by David Khan | Dec 16, 2025 | Advice
Roof space developments, particularly the conversion of existing buildings to create new apartments, are often presented as efficient development opportunities. Whilst this may indeed be correct, from a lender’s standpoint, such schemes often require additional scrutiny. Experience shows that roof space developments frequently carry a risk profile materially different from standard residential construction, and these risks must be fully understood and mitigated at the outset.
In this article, we outline the principal risk areas lenders should consider when underwriting roof space developments and explain why a more conservative approach is required more often than not.
Structural Risk and Suitability of Existing Buildings
A primary concern in any roof space development is structural risk. Many existing buildings were not designed to accommodate additional floors or significant alterations to roof structures. Initial feasibility assessments can underestimate the extent of strengthening required to foundations, load-bearing walls and the existing frame.
For lenders, reliance on early-stage assumptions without intrusive surveys introduces material downside risk, as structural remediation can rapidly escalate costs and extend programme durations. Therefore, structural surveys are key early on to establish suitability.
Construction Complexity and Access Constraints in Occupied Buildings
Construction complexity and access constraints also warrant close attention. Roof space developments are often undertaken above occupied buildings, which brings multiple challenges and risks such as:
- Restricted working hours
- Limited crane and site access
- Temporary weatherproofing requirements
- Maintaining services to existing occupants
Programme Delays and Operational Risk
Delays arising from tenant complaints or health and safety incidents can directly impact interest carry and loan repayment profiles.
Existing leases sometimes prohibit development above them and so it vitally important this legal minefield is dealt with otherwise the units may be unsaleable or considerable compensation may need to be paid to rectify this
Planning and Building Regulation Challenges for Roof Extensions
From a planning and regulatory perspective, roof extensions are rarely straightforward. Planning authorities tend to scrutinise roof additions closely, particularly in dense urban environments. Planning authorities often scrutinise roof developments due to concerns around:
- Visual impact
- Loss of daylight
- Overlooking and privacy
These complications often lead to design revisions and conditional consents. In parallel, compliance with building regulations – most notably fire safety, acoustic separation, and means of escape – can be challenging when retrofitted into older structures. Lenders should be particularly cautious where cost allowances for regulatory compliance appear optimistic or lightly evidenced.
Legal and Title Risks
Legal and title risks are another common area of concern. The ownership of roof space is not always clear, particularly within leasehold arrangements. Rights of light, airspace constraints and third-party consents can materially limit development potential. Protracted negotiations with freeholders or leaseholders can delay start on site or introduce unforeseen costs, undermining projected returns and exit timelines.
Purely acquiring the roof space without the freehold of the building it sits on can lead to major headaches particularly if access is required and scaffolding needed
Cost Certainty and Latent Defects
From a credit perspective, cost certainty is often weaker, than in conventional schemes. Roof space developments typically exhibit higher build costs per square foot due to complexity and contingency requirements.
The risk of latent defects – such as asbestos, inadequate existing services, or poor historic construction – should not be underestimated.
Appraisals should be considered and what is normal for a standard development will unlikely not be relevant in a roof space scheme
Importance of Sponsor and Contractor Experience
In addition, the experience of the sponsor and/or their contractor is very important.
Roof space developments are highly specialist schemes, and a proven track record in delivering similar projects is essential to mitigate execution risk. Lenders should place significant weight on demonstrable experience rather than general development credentials.
Exit Risk and Marketability
Finally, exit risk must be considered carefully. Apartments formed within roof spaces can suffer from compromised layouts, restricted ceiling heights or limited natural light if design quality is poor. These factors can adversely affect sales values particularly in more competitive markets.
Conclusion – Why Roof Space Developments Require Conservative Underwriting
In conclusion, while roof space developments can be viable and attractive in the right circumstances, they demand a more conservative approach. Robust due diligence, realistic cost assumptions and experienced sponsors are essential. For us as lenders, disciplined underwriting remains the key safeguard against the inherent complexities of building upwards rather than outwards.
