Permitted Development Finance
Permitted Development Finance
Permitted development finance funds property conversion and change-of-use projects carried out under permitted development rights (PDR), schemes where full planning permission is not required because Parliament has granted the right to develop subject to specified conditions. It is one of the most commercially attractive areas of UK property development, combining reduced planning risk with strong GDV uplifts, and the lender market for PDR schemes is well-established and competitive.
Platinum Global Bridging Finance arranges permitted development finance from £500,000 to £25 million for office-to-residential conversions under Class MA, agricultural building conversions under Class Q, and other PDR schemes across England. We work with specialist development lenders, private banks, and institutional funders with deep experience in PDR transactions to source the right structure for each project.
What Are Permitted Development Rights?
Permitted development rights are statutory permissions granted under the Town and Country Planning (General Permitted Development) Order 2015 (as amended), allowing certain works and changes of use to proceed without a full planning application to the local planning authority. PDR schemes still require prior approval for specified matters, and in some cases building regulations approval, but they bypass the full planning process, significantly reducing planning risk and development timescale.
The classes of permitted development most relevant to property development finance are:
Class MA (Commercial to Residential): Class MA permits the change of use of any building within Use Class E (commercial, business and service) to residential use (Class C3). Use Class E covers a broad range of commercial uses, including offices, retail units, restaurants and cafes, financial and professional services premises, light industrial buildings, gyms, medical and health facilities, and crèches. Following the March 2024 amendments to Class MA, the previous 1,500 square metre floorspace cap has been removed, buildings of any size can now be converted under Class MA. The previous requirement for a building to have been vacant for three months before the prior approval application has also been abolished. Prior approval is still required and covers transport and highways impact, contamination, flood risk, noise, natural light, impact on heritage, and (for buildings over 18 metres or more than seven storeys) fire safety.
Class Q (Agricultural to Residential): Class Q permits the conversion of agricultural buildings to residential use. Following the May 2024 amendments, a single Class Q application can now create up to ten dwellings with a combined floor area of up to 1,000 square metres, with each individual dwelling capped at 150 square metres. The building must be in lawful agricultural use and structurally capable of conversion without the need for rebuilding. Class Q schemes are popular with rural developers and landowners, but lenders assess them closely, particularly in remote locations, for exit viability and residential demand evidence.
Class N (Amusement Arcades and Casinos to Residential): Class N permits the conversion of amusement arcades, casinos, and betting offices to residential use.
Extensions and loft conversions: A range of permitted development rights covering extensions to dwellinghouses, loft conversions, and outbuildings, typically funded on heavy refurbishment bridging rather than development finance.
The March 2024 Class MA Reforms and Their Impact
The amendments to Class MA that came into force on 5 March 2024, under the Town and Country Planning (General Permitted Development) (England) (Amendment) Order 2024, represent the most significant expansion of commercial-to-residential PDR since the original Class O rights were introduced in 2013. Understanding their implications is essential for developers and funders considering Class MA projects in the current market.
Removal of the floorspace cap: Prior to March 2024, Class MA was limited to buildings with a gross internal area of 1,500 square metres or less. The removal of this cap opens up the Class MA route for substantially larger commercial buildings, town centre retail blocks, multi-floor office buildings, and large industrial units that were previously ineligible. For developers and lenders, this creates opportunity in a part of the commercial property market where vacancy rates have been rising consistently since 2020.
Removal of the vacancy requirement: Previously, a building had to have been vacant for a continuous period of at least three months before a Class MA application could be submitted. This requirement has been abolished, enabling developers to agree terms on an occupied building and submit a prior approval application immediately, significantly accelerating the acquisition timeline.
Implications for the development finance market: The 2024 reforms have materially increased the volume of Class MA prior approval applications. Planning statistics published by the Ministry of Housing, Communities and Local Government recorded over 5,800 prior approval applications for PDR schemes in the final quarter of 2024 alone. Lender appetite for Class MA schemes has grown in parallel, with a number of specialist development banks and institutional funders increasing their allocation to PDR transactions.
