Financing of Development Sites

Solicitors in Essex & London


There are a number of ways in which a development may be financed as well as the traditional financing structure from a high-street lender to an individual. This could include private individuals providing the capital through the creation of a joint venture, or through mezzanine finance. Our land development solicitors in Essex and London have assisted many clients in the legal implications of the financing of development sites.

Financing, or borrowing, is a key part of any development transaction. A development transaction will tend to progress in stages, such as from the initial acquisition, the submission of any planning applications, the building on site and the subsequent sale of the plots. There may also be other agreements which need to be put in place, some of which may require bonds. The developer may have also entered into planning obligations with the local council, which may require staged payments to be made. Therefore, financing is key in the development of property to ensure sufficient cash flow.

Given the nature of the development transaction and the varying financial requirements, it may sometimes be necessary for a development to be refinanced to release some additional cash to meet the costs involved. In such circumstances, a potential lender will want to ensure that the monies they agree to lend can be adequately protected to help ensure that the loan will be repaid when the plots are sold, for instance. For the developer, they will want to ensure that they can comply with the obligations set out in the loan including that the loan is adequately protected. The developer will want to ensure that any monies advanced to the developer can be repaid (particularly if there is a previous loan against the property) when the sales of the plots are realised. Considered a complex area of land development law, it is recommended that legal advice is always consulted when looking to refinance a development site.

As part of the financing process, many lenders may require debentures, personal guarantees, deeds of priority etc. Our team of expert land development lawyers are able to prepare, draft and register the necessary documentation to help protect your interests.

Mezzanine Finance Agreements

This is private lending which is secured by way of a charge registered against the relevant property. Mezzanine finance agreements are usually short-term financial arrangements which must be carefully drafted; legal assistance is thoroughly recommended.

These are often used by developers to secure private funding for a project before they are able to finance more cheaply with a major lending institution as their development progresses. Our solicitors have been involved in many such agreements, including cases where clients have been unable to obtain highstreet lending until title has been perfected, and instead use mezzanine financing to fund their project in the interim until they can enter into any necessary agreements to make the title “lender friendly”.

This form of lending tends to be used when the more commonplace funding routes are unavailable; therefore, the interest rates can be much higher.  We understand that developers will need efficient and fast legal advice on the remainder of the development process in order to be able to discharge the mezzanine loan as quickly as possible. 

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Find out more about our Land Development services

If you require further legal advice relating to either the financing or refinancing of a development site, please feel free to contact any of our land development solicitors directly. We operate out of five offices across Essex and London, or, if more convenient, we are happy to meet you onsite at your own premises.

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