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The demand for affordable housing has never been so challenging. Considering also that the population is expected to surpass 70 million by 2031.The government’s housing targets have also fallen well short, then throw in to the melting pot Brexit and a pandemic. In 2015 the government had ambitions to improve housing stock by 1 million by 2020. Analysis of housing data suggests that in real terms the figure of 300,000 homes annually will not be met until 2028. This compounded by a shortfall of 20,000 homes in London alone. It therefore seems a simple remedy to utilise air space above existing buildings. Legislation and planning came in to effect on the 1st August 2020 under new permitted development rights (PDR).

In short freeholders and property owners can now build upwards (purpose built flats/detached blocks) a further two additional floors. However given that this invariably affects numerous property owners under one umbrella achieving an Airspace development may not be as straightforward as other relaxed attitudes towards Permitted Development Rights.

Airspace development need not be the sole preserve of property developers. Coupled with the Leasehold Reform Act this represents excellent opportunities for those residents in blocks of flats and leasehold/freehold owners in multi-occupied properties. The idea of creating wealth and exploiting/creating value for existing flat/apartment owners need not be pie in the sky.

  • Airspace development is restricted to blocks of 3 floors or more.
  • The extended block must not be over 30 metres in total.
  • The extended height can not be more than 7 metres compared to the highest point of the existing roof.
  • New floors must be no more than 3 metres in height
  • New floors must consist of flats/apartments alone
    Airspace development only applies to properties built post 1st July 1948 and prior to 5th March 2018.

There are further exclusion such as whether the existing site sits within a site of special scientific interest. Local authority consideration includes contamination and flooding risks, transport and highways and the impact on air traffic and defence assets.
Further Reference:
PART 20 – Construction of New Dwellinghouses – Class A

Overage is the mechanism often used in property documents to protect a seller’s position in the event of a buyer achieving an uplift in the value of the land, or sales revenue above a certain agreed amount.

Overage is in essence an additional payment over and above the specified sale price payable at the point of completion of a land transfer, which in the event a certain specified event occurs within an agreed period of time after completion of the land transfer, will become due from the buyer to the seller.


The Property is sold with the benefit of a planning permission for 40 houses and the buyer secures a planning permission for 50 houses. Overage could be:

  • a certain agreed figure per additional house authorised
  • a proportion based on the additional square footage of authorised development
  • a proportion of the actual uplift in sales proceeds.

It is important to consider the ‘trigger’ for the payment to fall due – the seller may want the earliest possible timing, for example on the grant (or at least implementation) of an enhanced planning permission, but the buyer will say that it has not yet received any value to pay out overage from, so it might well prefer to pay out on completion of the sale of the final unit.

As equally as important as securing funding for your development project is determining your exit strategy and how your development funding will be repaid. Your ideal and preferred exit strategy is to sell your project. While your GDV is a forward date what happens if the market slows and you have to accept below market offers. What happens if sales are slow due to any prevailing economic pressures. A small knock to confidence in the housing market can lead to a big dent in profit.

Refinancing your project on to a buy-to-let rate will allow the developer to enhance a property portflio however only 75% to 80% LTV may be available from any buy-to-let lender. Thus only a maximum of 80% will be realised together with the associated costs of raising the capital. This isn’t an ideal option on a new build but lends itself to HMO and buy-to-let refurb.

Another option is development exit finance which allows the developer to refinance on to lower cost finance while also providing an extension. Not only will a lower rate of interest be payable but the stress of having to rely on a quick sale is alleviated.

The maximum loan to value (LTV) and term is typically set at 80% and 12 months respectively. The development needs to have achieved completion and all contractors/sub contractors accounts should be settled. Properties should be actively marketed and for sale. Any local authority planning conditions should be satisfied and discharged. Relevant warranties should be in place and building regs signed off. The completed development site should have a red book valuation.

Property Development Blog Post 3

A property option agreement is a legally binding agreement between a potential purchaser (developer) and a landowner. The  agreement grants a contractually binding first option to purchase. 

Development Loan Blog Post

Commercial property and leveraging changes to permitted development rights. There are now more lucrative opportunities without the exhaustive planning applications.

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Introduced to the UK in 2007 REITs continue to grow in popularity as people look at alternative investments. Both individuals and organisations can invest in a REIT