Glossary definition
Cost Overrun
The amount by which actual construction costs exceed the original budget approved in the development appraisal. Cost overruns are one of the most common causes of distress in development projects and can arise from unforeseen ground conditions, material price inflation, contractor insolvency, or scope creep.
Definition
The amount by which actual construction costs exceed the original budget approved in the development appraisal. Cost overruns are one of the most common causes of distress in development projects and can arise from unforeseen ground conditions, material price inflation, contractor insolvency, or scope creep. Lenders mitigate cost overrun risk through contingency requirements (typically 5–10%), independent QS verification, and monitoring surveyor inspections at each drawdown stage.
See also
Closely related terms.
Contingency
A budget allowance set aside for unforeseen costs during a development project, typically expressed as a percentage of build costs.
Quantity Surveyor
A construction cost professional who prepares detailed cost plans, manages budgets, and provides independent cost verification on development projects.
Monitoring Surveyor
An independent surveyor appointed by the lender to inspect the development site at regular intervals and verify that construction work has been completed to the required standard before each drawdown is released.
Build Cost
The total cost of construction works on a development project, typically including materials, labour, preliminaries, and contractor margins.
Further reading
Guides that touch this term.
Guide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readReadGuide
What Happens When a Development Loan Defaults? A Step-by-Step Guide
A detailed walkthrough of the development loan default process in the UK, from initial breach notice through to enforcement, and what developers can do at each stage to protect their interests.
12 min read readReadGuide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readRead
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