– Perry Kurash, Director and Head of New Business
Speak to a Specialist Development Finance Lender
If you are considering a roof space development, or another form of commercial or residential development, get in touch with our team at BLG Development Finance. Our team understands the unique risks involved in all project types and structures complimentary funds accordingly. Start discussions around getting your project off the ground now with a simple email or phone call.
by David Khan | Jul 21, 2025 | Latest News
A significant regulatory shift is on the horizon for property developers, with the Building Safety Levy set to come into effect on 01 October 2026. Introduced as part of the wider Building Safety Act 2022, the levy is designed to ensure that developers, not leaseholders or taxpayers, contribute financially toward the remediation of unsafe residential buildings. This article takes a deep look into the core components of the levy, including what it is, who it impacts, how it is calculated and the practical implications for development timelines and funding strategies. With final regulations still in draft form but key deadlines looming, it’s essential that developers understand this upcoming change and its potential cost implications.
What is the Building Safety Levy?
The Building Safety Levy is a Government-imposed charge on qualifying residential developments. Its purpose is to fund the remediation of life-critical safety defects in existing buildings where no voluntary agreement has been reached with developers. This includes many buildings impacted by historic cladding and fire safety issues post-Grenfell.
Although the policy was legislated in the Building Safety Act 2022, the practical rollout is now progressing via secondary legislation, with implementation set for October 2026. The core principle is straightforward: where developers profit from residential development, they should also contribute to addressing the safety failings of the past.
When was it first discussed and why?
The levy was first introduced by the Government in February 2021, during a period of intense public scrutiny over the cost of fire safety remediation. Leaseholders were being forced to cover enormous bills for defects they did not cause, leading to political pressure and growing media attention.
In response, the Government committed to ensuring developers, not leaseholders or the taxpayer, pay for necessary works to make buildings safe. The levy is a formal mechanism to achieve this for buildings that do not fall under existing developer remediation pledges. The policy is expected to raise between £3 billion and £3.4 billion over the next decade to contribute towards fixing safety issues in medium and high-rise buildings across the country.
Which Developments Will Be Affected?
The levy will apply to major residential developments, including both new builds and conversions. Specifically, it targets developments that meet one of the following thresholds:
- Schemes creating 10 or more residential units, or
- PBSA developments delivering 30 or more bedspaces
This applies to a broad range of project types including:
- New build residential schemes
- Conversions of existing buildings into residential use (e.g. office-to-residential)
- Extensions that increase the amount of residential floorspace
What is defined as ‘residential floorspace’?
The levy is based on the gross internal area (GIA) of residential floorspace. This includes:
- Private homes and apartments
- PBSA such as student halls of residence
- Shared amenity areas for residents such as lounges, gyms, kitchens and reception spaces
It is important to note that the levy applies regardless of building height or whether the building is considered ‘higher risk’ under other provisions of the Building Safety Act.
Examples of when the Building Safety Levy applies
| Example Development |
Levy Applies? |
| New build scheme of 11 private flats |
Yes |
| Office-to-residential conversion (11 flats) |
Yes |
| PBSA development with 30 beds |
Yes |
| 9 unit residential scheme |
No |
| Care home conversion |
No |
| Hotel development |
No |
Building Safety Levy exemptions
Several categories of development are exempt from the levy. These include schemes designed to meet specific social or health-related needs, or where the building is not used as permanent residential accommodation. Exemptions include:
- Social housing
- Supported housing
- Exempt accommodation such as: care homes, nursing homes, hotels and temporary supported accommodation for the homeless
The Government has signalled that it does not intend to widen the scope of these exemptions, so developers should not assume that additional categories will be added at a later stage.
When is the Levy Paid and How is it Calculated?
