Property conversions in the UK continue to rise, with over 100,000 new homes created through change of use in recent years.
Whether you’re converting an office block into flats or transforming a barn into a business space, securing the right funding can make or break your project. Many property owners and developers face a common problem: traditional lenders often hesitate to fund projects before planning permission is granted.
That’s where bridging finance comes in. Let’s look at how these short-term loans can help turn your conversion plans into reality.
What is Change of Use?
Change of use transforms how a building or land is used – like turning a bank into a restaurant or an office into flats.
These projects can range from simple internal renovations to complete structural overhauls. Under UK rules, you have two main routes: full planning permission or Permitted Development Rights (PDRs).
PDRs have become a game-changer for property conversion.
They allow certain changes without the need for full planning permission, making the process faster and more straightforward.
Under Class MA of the General Permitted Development Order, you can convert commercial buildings (Class E) into homes (Class C3). This includes shops, offices, restaurants, and other business premises.
However, PDRs come with specific conditions:
- The building must have been vacant for at least three months
- The space must be under 1,500 square meters
- The building must have been in commercial use for at least two years
- You’ll need prior approval from your local council to assess impacts on transport, flooding, and local amenity
Agricultural conversions have their own PDR classes. Class Q lets you convert farm buildings into up to five homes, while Class R allows changes to commercial uses like shops or offices. These rights help support rural development and business growth.
Even with PDRs, you’ll need to meet building regulations and consider practical aspects like:
- Minimum room sizes for residential conversions
- Adequate natural light requirements
- Sound insulation standards
- Fire safety measures
- Energy efficiency standards
The rules vary by location and project type.
Commercial to residential conversions in London might face different restrictions than those in York. Some areas have Article 4 Directions in place, which remove certain PDR rights to protect local character.
For projects outside PDR scope, you’ll need full planning permission.
This involves a more detailed application process but gives you more flexibility in what you can achieve. Many successful developers use a mixed approach – using PDRs where possible and seeking full permission for more ambitious changes.
A recent success story in Leeds shows how PDRs can work effectively.
A developer converted a vacant 1,200-square-metre office building into 15 apartments. Using Class MA rights, they completed the project in 10 months, saving significant time and money compared to the full planning route. The key to their success? Understanding PDR requirements from the start and working closely with the local council during the prior approval process.
Funding Requirements for Change of Use Projects
Converting property isn’t cheap.
Beyond the purchase price, you’ll need money for planning applications, professional fees, and the actual conversion work.
Let’s break this down with a real example: converting a former pub into three flats might need £400,000 for purchase, £150,000 for conversion costs, plus extra for planning and professional fees.
You’ll also want a healthy contingency fund – around 15-20% of your budget.
Unexpected issues often crop up during conversions, from hidden structural problems to planning delays. Timeline gaps between buying, getting approvals, and completing work mean you need flexible funding that can adapt to changes.
Let’s talk bridging loans!
How Bridging Finance Works for Conversion Projects
A bridging loan is a short-term loan secured against property.
For change of use projects, these loans can cover both purchase and development costs. Unlike standard mortgages – there’s no need for regular repayments, you pay everything at the end of the term.
Let’s say you’re buying a £500,000 commercial building to convert into homes.
A bridging lender might offer up to 75% of the purchase price, plus extra funds for the conversion work, via a refurbishment bridging loan. The loan term could be 12-18 months, giving you time to complete the work and either sell the property or refinance onto a long-term mortgage.
These loans particularly suit change of use projects because they:
- Release funds quickly – often within weeks
- Can lend before planning permission is granted
- Cover both purchase and development costs
- Offer flexible repayment options
- Don’t require the property to be habitable/usable
- Don’t require proof of rental income upfront
Read more:
Who Can Use Bridging Finance for Conversions?
Property developers, business owners, and investors regularly use refurb bridging finance for conversions.
You don’t need decades of experience – many lenders will consider first-time developers with solid plans and professional teams.
A farming family recently used bridging finance to convert their redundant barn into holiday lets. Despite having no development experience, they secured funding based on their clear business plan and experienced contractor team.
Why Bridging Loans Work So Well for Conversions
Bridging loans match the unique needs of property conversion projects in ways that standard finance options often can’t.
These short-term loans provide money exactly when you need it, rather than making you wait for planning permission or other approvals. A big part of their appeal is that bridging lenders are very flexible, both in terms of the type of property and the structure of a deal.
