Property Case Study: Airspace Development

24 Oct


  • Thomas Carroll’s property team were approached by a finance broker contact. A client of theirs was working on a development project and they wanted us to help them meet the requirements of the lender involved.
  • The project involved an exciting development of the airspace above an existing freehold to create a series of apartments.
  • The lender was concerned about the delivery of the project and the risk of damage to the existing freehold, which would cause significant delay to the project and the payback of the loan.
  • Working with the finance broker, their lawyers and the developer, our property team established the interests of the various parties in the development and their concerns.

The Solution

The matter needed to be resolved quickly to allow drawdown of the loan and to enable the project to start. With the clock ticking, we plotted the best route forward and arranged a policy that would protect the developer (Employer) against any damage to the works from the start of the project up to practical completion.

The lender was concerned that if the project was delivered later than expected, the developer would be subject to additional interest costs. However, we also negotiated ‘Delay in Start Up (DSU)’ insurance that would protect their revenue in the event of the project not delivering on time as a consequence of damage sustained during the development phase. This was all achieved within 48 hours of the initial enquiry.

As well as providing the lender with the reassurance they needed to lend the money, it also provided the developer with a ‘first party’ policy. This meant that in the event of damage to ‘the works’, they could make a claim themselves. It would also allow them to make a secondary claim if there was a delay as a result of the damage.

Barriers to Overcome

Whilst the lender regarded the new insurance arrangements as meeting some of their requirements, they still requested a number of clauses to be added to the developer’s insurance policies. Most Lenders’ Interest clauses are not widely accepted by the insurance marketplace and must be negotiated with each insurer (click here to learn more).

We worked with the finance broker’s lawyers and the insurer to reach an agreement on the clauses that would be added to the policy. Broker letters are often worded strongly in the favour of the lender, without an understanding of what is achievable with a particular insurer and can cause a sticking point. However, using our understanding of the clauses and typical wordings of these letters, we were able to negotiate with each party and understand the gravity and purpose of the letter. Our expertise enabled us to recommend and agree suitable wordings that worked for all.

The End Result

After a call very close to drawdown of the loan, the situation was resolved within a week. This prevented the lender from refusing to fund the project or the developer paying penalty costs for not meeting the lender’s strict requirements.

We are pleased to say that in the end, all parties were satisfied with the arrangements and the project was successfully delivered to the benefit of all parties.

Contact our Property Team Today

If you need advice on a property matter or have any questions relating to insurance, please contact our property team today on 02920 858618 or email