What makes pre-planning bridging different
In a standard bridging loan, the security value is clear: a RICS surveyor assesses the open market value of a property in its current condition. In a pre-planning bridge, the position is more complex. The land has two potential values: (1) its Existing Use Value (EUV) - what it is worth in its current planning class - and (2) its 'hope value' - what it might be worth if planning permission is granted.
Pre-planning lenders advance against the EUV only. They do not lend against hope value. The LTV is therefore expressed as a percentage of EUV, not GDV - and EUV is often a fraction of what the land will be worth with consent.
- EUV examples: agricultural land (£8,000-£20,000 per acre), industrial land with old commercial use (£50,000-£200,000 per acre), disused employment land (£100,000-£500,000 per acre depending on location)
- Hope value examples (consented residential): £500,000-£5,000,000+ per acre depending on location - often 5-20x the EUV
- Lender position: advance up to 55-65% of EUV, not the hope value
- Planning premium: the difference between EUV and hope value is the prize - it is what the developer earns for taking on the planning risk
What lenders assess for pre-planning bridges
Pre-planning lenders underwrite the planning case as much as the land itself. The factors below drive whether a specialist lender will engage and at what leverage.
- Planning probability - The lender's primary concern. They will assess: local plan allocation, pre-application feedback from the LPA, proximity of comparable consented schemes, planning consultant's opinion letter, and any pre-existing planning history on the site.
- Existing use value - Confirmed by an independent RICS surveyor. This is the security value - LTV is calculated against EUV. The hope value is noted but not relied upon by the lender.
- Borrower experience - Strongly preferred. Lenders are more comfortable with developers who have delivered consented schemes before. First-time land buyers face a significantly reduced lender pool.
- Planning consultant's report - Most pre-planning lenders require a formal planning consultant's assessment of planning prospects before issuing an offer. The consultant must be independent (not engaged by the borrower).
- Planning timeframe - The bridge term must be sufficient to complete a planning application cycle. In England, LPA determination periods are 8-13 weeks for standard applications plus pre-application engagement. Most pre-planning bridges are 12-18 months.
- Exit strategy - On receipt of planning permission: (1) refinance onto development finance; (2) sale of the consented site to a developer or housebuilder; (3) outright sale of the land at hope value. Lenders require a credible exit for each of these scenarios.
- Pre-application engagement - Many specialist lenders require evidence of formal pre-application engagement with the LPA before funding. This demonstrates due diligence and reduces the risk of a planning refusal on procedural grounds.
Rates and costs for pre-planning bridges
Pre-planning bridging is priced to reflect the higher risk - planning uncertainty, illiquid secondary market for consented land, and the possibility of a refused application extending the bridge beyond the planned term.
Rates typically range from 0.75% pm (strong site, experienced developer, local plan allocation, LPA pre-app complete) to 1.10% pm (speculative site, first-time buyer, no pre-app engagement). Arrangement fees are typically 1.5-2.0%.
Total costs for an 18-month pre-planning bridge at 0.85% pm on a £1.4m facility are approximately £230,000 - which must be weighed against a planning gain of £2m-£10m+ if consent is granted.
What happens if planning is refused?
This is the question every pre-planning borrower must have a clear answer for before drawing the facility. The main scenarios are below.
- Resubmission: most planning refusals can be addressed by resubmission with a revised application. An 18-month bridge gives sufficient time for one determination cycle plus a resubmission if needed. Some lenders will extend a bridge by 3-6 months for a credible resubmission.
- Appeal: a planning appeal typically takes 6-9 months for a written representation and 12-18 months for an inquiry. Most bridges will not be long enough to accommodate an appeal - this must be considered at outset.
- Sale at EUV: if planning fails and cannot be recovered, the site can be sold at EUV. The sale proceeds should comfortably repay the bridge (bridge advanced at 55-65% of EUV). This is the lender's backstop.
- Planning consultant's advice: the planning consultant's initial assessment should include a realistic probability score and a clear identification of the main planning obstacles. If the consultant scores planning at below 60-65% probability, most specialist lenders will not engage.
Case study: 2-acre former employment site, North Yorkshire
An experienced developer identified a former employment site with strong planning prospects in a commuter town. Pre-application engagement with the LPA had produced a positive response. Doulton arranged a £390,000 pre-planning bridge against 55% of EUV, funded by a specialist private lender on our panel comfortable with planning risk on locally-allocated sites.
Planning application submitted Month 3, determination Month 14, planning consent Month 15. Development finance arranged by Doulton - £3.8m senior debt facility - cleared the bridge and funded the scheme.
- Site - Former light industrial site, 2.1 acres, commuter town North Yorkshire
- Current use - Disused employment land - EUV confirmed at £340,000 per acre, total EUV £714,000
- Planning status - Local plan allocated for residential (mixed use). No application submitted.
- Pre-app engagement - Formal pre-app with LPA complete - LPA indicated support for 18-22 residential units
- Planning consultant's view - 85% probability of consent, subject to viability appraisal and affordable housing contribution
- Bridge arranged - £390,000 (55% of EUV)
- Rate - 0.82% pm, 18 months
- Exit achieved - Planning granted Month 15. Site refinanced onto £3.8m development finance facility.