Trigger point: Building control application date
The point at which a development becomes liable for the levy is the date the Building Control application is submitted by the developer. This means that even if construction does not begin until after the deadline, a development can still avoid the levy if the Building Control application is submitted before 1 October 2026.
| Building Control Application Date |
Levy Applies? |
| Before 01 October 2026 |
No |
| On/After 01 October 2026 |
Yes |
When is payment due?
The levy is payable on the earlier of:
- The date a completion notice is issued by Building Control, or
- The date of first occupation of any part of the development
This approach is designed to ensure payment is received before a scheme becomes revenue-generating or occupied.
How is the Levy Amount Calculated?
The levy is calculated based on the gross internal area (GIA) of residential floorspace and is subject to a variable rate determined by the local authority area.
Local authorities will be grouped into charging bands based on average house prices, meaning developers in high-value areas such as London and the South East will pay more per square metre than those in lower-value regions.
Indicative Rate Range (Not yet finalised):
| Location Type |
Estimated Levy Rate (per m²) |
| High-value areas (London, SE) |
£30–£50 per m² |
| Mid-value areas |
£10–£30 per m² |
| Low-value areas |
£0–£10 per m² |
Developments on brownfield land are expected to receive a 50% discount on the applicable rate, though the exact terms of this discount are still under review.
What is Still to be Confirmed?
While the core framework is largely agreed upon, several details remain under consultation and will be finalised through secondary legislation.
| Area |
Status |
| Exact levy rates (£/m²) |
TBC – Government has outlined banding by house price zones but rates are not finalised. |
| Local authority charging zones |
TBC – The exact banding per council is under review. |
| Brownfield discount terms |
Proposed at 50% but still draft. |
| Payment mechanisms & enforcement rules |
Draft guidance exists but final process maps are yet to be locked in. |
| Transitional relief or exceptions |
Government has not ruled out transitional measures for schemes partway through the pipeline, but no formal details yet. |
How likely are further changes?
The fundamental policy of the levy is unlikely to change. In fact, the Government has made it clear that:
- Developers, not leaseholders, will be responsible for remediation costs
- The charge will be based on residential floorspace, not building height or fire risk
- Major residential and PBSA developments are the intended targets
However, some refinements and clarifications are likely in the months ahead:
| What might change? |
Likelihood |
| Exact per m² rates |
Highly likely to adjust – based on further impact analysis. |
| Banding by local authority |
Possible tweaks depending on regional feedback. |
| Payment mechanics & process maps |
Likely refinements to simplify implementation. |
| Transitional provisions |
Unknown – developers are lobbying hard for cut-off clarity. |
| Exemptions scope |
Unlikely to expand significantly – Government will resist widening exemptions. |
Key dates in the Building Safety Levy implementation
| Milestone |
Status |
| Draft Regulations Published |
July 2025 |
| Implementation Date (Levy comes into force) |
01 October 2026 |
| Final Rates & Regulations |
Expected late 2025/early 2026 |
Conclusion – What Developers Should Do Now
The introduction of the Building Safety Levy marks a turning point for residential development in England. With the levy tied directly to the Building Control application date, developers have a clear opportunity to avoid these new charges by submitting their applications before 1 October 2026.
For developments that cannot be fast-tracked, it will be essential to factor the levy into project appraisals, funding strategies and land offers. Understanding your scheme’s exposure now could result in substantial cost savings and help secure funding on more favourable terms.
At BLG, we specialise in development finance that is responsive to market changes and regulatory shifts. If you’re planning a residential or PBSA scheme, get in touch with our team to explore tailored funding solutions that support your timeline and strategy.
by David Khan | Jun 30, 2025 | Latest News
What are the most Terrifying Words in the English Language? “I’m from the Government and I’m here to Help!!!”
It’s an old joke but it hasn’t lost its humour through time – Ronald Reagan I recall from the early 1980’s.
It came to my mind when I heard that the Government was to get into the SME housebuilder lending business by making £100million SME Accelerator Loans and up to £2.5bn of other low interest loans.
