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In many cases, clients assume they can’t refinance a property if it doesn’t have the correct planning permission in place, but this isn’t always true.
From a lending perspective, lending on a property without the correct planning permission creates a risk. If the local authority were to take enforcement action, it could impact the property’s value and their security. This is the reason most lenders require a ‘clean’ title and planning history.
In certain refinance scenarios, there are specialist lenders who may be able to proceed with an application subject to appropriate legal due diligence and risk mitigation.
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How It Works
Rather than requiring retrospective planning, the lender may accept a title indemnity insurance policy as part of the legal process. This is an indemnity policy that covers a lot of the legal enquiries, including building regulations sign-off and planning permissions. The policy is a lender-only protection.
This type of policy can provide protection against potential enforcement action or losses arising from issues such as:
- Lack of formal planning consent
- Missing building regulations approval
- Historical changes of use
By using indemnity insurance, the lender is able to mitigate risk while allowing borrowers to refinance efficiently.
Some examples of cases we have assisted with in the past are:
- HMO’s and changes of use
- Internal reconfigurations without building regulations sign off
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Important Considerations
It’s important to note that this approach is assessed on a case-by-case basis. Lenders will still carry out full underwriting and legal checks, and not all properties will qualify. It is also important to understand that this doesn’t ‘fix’ the lack of planning permission; it simply manages the risk in a way that some lenders are comfortable with.
Indemnity policies also come with specific conditions, for example, they typically require that no prior contact has been made with the local authority regarding the issue, as this could invalidate the title insurance.
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Conclusion
For experienced developers, specialist lending solutions like this can provide flexibility where traditional finance might not be an option.
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How can Advocate Finance help?
If you have a property that you’re looking to refinance but it doesn’t have the correct planning permission, please get in touch so we can review your circumstances and talk through your potential options.
We provide a FREE assessment on all our services.
Please contact me directly for more information, or use the Get in Touch With Us Today feature at the bottom of this page.