Let’s look at a real example.
When Sarah bought an old warehouse in Putney to convert into apartments, she needed £800,000 quickly to secure the purchase, plus extra funds for the conversion work. A bridging loan let her buy the property and start the planning process simultaneously, saving months of potential delays.
Speed makes a big difference in conversion projects. You might spot an ideal property at auction, or find a seller who wants to complete quickly.
Bridging loans can be arranged in weeks rather than months, helping you grab these opportunities before they slip away.
The flexible nature of bridging finance suits the unpredictable journey of property conversion.
You might discover unexpected structural issues, face planning delays, or decide to change your plans mid-project. Bridging lenders understand these challenges and can often adjust loan terms to match your needs.
Another advantage is the ability to borrow against the property’s future value.
If you’re converting a £500,000 commercial building into flats worth £1 million, many bridging lenders will consider this increased value when deciding how much to lend.
This can help fund more of your conversion costs.
Bridging loans also solve common conversion project problems:
- You can often borrow before getting planning permission
- Interest can be rolled up until the project completes
- Additional funds can be released as work progresses
- The loan term can match your project timeline
- You don’t need to show rental income upfront
Many conversion projects make money only upon completion – either through sale or refinancing.
Bridging loans align with this pattern by not requiring monthly capital repayments. Instead, you can choose to roll up the interest and repay everything when you sell or refinance the converted property.
Read more: How Bridging Loan Interest is Calculated and Charged
Working with a Broker
A finance broker with conversion project experience can transform your funding journey.
They’ll know which lenders suit different project types and can secure better terms than going direct. Some lenders only work through brokers, giving you access to a lot more options.
Brokers also help present your case effectively. They understand what lenders look for in conversion projects and can highlight your project’s strengths while addressing potential concerns upfront.
Related: Why Use a Bridging Loan Broker?
Alternative Funding Options
While bridging finance suits many conversion projects, other options exist.
Development finance works well for larger projects, especially if you need staged funding releases. Commercial mortgages might suit simpler conversions where you have planning permission and a longer timeline.
Joint venture funding, where partners share both risk and reward, offers another route. This works particularly well if you have experience but lack capital.
If you own other property, it may be possible to borrow using multiple properties as the security. The advantage here is that you can generally borrow more money and negotiate a rate reduction as the lender’s risk has reduced.
Related: Legal Charges: Your Guide to Bridging Loan Security
Common Challenges and Solutions
Change of use projects regularly face several hurdles.
Planning delays might extend your timeline – consider applying for planning while arranging finance to save time. Cost overruns happen, but careful budgeting and regular monitoring help keep things on track.
Market changes during your project can affect your exit strategy. Stay flexible – if sales slow down, could you refinance onto a buy-to-let mortgage instead?
Related: Can You Pay Off a Bridging Loan With Another Bridge?
Ready to Move Forward?
Change of use projects offer exciting opportunities, but getting the right funding structure matters.
Speaking with an experienced broker can help you understand your options and find the best solution for your project. They’ll guide you through the process, ensuring you have everything in place for a successful conversion.
Remember, every project is unique – what works for one conversion might not suit another.
Take time to plan thoroughly and build the right professional team around you. Your broker can help connect you with experienced surveyors, planners, and solicitors who understand conversion projects.
FAQ
A change of use project involves changing how a property is used – for example, converting offices to flats or a shop to a restaurant. In the UK, this may require planning permission or fall under Permitted Development Rights.
Bridging lenders typically offer up to 75% of the property’s value, plus additional funds for development costs. The exact amount depends on your project’s viability and exit strategy.
Related: Are Property Development Finance and Bridging Loans the Same?
No, many bridging lenders will provide funding before planning permission is granted. However, you’ll need a clear strategy for obtaining necessary permissions.
Our minimum loan size is £150,000.
With all documentation ready, bridging finance can be approved within 1-2 weeks. Complex cases may take longer.
Common exit strategies include selling the converted property, refinancing to a commercial mortgage, or securing a buy-to-let mortgage.
Read more: How Do You Pay Back a Bridging Loan?
PDRs can make your project more attractive to lenders as they reduce planning risk. However, you’ll still need to prove the conversion’s viability.
Yes, short-term bridging finance is commonly used for agricultural conversions under Class Q permitted development rights.
Yes, bridging finance can fund mixed-use conversions, though terms may vary based on the final property use.
Read more: How to Use Bridging Finance for Mixed-Use Properties