Now I applaud the focus and efforts to boost homebuilding. 1.5m new homes by the end of the Parliament is one enormous challenge but shoot for the stars and you might hit the moon. The UK needs an injection of that “moon shot” spirit and let the nay-sayers be dammed!
But equally let’s not fight the last war – senior debt to homebuilders is not in short supply. There were issues after the global financial crash but that as 12-14 years ago. And some further issues around covid but there is a raft of senior lenders, challenger banks and thriving non-bank alternative lender sector. There are many issues for homebuilders but senior debt isnt one of them.
In May 2025, I celebrated (if that is the right word!) 35 years working in the Homebuilder Finance sector. If there is one issue that has hampered housing delivery in that time, its Planning, it has been Planning for years, frankly its always been Planning!!!! Now the Government is seeking to improve the planning process but it needs to move harder, faster and focus its scarce financial resources in the planning process.
Generally speaking, the Public Sector is not good at intervening in developed markets, there is no need. The UK financial sector is innovative, resourced and highly developed – it doesn’t need intervention – it needs Government to remove barriers to innovation not to try and innovate itself.
– Stuart Parfitt, Managing Director of BLG
by David Khan | May 23, 2025 | Advice
When it comes to property development, securing the right finance is just as important as finding the right site. Whether you’re building from scratch on unowned land, converting existing properties or managing a mixed-use scheme, having the appropriate funding structure in place can be the difference between success and a stalled project.
In this article, we will explore some of the most suitable finance options for property developers in the UK, looking at when and why they might be useful.
Development Finance
A staple option for new builds and major projects, development finance offers short-term funding typically used to cover land purchase and construction costs. Funds are released in stages aligned to construction milestones – a process known as ‘drawdown’ – which ensures lenders manage risk and developers only draw what they need.
If you’re exploring how to finance a property development project, this is often the go-to solution for both residential and commercial builds. Development finance is flexible and fast, making it ideal for phased construction projects with a clearly defined exit strategy, such as unit sales or refinancing onto a long-term facility.
Bridging Finance
Bridging loans are short-term loans designed to ‘bridge the gap’ between an immediate need and a more permanent form of financing. They’re popular among developers needing to move quickly – whether to secure a site at auction or cover cash flow while waiting for planning consent.
If you’re wondering how to get finance for property development that requires immediate action, bridging finance is one of the most efficient tools. It helps developers capitalise on time-sensitive opportunities where traditional funding routes would take too long to arrange.
Mezzanine Finance
Mezzanine finance is a hybrid loan option that sits between senior debt (primary funding) and equity. It’s used to top up funding where developers want to reduce the amount of their own capital in a project. While interest rates are higher, it allows for greater leverage without diluting ownership.
For developers aiming to raise finance for property development on a larger scale, mezzanine finance can provide an additional layer of capital to help bridge funding gaps. It’s especially useful in high-margin projects where retaining equity is as important as funding the build.
Stretch Senior Loans
Stretch senior loans offer higher leverage than traditional senior debt by incorporating some characteristics of mezzanine finance. This option allows experienced developers to access more funding under a single facility, simplifying the capital stack and potentially reducing the overall cost of finance.
This can be an ideal route for developers considering how to finance a small property development with limited equity. The convenience of a single lender relationship and the potential for increased borrowing capacity makes it attractive for those scaling up their operations.
Joint Venture (JV) Funding
Joint ventures are where a financial backer teams up with a developer to fund a project. The investor provides the capital, while the developer contributes expertise and management. Profits are split according to the agreement, and often no loan is involved.
If you’re exploring how to raise finance for property development but have limited cash or assets, a JV partnership may be the answer. It allows you to undertake larger or more ambitious projects than might otherwise be possible, provided you can deliver the development expertise.
Senior Debt from High Street Banks
Traditional bank lending remains a route for some, particularly where the project carries lower risk and fits within tighter lending criteria. However, the process can be slower and less flexible than specialist lenders.
