Your lender sold your loan. Now your planning permission is hostage.
The hidden cost of loan-book sales for borrower-developers — and what to put in your facility agreement before it happens again
There is a particular kind of planning delay that nobody warns developers about, because nobody thinks of it as a planning problem. It begins with a routine, almost invisible commercial decision: a bridging lender — quite legitimately and quite quietly — sells its loan book, or part of it, to another lender. The new chargee may be a UK private credit fund, an overseas trust, or a vehicle the borrower has never heard of. The borrower’s loan account number does not change. Direct debits do not change. From the borrower’s seat, nothing has changed.
Then a section 106 agreement, or a unilateral undertaking under section 106 of the Town and Country Planning Act 1990, needs to be executed. And everything stops.
Why this is now a common pattern, not an unusual one
The market for trading UK bridging and development loans is busier than it has been at any point in the last decade. Originators warehouse loans on short balance sheets and sell down. Private credit funds, family offices and overseas vehicles buy seasoned books in bulk. The borrower is rarely consulted, often not even meaningfully notified: a generic assignment clause in the facility agreement does the work, and the originator’ss servicing team continues to front the relationship.
For most of the life of a loan, this is irrelevant to the borrower. The terms do not change. The interest rate does not change. The new chargee is a name on a register, nothing more. The arrangement breaks down only at the points where the chargee has to do something — give a consent, sign a deed, or stand behind a planning obligation. That is precisely what a section 106 agreement asks of a chargee.
Why the chargee matters for a section 106
A planning obligation under section 106 binds the land. It runs with title and binds successors. Where the land is charged, the local planning authority will almost invariably require the chargee either to be a party to the deed or to give a written consent confirming that the planning obligation takes priority over the charge. Without that, the LPA cannot be confident that on enforcement against the land, the obligation survives a sale by the mortgagee in possession.
That requirement is unremarkable when the chargee is a familiar UK lender with a known signing protocol, a known capacity position and a recognisable execution clause. It is not unremarkable when the chargee is, for example, a vehicle incorporated in another jurisdiction, structured as a statutory trust, or administered by a separate entity under a power of attorney. At that point the LPA — quite properly — wants evidence.
What the LPA tends to ask for, and why
Where a new chargee is unfamiliar, expect a planning solicitor at the council to ask for the following before they will issue an engrossment:
A copy of the executed transfer of charge, together with evidence of any pending Land Registry application — so they can see the chain of title to the security.
Constitutional documents of the new chargee evidencing its legal existence and the source of its power to enter into planning obligations.
Evidence of any administrator or attorney’s authority to act, and the named signatory’s authority to sign the deed.
A formal legal opinion confirming legal existence, capacity to enter into an English-law deed, the authority of the signatory, and the validity of execution under both English law and the law of the chargee’s home jurisdiction.
None of that is unreasonable. It is what any well-advised LPA should be asking for. The problem is not that the questions are asked. The problem is that they are asked at the back end of the transaction, months after the loan was originated, when nobody — least of all the borrower — anticipated needing a capacity pack.
The bit that hurts: the borrower-developer pays for the delay
Here is what is rarely said out loud, because lenders do not like to hear it and brokers prefer not to think about it. The cost of this kind of delay falls almost entirely on the borrower.
A typical bridging or development facility is short-dated and expensive. It is taken out on the assumption that the borrower will refinance onto a development or investment loan once planning is in place — and planning is rarely in place without the section 106 being executed. Each of those steps is a precondition to the refinance, and the refinance is the only way out of the bridge.
The borrower is paying default-rate interest on a bridge whose refinance is gated by a planning permission, whose grant is gated by a section 106, whose execution is gated by capacity evidence the new chargee was never asked to prepare — and the new chargee has no contractual or commercial incentive to move quickly, because it is earning on the very delay it caused.
In commercial terms, the new chargee is being paid to be slow. That is not a moral judgement; it is a description of the incentive structure. The originator who sold the book is gone. The borrower has no contractual lever. The LPA cannot act until the paperwork is right. The new chargee’s administrator is dealing with the borrower’s file alongside many others and has no commercial reason to prioritise it over yield-bearing matters.
Where extension fees, exit fees, surveyor revisits, professional fee top-ups and additional interest are added in, an eight to twelve-week delay on a sub-£3 million bridge can comfortably cost a developer a five-figure sum, sometimes six. That cost is borne by the borrower, who did not choose the new chargee and was not told the loan had been sold. It is not recoverable from the originator (who has assigned away its interest), from the new chargee (who has not breached anything), or from the LPA (which is doing its job).
It is the developer’s loss. And in aggregate, across the market, it is a non-trivial drag on housing delivery.
What I now do differently
Two changes, both cheap, both borrower-controlled, both demonstrably worth doing.
1. A facility-agreement ask, at origination
Standard facility agreements give the lender an unconditional right to assign at any time. Borrowers sign that clause without negotiating it because they assume it is irrelevant. It is not. I now ask, on every borrower-side instruction, that the assignment clause be amended to require:
Prompt written notice to the borrower of any intended assignment of the facility, the security, or any related right, with a meaningful minimum notice period;
Identification in that notice of the proposed transferee, its jurisdiction of incorporation, and the entity that will administer the loan post-transfer;
A representation that, where the security relates to land that is the subject of, or likely to be the subject of, a planning obligation under section 106, the lender will procure that the transferee provides any reasonable capacity and authority documentation the LPA may require, without undue delay and at the transferee’s cost.
Lenders push back on the last limb. They push back less than you might think. The first two are usually conceded on the day.
2. A pre-instruction question to lenders, at section 106 stage
Before any unilateral undertaking is even drafted, I now ask the chargee’s solicitors three questions in writing, and I keep the reply on file:
Is the loan held with a view to portfolio sale, and if so, on what timeframe?
Has the loan in fact been transferred, or is any transfer pending or under negotiation? If so, what is the identity and jurisdiction of the transferee, and who will be the administrator?
Does the chargee (or proposed transferee) already hold a capacity pack — constitutional documents, signatory authorities, legal opinions — that has been used on a comparable English-law planning obligation? If so, can it be provided now?
None of those questions is intrusive. All three are answerable in a single email. But the act of asking them transforms the dynamic: the lender knows you know, the borrower has a written record, and if a transfer is in the offing, the capacity pack is being assembled before the LPA asks for it rather than after.
A note for fellow practitioners
None of this is a criticism of any individual LPA, lender or counterparty. The legal positions taken in matters of this kind are usually correct. The drafting requirements are usually reasonable. The new chargees are usually acting within their rights. The issue is structural: the secondary market for UK property lending has matured, the planning system has not been adjusted to anticipate it, and the burden falls on the party least able to influence either side.
The remedy is not regulatory. It is contractual, and it sits in the borrower’s facility agreement. The earlier we ask for it, the less anyone has to argue about it later.
If you act for developers and have not revisited your standard assignment-clause position recently, this is worth half an hour of your time. The cost to your client of not doing so is, in the right facts, considerable. And, increasingly, foreseeable.