Article 4 directions: Local planning authorities retain the power to remove PDR in specific areas through Article 4 directions. A number of London boroughs and city centre local authorities have introduced Article 4 directions restricting Class MA conversions in areas they consider important for employment use. Developers should confirm the Article 4 position for their target building before proceeding. Platinum Global Bridging Finance recommends instructing a planning consultant to confirm PDR status and the prior approval strategy as early as possible in the transaction process.
Finance Structures for Permitted Development Schemes
The right finance structure for a PDR scheme depends on the scale of the works, the number of units being created, and how costs fall across the project. Prior approval removes planning risk, but it does not determine the finance product. That is determined by whether the conversion requires staged drawdowns against build progress or can be funded by a single advance.
Bridging finance for simple PDR conversions: Smaller Class MA conversions, a single office floor being converted to two or three residential units with light internal works, can often be funded on a single-advance bridging loan. The lender advances against the current value of the building (subject to prior approval being in place), the works are completed, and the exit is sale of the units or refinance onto investment finance. This is the most straightforward and lowest-cost structure, with rates from 0.75% per month and terms of six to twelve months.
Development finance for larger PDR conversions: Larger conversions, a substantial office block being converted to twenty or thirty units, or an agricultural complex being converted to ten dwellings under Class Q, require development finance with staged drawdowns and monitoring surveyor oversight. The development finance structure provides greater total leverage (up to 65% of GDV), manages the lender’s risk across a longer and more complex works programme, and provides the borrower with a drawdown schedule matched to their construction timeline. Development finance rates for PDR schemes currently range from 0.75% to 1.2% per month depending on the project and the borrower’s profile. For larger, well-located Class MA schemes, some challenger banks are now offering stretched senior structures advancing to 70-75% of GDV in a single facility rather than requiring a separate mezzanine tranche, a leverage point that has become more widely available across the development finance market in 2026 than it was two years earlier.
Acquisition and development in one facility: For developers who need to fund both the acquisition of the commercial building and the conversion works, a combined acquisition and development facility is available. The initial drawdown covers the purchase price, and subsequent drawdowns fund the works against build progress. This is the most common structure for Class MA schemes where the developer is acquiring a building with vacant possession and beginning works immediately.
Bridge to development: Some developers prefer to separate the acquisition finance from the development finance, using a short-term bridging loan to secure the asset while the prior approval process is completed and the development finance is arranged. This can be efficient where the developer needs to move quickly on the acquisition and the development finance will take longer to arrange. Platinum Global Bridging Finance can structure the bridging finance and the development finance through complementary lenders to avoid break costs on refinancing.
Prior Approval: The Planning Gateway for PDR Schemes
Although permitted development does not require a full planning application, most PDR classes, including Class MA and Class Q, require prior approval from the local planning authority for specified matters before development can commence. Prior approval is not planning permission, but it is a formal decision by the local authority that the specified matters have been considered and that the development can proceed.
For Class MA, the prior approval matters include:
- Transport and highways impact
- Contamination risks
- Flooding risk
- Noise impacts from nearby commercial or industrial premises
- Adequate natural light to all habitable rooms in the proposed residential units
- Impact on the intended occupiers from the introduction of residential use in an area important for general or heavy industrial use, waste management, or storage and distribution
- Where the development is in a conservation area and involves a change of use of the whole or part of the ground floor, the impact on the character or sustainability of the conservation area
- For buildings over 18 metres or more than seven storeys: fire safety impacts on intended occupants
The local planning authority has 56 days to determine a Class MA prior approval application (extended to 96 days where environmental impact assessment is required). If the authority fails to determine within the statutory period and no extension has been agreed, prior approval is deemed to be granted.
Most development finance lenders require prior approval to be granted before they will complete. Some lenders will agree heads of terms and begin due diligence while the prior approval application is in progress, enabling a faster completion once approval is issued. Platinum Global Bridging Finance can identify which lenders will begin the process pre-approval and structure the transaction accordingly.
