Permitted development finance
Funding for office-to-residential and other permitted development conversions.
What permitted development finance is
Permitted development finance funds conversion schemes that use permitted development rights rather than a full planning consent, most commonly office-to-residential conversions under the relevant prior-approval route. Because the change of use is established through prior approval rather than a full application, the planning risk profile differs from a ground-up scheme, and lenders underwrite accordingly.
We arrange facilities that fund the purchase of the existing building and the conversion works, sized against the value of the finished, converted scheme. As with other development finance, the loan releases in stages and interest is usually rolled up. The key questions are the certainty of the prior approval, the deliverability of the conversion and the strength of the end values.
- Funds purchase and conversion works
- For office-to-residential and similar PD routes
- Sized on the converted value
- Staged drawdowns with rolled-up interest
Indicative terms
- Loan size£500k to £30m+
- Loan to costUp to around 70%
- Loan to GDVUp to 60 to 65%
- Term12 to 24 months
- Key testPrior approval certainty and end values
Indicative only. Terms vary by lender, scheme and borrower and are not an offer of finance.
Who it suits
- Developers converting offices to residential
- Investors repurposing redundant commercial buildings
- Schemes using permitted development rights
Discuss permitted development finance
A view on fundability within one working day.
How a permitted development conversion is funded
Confirm the prior approval
We establish the certainty of the permitted development right and prior approval before sizing the works tranche.
Fund the acquisition
The facility funds the purchase of the existing building, with leverage reflecting the converted-value plan.
Staged conversion drawdowns
Conversion works are funded in stages against surveyor certificates, exactly as with ground-up development.
Exit on the converted value
On completion the scheme sells or refinances at the converted value, repaying the loan and rolled-up interest.
Who is eligible and what lenders need
Permitted development finance suits developers and investors repurposing redundant commercial buildings, most often offices, into residential or other permitted uses. Lenders need confidence in the prior approval, a deliverable conversion specification, and end values supported by the local residential market. Some will fund the acquisition ahead of prior approval at lower leverage, with the conversion tranche released once approval is confirmed.
How much you can borrow on a conversion
Permitted development facilities fund up to around 70 percent of total cost, capped at 60 to 65 percent of the gross development value of the finished, converted scheme. Where the acquisition is funded before prior approval is in place, day-one leverage is lower, rising once approval is confirmed.
Rates, fees and the planning premium
Pricing sits in the development-finance range and reflects the planning certainty: a confirmed prior approval prices keenly, while funding ahead of approval carries a premium for the additional risk. Interest is usually rolled up, with an arrangement fee in the 1 to 2 percent range.
Permitted development versus full planning development finance
A full planning scheme carries application risk and a longer pre-build timeline; permitted development establishes the change of use through prior approval, which can be quicker and cheaper to fund. For a redundant office, we model an office-to-residential conversion against a full redevelopment and arrange whichever the numbers favour.
Permitted development finance: common questions
Can I fund a conversion before prior approval is granted?
Some lenders will fund the acquisition ahead of prior approval at lower leverage, with the conversion tranche released once approval is confirmed. Most prefer prior approval to be in place or close to certain before funding the works.
How is a PD conversion valued for lending?
On the gross development value of the finished, converted scheme, with the facility capped against both that value and total cost. End values and the local residential market drive the appraisal.
What can permitted development finance fund?
It funds the purchase of the existing building and the conversion works for schemes using permitted development rights, most commonly office-to-residential, and other prior-approval change-of-use routes.
Is permitted development finance cheaper than full development finance?
Pricing is similar and depends on planning certainty. A confirmed prior approval prices keenly; funding ahead of approval carries a premium. The saving is usually in time and deliverability rather than rate.
Discuss permitted development finance
Send us your scheme and we will come back with a view on fundability and likely terms within one working day.