This client came to me requiring lending against greenbelt land without planning permission but which he hoped to soon be in discussion with property developers over. This type of lending, where we have to consider the future potential to either secure a higher amount or to demonstrate there is sales potential if it is ever repossessed, is known as a ‘pure lend’.
The client, an entrepreneur, owned an estate of 14 acres on the outskirts of York. The estate had three plots with barn conversions on them and with planning permission to expand them, however, the rest of the estate was comprised of greenbelt land. Although the particular plot had no planning permission on it my client was extremely hopeful that within the next year he would secure some development offers. As such, he required a pure lend loan on land only to give him the necessary time to for such an opportunity to arise.
The plot was valued at £385,000 if sold as it was and the client already owed £200,000 against it on a first charge. To complicate matters further, the first charge was with an animal feed company to whom my client previously owed money when his business was struggling and this was the only way to cover the debt.
So in order to secure lending for this client, I had to overcome the challenges faced by it being a pure lend and looking at the future potential of a site without planning permission, the existing debt on a first change, as well as some adverse credit history as my client had previously fallen behind on his mortgage payments on his home. To my mind the most sensible solution seemed to be a 12 month bridge pure lend on land.
The strategy I decided to take was to secure a 12 month bridge pure lend on land. I liaised with a third tier lender we closely work with in the North, I described the potential of this property and stressed the fact property developers had actively taken interest other plots on the estate to date. I also demonstrated the additional value planning permission would add and how much the overall sales value would greatly appreciate. I also spoke to the lender at length about my client’s aspirations for the estate and smoothed over the adverse credit he had on record.
This approach made the lender feel comfortable and secure enough in order to make an offer. As the risk is fairly high and a 12 month pure bridge on land, the terms were relatively expensive but reasonable for the circumstances. We finalised on a 2% arrangement fee for a 12 month facility at a rate 1.5% per month, with 6 months’ interest retained. We also complimented the deal by arranging buildings insurance in house for other parts of the estate.
My client was happy with the outcome as this presented him with the flexibility he required so he wasn’t pushed into making a rash decision with developers.