Permitted development and full planning
Many conversions in England use permitted development rights rather than a full planning application. Class MA allows many buildings in commercial, business and service use (Class E) to change to residential use through prior approval, subject to conditions and the local authority's assessment of matters such as transport, flooding, noise and natural light.
Prior approval is not automatic, and some areas have restricted these rights. Lenders will want to see the approval itself, the approved drawings and any conditions. Other schemes, including those with external alterations or extensions, need full planning permission.
Whichever route applies, the planning position shapes the lender's view of risk. A building bought with consent in place is a very different case from one where approval is still being sought, which may need land or bridging finance first and conversion funding later.
Bridging or development finance
Smaller conversions, and those where the structure stays largely as it is, are often funded with heavy refurbishment bridging. The lender advances part of the purchase price and releases the works funding in stages, with the facility sized against the value after completion.
Larger schemes, or those involving substantial structural work, extensions or new floors, may be better suited to development finance, with a monitoring surveyor and a formal drawdown process. Development lenders on our panel also fund conversions, and their structure is designed for longer build programmes.
The right choice depends on the scale of the works, the term needed and how much leverage you want. We look at both routes before approaching lenders, so you can compare like for like.
What lenders look at on conversions
Converted units are judged against residential buyers and mortgage lenders, not just against the building's current use. Lenders and valuers pay close attention to:
- Unit sizes, layouts and natural light, including the nationally described space standards where they apply
- Fire safety, sound insulation and building regulations sign-off
- Whether new-build warranties or a professional consultant's certificate will be provided, which affects the buyer's ability to get a mortgage
- Parking, refuse and access arrangements
- Comparable sales of converted and new-build flats nearby
A scheme that produces units mainstream mortgage lenders will accept supports both the valuation and the exit. We check these points early, as they affect which lenders will consider the case.
Planning the exit
The exit is usually a sale of the units or a refinance onto buy-to-let or portfolio finance. If units will be sold individually, a development exit loan can bridge the gap between completion and sales. If they will be held, check early that the refinance lender accepts the unit sizes and building type.
Allow time in the term for building control sign-off, warranty inspections and, where flats are created, new addresses and leases to be set up. Leasehold structures, service charges and management arrangements need to be in place before units can be sold or mortgaged, and buyers' solicitors will ask about them.
Indicative quotes from our panel are a starting point. Final terms depend on the valuation, the planning documents, the build team and each lender's checks.