Developers exploring how to finance property development through conventional channels may find that banks offer competitive rates but limited scope for complex or speculative projects. These loans are best suited to experienced borrowers with strong financial profiles and pre-let agreements in place.
Equity Investment
Equity investment involves raising capital in exchange for a share of the project or company. It’s not a loan, so there’s no requirement to repay capital or interest. Instead, investors share in the project’s profits.
This method suits developers working out how to finance a property development project with high potential returns. While you sacrifice a portion of future profits, you reduce financial pressure and avoid the burden of loan repayments, which can be critical in early-stage developments.
Personal or Private Funding
Some developers use their own capital or borrow from private individuals or family offices. While this provides flexibility and fewer hoops to jump through, it often lacks the scale and structure of formal development finance.
For those asking how to finance a small property development, personal funding may be the most straightforward option. It works well for first-time developers and small-scale conversions or refurbishments where the funding requirement is relatively modest.
Peer-to-Peer (P2P) Lending
P2P platforms match developers with private investors. While still relatively niche, they are becoming more common as technology makes alternative lending easier. However, costs can vary and due diligence is essential.
If you’re new to development and seeking how to get finance for property development with limited access to traditional routes, P2P lending can provide an alternative. Many platforms are tailored for smaller projects, giving early-stage developers a practical starting point.
Final Thoughts
There is no universal ‘best’ finance option – it depends entirely on your project, experience and appetite for risk. What is important is matching the funding solution to the project lifecycle, ensuring it’s structured to support your cash flow, protect your equity and deliver the best return. At BLG Development Finance, we understand that successful developments need more than money – they need the right funding partner. Speak to us about how our specialist finance solutions could help support your next project.
by David Khan | May 23, 2025 | Advice, Featured
Development finance can often feel like a bit of a black box. For seasoned developers, it might be familiar territory, but for those newer to the industry or stepping into larger projects, understanding how development finance loans work is crucial. In this article, we’ll explore how these loans function, who they’re for and what you need to consider when exploring development finance as a funding option.
What is Development Finance?
Development finance is a form of short-term lending designed specifically for property development projects. These loans provide developers and their partners with the capital required to purchase land and fund construction costs. Once the development is complete and sold or refinanced, the loan is then repaid, leaving the developer with the profit margin from the project after accounting for all development costs, interest, and fees. A key point on the product is that interest is typically rolled up and paid out from sales at the end of the project
Unlike traditional mortgages or commercial loans, development finance is structured around the build schedule and is usually released in stages rather than as a lump sum. This staggered funding approach is referred to as ‘drawdown’, and aligns the financing with specific construction milestones, allowing lenders to manage risk.
Types of Development Finance Loans
Development finance is not a one-size-fits-all funding solution. There are actually several types of development finance loans available depending on the nature and scale of the project.
Commercial Development Loans
Commercial development finance loans are tailored for the construction or redevelopment of business premises such as office buildings, retail spaces and industrial units. They focus on commercial viability, tenant demand and income yield.
Residential Development Loans
Aimed at developers looking to build new homes, flats and other residential-led mixed-used schemes, residential development finance is an extremely popular financing option in the UK. To determine viability, lenders will typically assess factors such as end-user demand, local market conditions and potential sales velocity.
Ground-Up Development Loans
As the name would suggest, this funding option is suitable for projects starting from scratch, such as building residential units on vacant and unowned land. Lenders will assess planning permission, construction costings, timelines and the project end value before releasing funds to developers enquiring on this type of project.
Refurbishment Loans
Refurbishment loans finance property upgrades, from minor renovations (known as light refurbishments) to major structural changes (known as heavy refurbishments). This funding solution is ideal for developers converting single homes into apartments or transforming outdated commercial spaces.
Bridging Loans
While not exclusively development finance, bridging loans can be used as a short-term funding option when timing is critical such as securing a property at auction, preventing a sale falling through, or taking advantage of time-sensitive opportunities before traditional financing can be arranged.
