Programme Delays and Development Loans: Managing Lender Expectations

Programme delays are the single most common reason that development finance facilities reach their maturity date without being repaid. Unlike cost overruns, which can sometimes be absorbed through additional equity or value engineering, programme delays have a direct and unavoidable impact on the facility's repayment timeline. If the build takes longer than planned, completion is delayed; if completion is delayed, the exit strategy (whether sales or refinancing) cannot commence; and if the exit strategy cannot commence, the facility cannot be repaid on time.

In our experience, programme delays of three to six months are common across all types of development projects. The causes are varied: adverse weather, subcontractor availability, material delivery delays, planning condition discharge timescales, building control inspection delays, and service connection lead times. Many of these are outside the developer's direct control, but all of them are foreseeable risks that should be accounted for in the original programme. The developers who avoid maturity default are those who build realistic programmes from the outset and monitor progress rigorously.

The financial impact of programme delays extends beyond the maturity date issue. Every additional month of construction adds to the rolled-up interest on the facility — at an interest rate of nine percent per annum on a £2,500,000 facility, each month of delay adds approximately £18,750 to the total debt. Over a six-month delay, this amounts to £112,500 of additional interest, which directly reduces the developer's profit margin and can push a marginal scheme into loss territory.

Weather is the most frequently cited cause of programme delays, and while it is genuinely disruptive — particularly for groundworks and external trades — experienced developers and contractors should account for seasonal weather patterns in their programme. A development starting groundworks in November in the Midlands should programme for significantly more weather downtime than one starting in April. Yet we regularly see programmes that assume the same productivity rates regardless of the season.

Subcontractor availability is an increasingly significant cause of delays, particularly in regions with high levels of construction activity such as Greater London and the wider South East. Specialist trades — bricklayers, roofers, electricians, and plumbers — are in high demand, and a subcontractor who commits to a start date may delay by several weeks if a more profitable or convenient job becomes available. The developer's main contractor should manage subcontractor coordination, but the developer should monitor progress against programme and escalate delays early.

Regulatory delays are often underestimated. Discharging planning conditions, obtaining building control sign-off, securing utility connections, and completing Section 278 highway works agreements all have lead times that can extend to several months. We have seen developments delayed by eight to twelve weeks waiting for a water connection or an electricity supply, even though the application was submitted months in advance. Developers should identify all regulatory and utility requirements at the earliest stage and programme lead times based on current processing times, not optimistic assumptions.

Design changes and variation instructions during construction are a further source of delay. Every change requires the design team to issue revised drawings, the contractor to re-programme and re-price the affected works, and potentially a new building control submission. The cumulative effect of multiple small changes can be as significant as a single major variation. The best strategy is to freeze the design before construction starts and resist the temptation to make changes during the build unless they are essential.

The golden rule is to notify your lender or broker as soon as you identify that the programme is materially delayed — meaning the delay will affect the facility's repayment timeline. Do not wait until the delay is certain; notify when it is probable. A developer who contacts their lender at month six saying "we have identified a potential three-month delay and here is our plan to mitigate it" will receive a very different response from one who contacts the lender at month seventeen (one month before maturity) saying "we need a three-month extension."

The notification should be in writing and should include: a summary of the current programme position, the cause of the delay, the expected impact on the completion date, a revised programme showing the new anticipated completion date, and any mitigating measures the developer is taking. If the delay will affect the exit strategy timeline, include a revised exit strategy timeline as well. Supporting the notification with an updated monitoring surveyor's report adds credibility.

In our experience working with lenders across the UK market, the tone and content of the notification matter significantly. Present the delay as a managed issue that you are addressing proactively, not as a crisis that you are unable to control. Lenders are looking for evidence that the developer understands the problem, has a realistic plan to manage it, and is taking active steps to minimise the impact. If you can demonstrate that you are recovering time through acceleration measures (additional labour, extended working hours, revised construction sequence), this further strengthens your position.

We also recommend having your broker make the initial approach to the lender where possible. As intermediaries, we can frame the issue in terms the lender's credit team will respond to positively, and we can manage the subsequent discussions to achieve the best possible outcome. Many of the term extensions and covenant waivers we have negotiated started with a carefully crafted notification that set the right tone for the discussion. Contact our deal room if you need assistance with lender communications.

Most development finance lenders have provisions within their facility agreements that allow for term extensions, subject to lender approval and the payment of an extension fee. A typical extension fee is 0.25% to 1% of the outstanding facility amount per month of extension. On a £3,000,000 facility, a three-month extension at 0.5% per month costs £45,000 in extension fees, in addition to the continued accrual of interest at the facility rate (or a higher rate if specified for the extension period).

To maximise your chances of securing a term extension, prepare a comprehensive extension application that demonstrates: the development will be completed within the extended term (support this with a revised programme endorsed by your contractor and monitoring surveyor), the exit strategy remains achievable within the extended timeline (support this with current market evidence and, where possible, evidence of buyer interest or pre-sales), all covenants will continue to be complied with during the extended period, and the developer has the financial resources to fund the extension costs and any remaining construction costs.

