Jorden Abbs, CEO at Commercial Trust, discusses how permitted development rights under Class MA have created a new type of borrower in the development finance market.
Permitted development rights have quietly created a new category of borrower, and the lending market has not fully caught up with it.
Under Class MA, a landlord who owns a parade of shops, an office block, or a redundant commercial unit of almost any description, can convert it into residential flats without going through a full planning application. It is one of the more useful pieces of planning reform of the last decade, and landlords are using it.
National retail vacancy stood at 13.5% in the third quarter of 2025, and while forecasters expect it to ease only slowly towards pre-pandemic levels by the end of this year, that still leaves tens of thousands of units sitting empty or underused across the country.
Permitted development rights, and Class MA in particular, have turned a good number of those units into viable residential conversions without the delay of a full planning application.
A professional developer building forty units on a greenfield site has a track record, a build programme, and a lender relationship built for exactly that profile.
A landlord converting three empty units above a parade, which they have owned for 15 years, has none of those things, at least not in the form a development finance underwriter expects to see.
They have a good property asset and sound instincts, but they will likely need a mortgage broker to support them with a whole host of application requirements. There are lots of questions to ask and scenarios to look into before deciding the right course of action, such as what loan-to-gross development value (LTGDV) a lender will accept on a conversion rather than a new-build, whether the landlord’s existing commercial mortgage needs to be cleared before drawdown, and what happens if the property conversion runs over and the landlord’s exit becomes a refinance onto a buy to let mortgage rather than a sale.
None of those questions has a single right answer, because lenders vary enormously in how they treat this kind of case.
Some development finance lenders are entirely comfortable funding permitted development conversions and price them close to standard refurbishment terms, since the absence of a planning application removes one of the bigger risks in the project.
Others still underwrite as though every scheme carries planning risk, regardless of the permitted development route, because their credit policy has not adapted to how the borrower actually got there. A landlord approaching the wrong lender first can walk away thinking their project is unfundable, when in fact it was simply mispriced against the wrong risk model.
There is a second layer of complexity that is easy to miss. Many of these landlords are converting a property that already carries a commercial mortgage, sometimes on a semi-commercial basis where flats sit above the retail units already.
Unwinding an existing charge, sequencing a development facility against it, and then refinancing the completed flats onto buy-to-let (BTL) terms is a three-stage process that has to be planned before the first spade goes in, not worked out midway through.
Get the sequencing wrong and a landlord can find themselves part-way through a conversion with no clear route to the financing they need at the end of it.
Every landlord who converts a redundant commercial unit under permitted development rights takes a building that was contributing nothing to the housing stock and turns it into homes, and does so faster and more cheaply than a conventional planning process would allow.
A six-flat scheme above three empty shops will never make a headline in the way a 200-unit build-to-rent block does, but multiply it across every high street with a vacancy problem and the numbers start to matter.
What these landlords need, more than anything, is somebody who can read the whole picture before the first mortgage application goes in. Someone who can help them understand which lenders are best to approach, how the existing mortgage needs to be handled, and what the exit actually looks like once the building is finished.
Landlords who get that guidance early on can go on to convert their empty units into finished flats without issues.
Jorden Abbs is CEO of Commercial Trust