Before you apply for finance for any refurbishment project, it’s important to gather as much information as possible and have all the necessary permissions in place so that you can negotiate the best possible deal.
Planning permission can be one of the biggest headaches in a property developer’s application process. When you are seeking bridging finance to acquire a property or land for future development, the lender may ask for pre-application advice from the council planning officer or even outline planning permission. When sourcing development finance, full detailed consent is a pre-requisite.
Permitted Development Rights
However, since 2015, the Town and Country Planning (General Permitted Development) Order has enabled some types of work to take place in England without the need for planning permission. Commonly known as Permitted Development Rights, the regulations allow some home extensions and changes of use such as the conversion of office blocks to apartments. The overall aim is to encourage the creation of much needed new housing.
Due to the faster planning permission process, the project timeline can be much shorter than when negotiating traditional planning consent. This means that not only will the developer save on professional fees and costs, but can execute more deals, generating more profit, rather than being bogged down in the planning process
In the situation where you are converting offices into flats, you will either be planning to sell them on after conversion or to rent them out yourself.
If you are renovating to resell, you will only need a short-term loan, such as a bridging loan. The clearer your exit strategy the better the deal you will be able to put in place to fund the refurbishment work.
When you intend to keep the building and rent out the refurbished units in the Private Rental Sector, you may require a Build to Rent loan or, in some cases, it may be more cost-effective to take out a bridging loan for the renovation part of the project followed by specialist funding for the rental business.
In May 2019 the Government changed the rights to allow permanent changes of use from shops to offices. Communities may benefit from having convenient workspaces, reduced commuting time and revived local High Streets. However, acquiring funding for commercial conversions is not within the remit of the majority of lenders, and so it is advisable to look for a short-term property development loan, specifically for this type of renovation project.
While Permitted Development simplifies the majority of extension and conversion projects, there are always exceptions. For example, there are restrictions in conservation areas and national parks.
For large scale renovations and ground-up property developments, full planning permission will still be needed, and you will need to take this into account when working out the project timings.