Legal Fees in Property Development Finance: Both Sides of the Bill

One of the most surprising aspects of development finance for many borrowers is that you are responsible for paying not only your own solicitor but also the lender's solicitor. This dual legal cost structure is standard across the UK development finance market and applies to virtually every facility, from small refurbishment loans to large-scale residential developments. The rationale is that the lender requires independent legal representation to protect their position, and the cost of that representation is passed to the borrower as a condition of the facility.

Your own solicitor handles the property transaction elements: reviewing the purchase contract if you are acquiring a site, conducting title searches, arranging for the transfer of title, and ensuring that all planning conditions and other requirements are met. The lender's solicitor handles the finance side: drafting and reviewing the facility agreement, creating the legal charge over the property, ensuring the lender's security is properly constituted, and dealing with the conditions precedent that must be satisfied before the first drawdown.

In total, legal fees for a development finance facility typically range from £8,000 to £25,000 for both sides combined, depending on the complexity of the transaction and the value of the facility. On a straightforward residential development with clean title and a single borrowing entity, costs tend to sit at the lower end. Complex transactions involving multiple sites, corporate structures, or title issues can push costs significantly higher. These sums represent a material charge that should be included in every development appraisal from the earliest stage.

Your solicitor's fees will depend on several factors: the value of the transaction, the complexity of the title, whether you are purchasing the site simultaneously with drawing down the loan, and the experience of the firm. For a standard development finance transaction, borrower solicitor fees typically range from £3,000 to £10,000 plus VAT and disbursements. A straightforward purchase of a single freehold site with clean title might cost £3,000 to £5,000. A more complex transaction involving leasehold interests, multiple titles, or ransom strips could cost £7,000 to £10,000 or more.

Disbursements are the additional costs your solicitor incurs on your behalf, such as Land Registry fees, search fees, and Stamp Duty Land Tax submissions. These are passed through at cost and can add £1,500 to £3,000 to the total bill. It is important to ask for a complete estimate of disbursements upfront because they are often not included in the headline fee quote. Some solicitors will provide a fixed fee for their professional charges but then add disbursements on top, which can lead to an unpleasant surprise when the final invoice arrives.

We recommend using a solicitor who specialises in development finance transactions rather than a general property solicitor. While the fees may be marginally higher, a specialist solicitor will be familiar with the standard facility documentation, understand the conditions precedent process, and be able to respond quickly to lender queries. Speed matters in development finance because delays in legal completion can trigger additional interest costs on bridging facilities or risk losing a purchase. We can recommend solicitors from our network who regularly act for development finance borrowers; submit your enquiry through our deal room for a referral.

The lender's solicitor fees are typically higher than the borrower's fees because they involve more detailed due diligence and the drafting of bespoke facility documentation. Lender solicitor fees generally range from £5,000 to £15,000 plus VAT and disbursements for a standard development finance facility. On larger or more complex transactions, these fees can exceed £20,000.

Several factors drive lender solicitor costs upward. Title complexity is the most common: if the property has defective title, missing title deeds, unregistered land, restrictive covenants, or other issues, the lender's solicitor must undertake additional work to assess and mitigate the risk. Each additional issue requires investigation, and the cost of that investigation is passed to you. Title indemnity insurance may be required to cover residual risks, adding further costs.

Corporate structure complexity also increases legal fees. If you are borrowing through a special purpose vehicle, which is standard for development finance, the lender's solicitor must verify the corporate structure, review articles of association, confirm that the directors have authority to borrow, and ensure that any personal guarantees are properly documented. If the structure involves multiple entities, joint ventures, or overseas elements, the legal fees escalate accordingly. We always advise keeping your borrowing structure as simple as possible, not least because unnecessary complexity adds thousands of pounds to the legal bill.

The lender's solicitor will also charge for the review of planning documents, building contract, professional appointments, and insurance policies. If any of these are incomplete or unsatisfactory, the solicitor will raise requisitions that require your response, adding time and cost to the process. Having a comprehensive and well-organised legal pack from the outset can significantly reduce the lender's legal costs and speed up the drawdown timeline.

The most effective way to reduce legal costs is to ensure that your legal pack is complete and well-organised before the lender's solicitor begins their review. This means having clean title documentation, up-to-date searches, a fully executed building contract, all professional appointments in place, and comprehensive insurance evidence. Every missing document creates a requisition, and every requisition generates additional correspondence and cost.

Consider whether a single solicitor can act for both you and the lender. On smaller facilities, typically below £1,000,000, some lenders will allow dual representation, where one solicitor acts for both parties. This can reduce the total legal cost by 30% to 40% because there is only one firm involved, eliminating duplication. However, dual representation is not available from all lenders or for all transaction types, and the solicitor must be on the lender's approved panel. It is most commonly available on bridging loans and refurbishment finance facilities.

Negotiate the lender's solicitor fees at the term sheet stage. Many developers do not realise that the lender's legal costs are partly negotiable. While you cannot change the hourly rate of the solicitor, you can sometimes negotiate a fee cap that limits the maximum amount the lender's solicitor can charge. We regularly negotiate fee caps of £7,500 to £10,000 on standard development finance transactions, protecting our clients from runaway legal costs. Ask your broker to include a legal fee cap as part of the overall fee negotiation with the lender.

Legal fees apply every time a new facility is put in place, which means that refinancing from one lender to another incurs a fresh set of dual legal costs. If you are moving from a development loan to a development exit facility with a different lender, budget for £8,000 to £15,000 in combined legal fees for the refinance. This cost must be weighed against the interest savings from the new facility to determine whether the refinance is economically justified.

For developers with multiple projects, some lenders offer framework facility agreements that cover a series of loans under a single legal umbrella. The initial legal cost of establishing the framework is higher, typically £12,000 to £20,000, but subsequent drawdowns under the framework incur reduced legal fees of £2,000 to £4,000 each. Over a programme of four or five schemes, this can save £20,000 or more in aggregate legal costs. This structure is particularly attractive for developers who regularly build in the same region, such as Greater London, Kent, or the West Midlands.

VAT on legal fees is another cost that catches some developers by surprise. All solicitor fees are subject to VAT at 20%, and unless you are VAT-registered and can recover the input tax, this adds a significant premium to the bill. On combined legal fees of £15,000, the VAT adds £3,000. Ensure that all fee quotations you receive from solicitors are clearly stated as either inclusive or exclusive of VAT, and budget accordingly in your GDV calculation.

We have seen legal fees on development finance transactions exceed £40,000 in extreme cases, and the pattern is usually the same: a complex title issue is discovered during due diligence, the lender's solicitor raises extensive requisitions, the borrower's solicitor must instruct specialists to resolve the issue, and the back-and-forth continues for weeks with the meter running on both sides. The borrower, already committed to the purchase and under time pressure, has no realistic option but to pay the fees and move forward.

The best protection against spiralling legal fees is thorough pre-acquisition due diligence. Before you commit to a site purchase, instruct your solicitor to conduct a full title review and flag any issues that could complicate the finance. If the title is defective, factor the cost of remediation into your purchase price negotiation or walk away. A £2,000 pre-acquisition title report is a fraction of the cost of resolving title issues under the pressure of a live development finance transaction.

If you are concerned about legal costs on a specific transaction, ask us for guidance. We have extensive experience with the legal requirements of lenders on our panel and can advise you on which issues are likely to create additional costs. In many cases, we can recommend structuring solutions that simplify the legal process and reduce costs for both parties. Submit your project through our deal room and we will include a legal cost estimate as part of our funding recommendation.