Larger Class MA Schemes and Building Safety Act Gateway 2
Since the floorspace cap was removed in March 2024, Class MA has become a viable route for converting substantial commercial buildings, including some over 18 metres or seven storeys, into residential use. Where a converted building falls into this higher-risk category, it becomes subject to the Building Safety Act 2022’s Gateway 2 regime, requiring approval from the Building Safety Regulator before construction work can commence, in addition to Class MA prior approval. This is a genuinely new consideration for the PDR market that did not exist at this scale before the 2024 reforms, because the previous floorspace cap effectively excluded most higher-risk buildings from the Class MA route. Gateway 2 approval timelines have varied significantly by application, with median approval times running into several months and a wide range depending on the complexity and completeness of the submission. Developers considering a Class MA conversion of a taller or larger building should factor Gateway 2 into their financing timeline from the outset, and discuss the position with their lender and monitoring surveyor before committing to an acquisition timetable. See our residential development finance page for further detail on Gateway 2 and higher-risk building schemes.
Key Metrics: GDV, LTGDV, and Residential Demand
Lenders assess PDR development finance primarily against the gross development value, the projected market value of the completed residential units. The loan-to-GDV ratio (LTGDV) is the key leverage metric: most development finance lenders will advance up to 60–65% of GDV on a permitted development scheme.
The GDV is assessed by a specialist development valuer who will consider comparable sold prices for similar residential properties in the area, applying adjustments for size, specification, location within the building, and market conditions. For Class MA conversions in urban locations with strong residential demand, GDV uplifts over the commercial value of the building can be substantial, in some cases doubling or tripling the asset value. This GDV uplift is the financial engine of the Class MA strategy.
For Class Q schemes in rural locations, lender scrutiny of the GDV is more rigorous. Rural residential markets can be illiquid, and comparables for converted agricultural buildings are limited. Lenders will want to see a robust residential demand analysis and will apply conservative GDV assumptions. The exit strategy for Class Q conversions, whether sale or let, must be evidenced clearly at the outset.
The total development cost (TDC), the sum of the purchase price, works costs, finance costs, monitoring surveyor fees, planning and professional fees, and contingency, must stack comfortably below the GDV to generate an acceptable developer profit margin. Most lenders look for a minimum gross development profit of 15–20% of GDV (or 20–25% on cost) before they will provide development finance. Projects with thin margins are harder to fund and more exposed to cost overrun risk.
Eligibility Criteria
Lender criteria for permitted development finance vary, but the following factors are assessed on virtually every PDR application.
Prior approval status: Most lenders require prior approval to be granted before completion. A small number of lenders will lend subject to prior approval, meaning they will agree and document the facility, but will only complete once approval is confirmed. This approach carries planning risk and is reflected in slightly higher rates.
Borrower experience: PDR schemes, particularly large Class MA conversions, are operationally complex. Lenders prefer borrowers with a track record of completed development projects, though first-time developers are not excluded. A strong contractor team and a well-prepared appraisal can compensate for limited personal experience at the smaller end of the market. Smaller PDR conversions are, in fact, one of the more accessible entry points into development finance for first-time developers precisely because the removal of planning risk simplifies the lender’s assessment.
Property type and location: Lenders assess the commercial building being converted for its suitability as residential accommodation, natural light, floor-to-ceiling heights, façade flexibility, and unit layout viability. Buildings with structural or design constraints that limit the number or size of viable residential units face more scrutiny. Location is critical: Class MA schemes in strong residential markets, London, major regional cities, and commuter towns, attract the widest lender appetite. Rural and peripheral locations require more extensive demand evidence.
Exit strategy: The two standard exits are sale of the completed units and refinance onto buy-to-let or commercial investment finance. For a sale exit, the lender will want evidence that the market can absorb the units at the projected GDV within a realistic timeframe. For a refinance exit, the rental yield must support the proposed investment mortgage at the post-conversion value, based on current stress tests.
Structural viability: For Class Q and other agricultural conversions, the building must be structurally capable of conversion without substantial rebuilding. The monitoring surveyor will assess this as part of their initial report. If the building requires rebuilding rather than conversion, the Class Q permitted development right does not apply and full planning permission would be required.
Costs and Fees
Permitted development finance costs broadly mirror those of other development finance products, with some differences specific to PDR transactions.
Interest rates typically range from 0.75% to 1.2% per month for development finance structures, and from 0.65% to 0.85% per month for bridging loan structures on smaller PDR schemes. Interest is generally rolled up and added to the loan balance, preserving cash flow during the conversion period.