Stretch Senior Loans
Stretch senior development finance loans combine elements of senior debt and mezzanine finance to increase the total loan amount. They are ideal for experienced developers needing higher leverage but wishing to avoid layering multiple funding options.
Mezzanine Finance
Mezzanine finance fills the gap between primary loans and developer funds. It’s secondary debt, repaid after the main lender, with higher interest reflecting increased risk. This flexible funding enables developers to tackle larger projects without sacrificing more equity or cash reserves.
How Do You Obtain Development Finance?
The process of securing development finance is more bespoke and involved than applying for a high street mortgage. With higher risks and larger sums at stake, lenders conduct thorough due diligence and assess each project’s unique characteristics.
- Project proposal – You will need a detailed development plan including drawings, planning permissions and costings.
- Valuation and due diligence – The lender will commission independent valuations and assess the gross development value (GDV) of the project.
- Loan structuring – Funds are then released in tranches, aligned with each stage of the build.
- Legal work and drawdown – Once everything is agreed between lender and developer, funds are to be released as each phase is completed and certified.
Criteria for Loan Approval
Each lender is unique when it comes to criteria, and will assess applications based on their risk appetite, specialisations and internal policies. Understanding these variations in lending can be crucial when selecting the right financial partner for your project, but in general considerations include:
- Developer experience – Previous track record and ability to manage a build project
- Planning permission – Full planning consent is usually required before funds can be released
- Loan-to-GDV ratio – Most lenders will lend up to a certain percentage of the projected GDV, typically 65 – 70%.
- Loan-to-Cost ratio – This assesses how much of the project’s cost the loan will cover – usually up to 85%
Risk Assessment and Management
Lenders will conduct detailed risk assessments to ensure the viability of both the project and the developer’s ability to complete it successfully. Factors include market demand, the reliability of the build team, project timelines and potential exit strategies. Developers must also prepare for unexpected delays or cost overruns.
To mitigate risk, lenders often require step-in rights (to take over the project if things go wrong), personal guarantees, and independent monitoring surveyor (IMS) reports throughout the construction process to verify progress and quality before releasing staged payments.
Development Finance vs Traditional Lending
Unlike traditional bank lending, development finance is designed to be flexible and project-specific. High street lenders typically shy away from speculative builds, whereas development lenders understand the nuances and risks.
Traditional loans are also more rigid, often requiring full security upfront, fixed repayments, and are rarely suitable for phased developments. Development finance is typically more expensive, but it offers much-needed flexibility and speed.
When is Development Finance Suitable?
Development finance is suitable in a wide range of instances compared to traditional lending, with the most common scenarios being:
- Developers have secured a site with or without planning permission
- The project requires a substantial upfront investment in stages
- There is a clear exit strategy (sale or refinance)
It is less suitable if:
- Developers lack experience or planning permission
- Developers have insufficient equity to contribute to the project
- The development timeframe is long and uncertain
Importance of an Exit Strategy When Applying for Development Finance
Lenders will want a clear, well-documented plan for how the loan will be repaid, backed by credible market analysis and contingency options. This typically falls into two primary categories:
- Sale of Units – Common in residential developments where individual properties are marketed and sold to homebuyers, generating capital to repay the loan
- Refinancing – Often used for rental portfolios or longer-term investment properties, transitioning from development finance to a commercial mortgage once the project achieves stabilised occupancy
The exit strategy must be realistic and supported by robust market evidence, with particular attention to comparable sales, absorption rates and the projected timeline to full repayment.
Final Thoughts
Development finance loans are essential tools for property developers aiming to deliver housing, commercial or mixed-use schemes. While the process can be complex, understanding how it works – from loan types to approval criteria and risk management – helps ensure successful outcomes.
If you’re considering development finance for your next project, speak with a specialist lender like BLG Development Finance. Having the right partner can make the difference between a project that stalls and one that succeeds.