Some lenders will decline to extend and instead require the borrower to refinance with an alternative lender. This is particularly common with lenders who have strict fund mandates or who have become uncomfortable with the project's risk profile. If your lender declines an extension, do not panic — development exit finance is specifically designed for situations where the build is complete or near-complete but the exit has not yet been achieved. We can typically arrange development exit finance within two to four weeks, which may be sufficient to avoid a maturity default.

In some cases, the lender will agree to an extension but impose additional conditions — for example, a requirement to reduce the facility balance by a specified amount before the extension is granted, additional security over other assets, or enhanced reporting requirements. Evaluate these conditions carefully with your solicitor and broker. While additional conditions are not ideal, they are almost always preferable to the alternative of default and enforcement.

When a programme delay is identified, the first question should be whether the lost time can be recovered through acceleration. Common acceleration measures include: increasing the labour force on site, extending working hours (subject to planning conditions and noise restrictions), working weekends and bank holidays, re-sequencing works to allow parallel activities, and using off-site fabrication or pre-manufactured components to reduce on-site construction time.

Acceleration costs money. Additional labour, overtime rates, and weekend working premiums can increase the build cost by five to fifteen percent for the accelerated works packages. The developer must weigh the cost of acceleration against the cost of delay — specifically, the continued accrual of interest on the facility, the risk of a maturity default, and any extension fees that would otherwise be payable. In many cases, spending an additional £30,000 to £50,000 on acceleration is significantly cheaper than the £100,000 or more in additional interest, fees, and potential enforcement costs that a three-month delay would generate.

Not all delays can be recovered through acceleration. If the delay is caused by a critical path item — for example, a bespoke structural steel order with a twelve-week lead time — no amount of additional labour will recover the lost time. In these cases, the developer should focus on identifying parallel activities that can proceed while the critical path item is awaited, and on ensuring that the remainder of the programme is as efficient as possible. A construction programme consultant can review the programme and identify opportunities for time savings that may not be apparent to the developer or main contractor.

If acceleration is not feasible or cost-effective, the developer should accept the delay, revise the programme realistically, and focus on negotiating appropriate terms with the lender. As discussed in the previous section, a well-prepared extension application supported by a realistic revised programme is far more likely to succeed than an unrealistic promise to recover time that cannot be recovered. Lenders see through optimistic promises and will lose confidence if the developer repeatedly misses revised target dates.

A programme delay of three to six months may seem manageable during the construction phase, but its impact on the exit strategy can be disproportionate. For residential developments relying on individual unit sales, a delay in completion means a delay in obtaining practical completion certificates, a delay in marketing completed units (as opposed to off-plan), and a delay in exchanging and completing sales. The typical timeline from practical completion to the last unit selling is three to nine months, so a three-month construction delay can push the final exit twelve months beyond the original plan.

The timing of completion can also affect sales values. Completing in autumn or winter in the UK typically means fewer viewings, longer marketing periods, and potentially lower prices than completing in spring or summer. We have seen developments where a three-month delay that moved completion from March to June had minimal impact on sales, while the same three-month delay moving completion from September to December added two months to the average sales period.

For developments where the exit strategy is refinancing onto a commercial mortgage or investment product, the delay impacts the refinance application timeline. Most term lenders require the property to be complete, let, and producing rental income before they will complete a refinance. A construction delay therefore delays the start of the letting process, which in turn delays the refinance. The developer must fund the facility interest during this extended period, which can be substantial.

To mitigate the impact of programme delays on the exit strategy, consider whether any elements of the exit can be brought forward. Can units be marketed for off-plan sale before practical completion? Can commercial tenants be offered pre-let agreements? Can the refinance lender provide indicative terms and begin their valuation process before completion, so that the refinance can complete quickly after practical completion? These measures require proactive planning and coordination but can significantly reduce the gap between completion and exit. For detailed guidance on exit finance, see our guide on development exit finance.

The most important lesson from our experience with programme delays is that realistic programming at the outset prevents most problems. A programme that includes adequate float for weather, regulatory delays, and unforeseen issues is far more likely to be achievable than one optimised for the shortest possible duration. We advise developers to add a minimum of fifteen to twenty percent to the contractor's proposed programme duration as a management buffer, and to structure the facility term to accommodate this buffer.

The second lesson is that monitoring must be regular and rigorous. A monthly programme review that compares actual progress against the planned programme, identifies variances, and assesses the impact on the completion date is essential. This review should involve the developer, the project manager, and the main contractor, and the outcomes should be documented and shared with the lender or broker. The cost of a monthly programme review meeting is negligible compared to the cost of a programme delay that is identified too late to manage.

The third lesson is that communication with the lender should be ongoing and transparent. The lenders who are most willing to accommodate programme delays are those who have been kept informed throughout the project and who trust the developer's reporting. A lender who receives regular updates, site photographs, and programme reports is far more likely to grant a term extension than one who has had no contact with the borrower since drawdown. If you are managing a development project with finance in place, make lender communication a priority — it is one of the most effective risk management tools available to you.