A development finance case study is most useful when it shows where a project could have gone wrong, not simply where it succeeded. For developers, investors and landowners, funding is rarely just a question of agreeing a facility amount. The legal work behind the facility can affect whether funds are drawn on time, whether the site can be developed as intended and whether an exit remains achievable.
The following illustrative scenario reflects issues that commonly arise in smaller and mid-sized property developments across Northern Ireland and the Republic of Ireland. It is not based on a particular client, but it demonstrates why legal advice should be brought in before finance terms are treated as settled.
The project and the funding requirement
A property company agreed to acquire a former commercial site with planning permission for eight residential units. The intention was to refurbish part of the existing building, construct four new units and sell the completed homes individually. The purchase was conditional on development finance being available within a defined period.
The developer had experience in residential projects and had agreed heads of terms with a specialist lender. The proposed facility covered the purchase price, a proportion of anticipated build costs and interest rolled up during the development period. The lender required a first legal charge over the site, personal guarantees from the directors, debentures over the borrowing company and an assignment of key project documents.
On the face of it, the arrangement was straightforward. The developer had planning permission, a contractor ready to begin and a valuation supporting the proposed gross development value. Yet the lender’s solicitors raised issues during due diligence that threatened both the acquisition timetable and the first drawdown.
Where the risk emerged
The title to the site included a right of way across neighbouring land. It had been used for years, but the wording did not clearly permit the level of construction traffic expected during the build. The site also had a service media issue: an existing water connection crossed an adjoining parcel that was not included in the purchase.
Neither point necessarily prevented development. However, a lender funding a scheme wants confidence that access, services and disposal of the finished units will not be compromised. A buyer may accept practical arrangements based on good relations with a neighbour. A lender generally cannot rely on them.
There was a further complication. The planning permission had been granted to the seller before the project company was incorporated. While the permission ran with the land, several pre-commencement conditions required detailed submissions and approvals. The contractor’s proposed programme assumed work could start immediately after completion, but the conditions had not yet been discharged.
The lender therefore faced a familiar concern: it could advance acquisition funds against land whose development timetable, value and saleability depended on rights and approvals still requiring attention.
Development finance case study: resolving the issues
The legal strategy had to protect the developer’s commercial timetable without asking the lender to take avoidable risk. This required several workstreams to proceed together rather than in sequence.
First, the title and rights of way were examined alongside the planning drawings, proposed construction method and intended estate layout. This made it possible to identify precisely how access would be used during the build and after completion. A deed was negotiated with the adjoining owner to clarify vehicular access, permit construction use within agreed limits and establish ongoing rights appropriate for future occupiers.
Secondly, the service issue was addressed through a formal easement and supporting documentation from the relevant utility provider. The objective was not merely to show that water had been supplied historically. It was to create a clear, registrable legal right that a future purchaser, their mortgage lender and the development lender could rely upon.
Thirdly, the planning conditions were reviewed with the developer’s planning consultant. A realistic programme was prepared for discharge of the outstanding conditions. The finance documents were then structured to reflect this. The lender could complete the acquisition, but drawdown of construction funds was tied to specified evidence, including satisfactory condition discharge and agreed project documentation.
This was a sensible compromise. Requiring every condition to be discharged before acquisition might have caused the developer to lose the site. Advancing the entire facility without safeguards would have exposed the lender unnecessarily. A phased facility allowed the transaction to progress while retaining clear protections.
Security is more than the legal charge
A development finance facility often includes a package of security, and each element should be considered in the context of the project. In this case, the lender required a charge over the land, a debenture from the company and guarantees from the directors. It also required assignments of the building contract, professional appointments, warranties and insurance policies.
These documents serve different purposes. A charge gives the lender security over the property. A debenture can cover company assets and create charges over present and future property. Assignments and collateral warranties are intended to give the lender step-in rights or a route to enforce relevant contractual rights if the borrower defaults.
For the developer, the key point was to ensure that the security package matched the commercial structure. The contractor and design team needed to understand the lender’s requirements early. If assignment clauses and warranty obligations are left until the eve of drawdown, the parties may find that their standard contracts do not contain the necessary provisions, or that consents are required from insurers and third parties.
The personal guarantees also needed careful review. Directors should understand whether their liability is capped, whether it reduces as units are sold or the loan is repaid, and what events may trigger enforcement. Giving a guarantee should never be regarded as a formality simply because a project is held through a limited company.
Conditions precedent and the drawdown timetable
Conditions precedent are the documents and evidence a lender requires before completing or releasing money. They can include searches, valuations, insurance, planning information, corporate authorities, security documents, building contracts and proof of equity contribution.
In this scenario, the original schedule of conditions was extensive and did not distinguish clearly between purchase completion and construction drawdowns. Without revision, it risked creating uncertainty over when the developer could access funds. The solution was a drawdown schedule that recorded which requirements applied at each stage.
For example, the acquisition drawdown required satisfactory title, executed security, insurance and evidence of the developer’s cash contribution. The construction drawdown required the discharged planning conditions, executed collateral warranties, confirmation of the building contract and an approved cost report. Later drawdowns depended on surveyor certificates and compliance with loan-to-cost and loan-to-value testing.
This approach did not reduce the lender’s protection. It made the process more transparent. The developer could plan its advisers’ work and contractor commitments against known requirements, while the lender had clear evidence before advancing each tranche.
The cross-border point requires early attention
For projects involving parties, assets or finance across Northern Ireland and the Republic of Ireland, assumptions can create delay. The law governing the facility, the location of the secured property, the borrower’s corporate status and the lender’s enforcement requirements may all need separate consideration.
A company incorporated in one jurisdiction may be borrowing against land in another. Security registration, company filings, legal opinions and tax treatment can differ. So can the practical expectations of lenders and purchasers. A cross-border element is not automatically problematic, but it should be identified at the outset rather than discovered in final documentation.
This is particularly relevant where a developer’s group structure, guarantors or funding source sit on the other side of the border. Early coordination between property, banking and corporate advisers can prevent a late request for additional documents, registrations or consents from disrupting completion.
What changed for the developer
The purchase completed within the contractual deadline. Construction did not begin on the original anticipated date, because planning-condition discharge took longer than hoped. However, the revised finance timetable had allowed for that possibility, and the developer was not left with an undrawn facility or a contractor expecting immediate mobilisation without the required approvals.
More importantly, the rights needed for the completed homes were documented before construction was well advanced. This reduced the risk that sales would be held up by questions from purchasers’ solicitors or mortgage lenders. The project remained subject to the usual commercial pressures – build costs, sales values and market conditions can change – but its legal foundations were clearer.
Practical lessons for development finance
The lesson is not that every project needs the same documents or lender protections. A single refurbishment of a buy-to-let property will differ substantially from a multi-unit scheme. The lender’s requirements will also depend on the borrower’s track record, the value of the site, the proposed exit and the complexity of the title.
Nevertheless, three principles apply widely. Review title, access, services and planning against the actual development proposal, not simply the existing use of the site. Treat conditions precedent as a project plan rather than a last-minute checklist. Finally, consider the entire security package, including guarantees and project-document assignments, before contracts are signed.
Development finance works best when legal issues are identified while there is still room to negotiate. A clear conversation with experienced solicitors at the heads-of-terms stage can give a developer, investor or landowner a more realistic view of the timetable, the funding obligations and the decisions that need to be made before commitment.