Why planning permission matters for development finance
Planning permission is one of the most critical factors in a development finance application. Without planning — or with planning that has unresolved conditions — most lenders will not proceed. The reason is simple: planning determines what can be built, which directly determines the Gross Development Value and therefore the viability of the entire project.
Types of planning consent
UK planning consents come in several forms, each carrying different levels of certainty for lenders:
- Full planning permission — the gold standard for lenders. Specifies exactly what can be built.
- Outline planning permission — establishes the principle of development but not the details. Reserved matters must still be approved.
- Permitted development rights (PDR) — allows certain changes of use (e.g., office to residential) without full planning, subject to prior approval.
- Lawful development certificate — confirms that proposed development is lawful under existing planning rules.
Lenders strongly prefer full planning permission or permitted development with prior approval granted. Outline consent with reserved matters outstanding adds risk and may limit lender appetite or require conditions precedent before drawdown.
Pre-commencement conditions
Even with full planning permission, there are usually conditions that must be satisfied before work can begin. These are called pre-commencement conditions and might include:
- Submission of a construction management plan
- Archaeological investigation
- Contamination remediation strategy
- Drainage and flood risk assessment approval
- Materials samples approved by the local planning authority
Lenders assess whether pre-commencement conditions are dischargeable (i.e., can realistically be cleared before the build starts). If a condition requires expensive specialist reports or is subject to third-party approval with uncertain timelines, this creates risk that lenders will price in or decline.
CIL and S106 obligations
The Community Infrastructure Levy (CIL) and Section 106 agreements are financial obligations attached to planning permission. CIL is a fixed charge per square metre of new development. S106 obligations are negotiated contributions — affordable housing, public open space, highway improvements, education contributions.
Both affect the financial viability of a scheme and must be accurately reflected in the development appraisal. Lenders will check that CIL and S106 costs are included in the total project cost, not overlooked.
Implementability
A key concept lenders assess is whether the planning permission is implementable — meaning: can the developer actually start building under this consent? Planning permissions typically expire if not commenced within three years. If the consent is close to expiry, the lender may require a new application or an extension before proceeding.
What lenders look for in planning documentation
- Decision notice confirming planning is granted
- Full list of conditions with discharge status
- Approved drawings (site plan, floor plans, elevations)
- CIL liability notice and any exemption claims
- S106 agreement (if applicable)
- Confirmation that the consent is implementable and has not lapsed
Frequently asked questions
Can I get development finance without planning permission?
It is very rare. Some lenders will consider lending against a site with a strong planning application in progress, but this is niche and expensive. For most borrowers, securing planning before approaching lenders is the standard path.
Does permitted development make it easier to get funding?
PDR projects (such as office-to-residential conversions) can be simpler from a planning perspective, which some lenders like. However, PDR schemes have their own risks — space standards, natural light requirements, and the quality of the existing building all factor into the lender's assessment.