Guide
Is development exit finance regulated, and what protects you
Updated
Borrowers often assume any lending is regulated lending, and in commercial property that is usually not the case. It is worth understanding before you sign, because the protections you might expect to fall back on may not be there.
Why most of this lending is unregulated
Broadly, consumer protections in UK lending attach to borrowing by individuals, secured on a home they or a relative occupy. Development exit finance is normally lending to a corporate borrower against property held for investment or sale, so it typically falls outside that.
That does not make it improper or unsafe. It means the framework is contract law and the terms you negotiated, rather than a rulebook that fills gaps in your favour.
What you may not have
Where a facility is unregulated, the Financial Ombudsman Service and Financial Services Compensation Scheme routes that consumers rely on may not be open to you, and the FCA's Consumer Duty applies to firms in respect of retail customers rather than to every commercial counterparty.
So the protection is the document. Read the facility letter and have a solicitor read it, particularly the default provisions, the extension terms and anything that lets the lender re-price or re-value during the term.
Check the firm anyway
Many firms operating here are authorised for other activities even where this particular facility is not regulated, and the FCA's Financial Services Register is free, public and searchable. Look the firm up before you send documents or pay a fee.
The FCA also publishes guidance on protecting yourself from scams, and the pattern it describes fits this market: pressure to pay an upfront fee quickly, to an entity whose name differs slightly from the one you were introduced to.
Fees paid before an offer
Be careful with fees payable before you have a written offer. Commitment and application fees do exist legitimately, and they are also the mechanism most used by firms that never intend to lend.
Ask what the fee buys, whether it is refundable and on what conditions, and get the answer in the facility documentation rather than in an email. If a firm resists putting a fee condition in writing, that is the answer to a different question.