold can be split into individual leasehold titles. Because the asset is finished and saleable, a first-time developer is fundable where the conversion is genuinely complete and the exit is sound. We assemble the prior approval, the sign-off, the warranties and the title plan before approaching lenders, so the case is presented at its strongest.

Sizing a finished-scheme bridge against GDV

Permitted development finance is sized against the gross development value of the finished units, the day-one value of the completed flats, indicatively up to 70 to 75 percent of GDV. Expressed as loan to value (LTV) or loan to gross development value (LTGDV), that is often more than the development loan being repaid, because the scheme is now valued on completion rather than on build cost, and the headroom can release surplus equity for the next project. Pricing sits below the development finance it replaces, because the build risk is gone, and is set per month or per year over a sales period that typically runs 12 to 18 months. Interest is usually retained or rolled up across the exit window, so the rising sales proceeds are not all consumed by debt service and the net day-one advance is the gross loan less any retained interest and fees. We model the loan against GDV, the equity it releases and the all-in cost over the expected sales period before approaching lenders. All bands are illustrative, vary by lender and scheme, are subject to principal sign-off, and are not an offer.

What the sales-period bridge costs

The point of moving onto permitted development finance is the saving: refinancing off a development loan priced for construction risk onto a finished-scheme bridge usually cuts the monthly cost materially, while removing the maturity pressure that forces a discounted block sale. Expect a lender arrangement fee, indicatively around 1 to 2 percent of the loan, a valuation of the finished units, legal costs for both sides, and sometimes an exit fee. A conversion can carry extra survey costs where a warranty was retrofitted by Professional Consultant's Certificate, or where an EWS1 form is required on the external wall system, and we factor those in early because they affect both the valuation and the buyers' ability to get mortgages. The largest cost lever is time, so a realistic sales programme and clean unit titles matter more than chasing the lowest headline rate. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim an exclusive panel or an exclusive tie to any lender. The figures are indicative and not an offer of finance.

Conversion sell-down debt versus a commercial mortgage

Most lenders treat a permitted development conversion as a mixed-use or commercial mortgage case, pricing it as a long-term hold rather than the post-completion exit event it actually is. That framing misses the moment that matters: the point at which building control sign-off, the structural warranty and the registered unit titles turn an unfinanceable building site into saleable, mortgageable flats. A development exit bridge is the right structure for that window, because it repays the development loan at practical completion and holds the converted block through the sales period, sized on gross development value rather than passing rent. Where the developer intends to keep the flats and let them, the route is often this finished-scheme bridge first, then a buy-to-let or investment term loan once the freehold is split and the tenancies are in place. A standard commercial mortgage is the wrong tool at completion, because it underwrites a stabilised income the freshly converted block does not yet have. We map the route so the scheme is on the right debt for what it is about to do, sell-down or hold.