Additional costs include:
- Arrangement fee: 1–2% of the facility
- Prior approval application fees: The local planning authority charges a statutory fee for prior approval applications. For Class MA, the fee is currently £120 per residential unit created, subject to a maximum of £25,000 per application
- Planning consultant: Instructing a specialist planning consultant to manage the prior approval application is recommended for all but the simplest schemes and adds £2,000 to £10,000 depending on the complexity of the application
- Monitoring surveyor: £500 to £1,500 per inspection, with four to eight inspections typical over a twelve to eighteen month programme
- Valuation: A development appraisal valuation including GDV assessment, typically £2,000 to £5,000 for a Class MA scheme of ten or more units
- Legal fees: Borrower and lender legal costs combined, typically £3,000 to £7,500 for a standard PDR development finance transaction
Why Platinum Global Bridging Finance for Permitted Development Finance
Platinum Global Bridging Finance is a specialist unregulated lending intermediary with over 20 years of experience arranging development finance for high-net-worth individuals, experienced developers, and corporate borrowers. Our lender relationships cover the full spectrum of the development finance market, from challenger bank and specialist lender through to private bank, family office, and institutional development funder.
We understand the mechanics of Class MA, Class Q, and other permitted development routes, and we know which lenders have active appetite for PDR schemes, which lenders will begin the process before prior approval is issued, and which structures will achieve the maximum available leverage for a given project.
Our arrangement fee is agreed at the outset and payable on completion. There are no upfront fees and no charges for indicative terms. We provide a same-day response to new enquiries and can issue indicative terms from multiple lenders within 24 hours.
Platinum Global Bridging Finance operates from offices at 64 Knightsbridge, London SW1X 7JF and Railway House, Urmston, Manchester M41 6NA. To discuss a permitted development finance requirement, contact us directly for a confidential discussion with a specialist.
Frequently Asked Questions
Do I need planning permission for a Class MA conversion?
No, Class MA is a permitted development right, meaning full planning permission is not required. However, prior approval from the local planning authority is required for specified matters including natural light, contamination, flood risk, and noise. Development cannot commence until prior approval is granted (or deemed granted on expiry of the statutory determination period).
Can I apply for Class MA on a building that is still occupied?
Yes. The March 2024 amendments removed the previous requirement for a building to have been vacant for three months. A Class MA prior approval application can now be submitted regardless of the building’s current occupancy status.
Is there a size limit on Class MA conversions?
No. The March 2024 amendments also removed the previous 1,500 square metre floorspace cap. Buildings of any size can now be converted under Class MA, subject to prior approval. Where the converted building is over 18 metres or seven storeys, it will also fall under the Building Safety Act’s Gateway 2 regime.
What is an Article 4 direction and does it affect my project?
An Article 4 direction is an order made by a local planning authority that removes a specified permitted development right in a defined area. A number of local authorities, particularly in central London and major city centres, have introduced Article 4 directions restricting Class MA conversions in areas they wish to protect for employment use. Developers should always confirm the Article 4 position for their target building before proceeding. A planning consultant can confirm this quickly and inexpensively.
Can I fund a Class Q agricultural conversion through development finance?
Yes. Class Q conversions are funded on the same development finance structures as Class MA and other PDR schemes, subject to the lender’s assessment of the building’s structural suitability, the GDV, and the exit market. Rural locations attract more conservative lending criteria, and the field of lenders with active appetite for Class Q is narrower than for urban Class MA schemes.
How long does the prior approval process take?
The local planning authority has 56 days to determine a Class MA prior approval application (or 96 days where environmental impact assessment screening is required). Some authorities process applications within four to six weeks; others take the full statutory period. Developers should factor the prior approval timeline into their acquisition and financing schedule.
Can I access development finance before prior approval is issued?
Some lenders will begin due diligence and agree heads of terms while the prior approval application is in progress, enabling a faster completion once approval is confirmed. A small number of specialist lenders will complete subject to prior approval, with a condition attached to the facility that approval is obtained within a specified period. Platinum Global Bridging Finance can identify lenders willing to proceed on this basis for suitable projects.
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