Harper James is a modern, full-service UK commercial law firm advising ambitious businesses on the laws of England and Wales, including banking and finance. In a development finance transaction, the legal structure must connect the lender’s security package to the project’s land, construction contracts, planning position and expected sales or rental income.
A senior lender will usually take a legal charge over the development property, supported by a debenture from the borrowing company. The package may also include personal or corporate guarantees, a share charge over the borrower, assignments of key contracts and insurance policies, and control over project bank accounts. The facility agreement sets the commercial terms, including the loan amount, interest, fees, loan-to-cost or loan-to-value limits, repayment date, permitted uses and events of default.
Priority needs early attention where there is mezzanine finance, investor funding or existing borrowing. An intercreditor agreement records which lender is paid first, how enforcement works and whether one lender can block or control action by another. Security over land must be registered at HM Land Registry, while company charges must generally be registered at Companies House within 21 days of creation.
A facility is rarely advanced in one payment. The borrower normally submits a utilisation request, followed by evidence that the relevant conditions have been met. These can include evidence of planning permission, building contracts, professional appointments, insurance, equity contributions, satisfactory title, valuation and a monitoring surveyor’s report. The lender may also require confirmation that previous funds were spent on approved project costs.
A practical drawdown schedule should identify each document, responsible person, approval deadline and funding consequence. Borrowers can use this development finance reference guide to explore related legal and commercial issues. The facility should also state how cost overruns are funded, what happens if the development programme slips, and whether interest is paid monthly or retained within the facility.
The borrower must keep the lender informed through regular reports, updated valuations, cost-to-complete statements and certificates from the monitoring surveyor. The legal documents should deal clearly with variations to the building contract, delays, insolvency of a contractor, changes to planning permission and defects. Lenders commonly require minimum insurance cover and restrictions on disposing of units or granting leases before agreed milestones.
Before signing, the developer should test the structure against the whole project lifecycle: acquisition, construction, practical completion, sales or letting and final repayment. The key question is not simply whether security exists, but whether it can be enforced and realised in the intended order if the project departs from its original plan.