UTB loan solves Section 106 problem
By Gavin Diamond, commercial director - bridging
We were recently approached to provide a bridging loan which would ultimately enable the borrowers to complete the sale of their property with the benefit of planning consent, for a development of 28 new homes.
The bridge was to be secured against the family home, a three-storey Edwardian house set in grounds of four and a half acres. The property had outline planning permission for a substantial housing development, subject to the finalising of a Section 106 agreement. The house had both first- and second-charge mortgages already secured against it and the problem for the owners arose because the mortgage lenders would not enter into the Section 106 agreement. Therefore they needed to find a lender with an understanding of the situation and a willingness to lend in these circumstances – and United Trust Bank (UTB) is prepared to be a party to Section 106 agreements in relation to properties held as security.
As a result, the £1m loan from UTB would be used to repay the outstanding first- and second-charge mortgages already secured against it, the second charge having been raised to assist with consultants’ fees and other costs in relation to the planning application – a process which had taken over four years.
The exit for the bridge was to be the sale of the home with the benefit of the planning permission. The borrowers were able to evidence heads of terms for an agreement, providing a developer with an option to purchase the site within a fixed timescale, pending the resolution of certain reserved matters relating to the planning permission.
The team was very pleased to enable our customers to achieve their objectives. This case is a good example of UTB’s ability to understand property transactions – in particular property development-related scenarios – and our appetite and willingness to provide sensible solutions for customers.
Once the planning permission is obtained, the sale to the developer will proceed, providing the borrowers with the means to exit the bridging loan and leave them with a significant sum with which to purchase a new residence.