Financing Property Developments with Deferred Consideration

Learn how deferred consideration and development finance work together to fund property projects with less upfront cost and greater flexibility

August 12th, 2025

Financing Property Developments with Deferred Consideration

Learn how deferred consideration and development finance work together to fund property projects with less upfront cost and greater flexibility

What is Deferred Consideration?

Deferred consideration in property development is a flexible payment structure often used in real estate and construction projects. It refers to part of the purchase price being paid later, rather than in full at the outset.

This approach allows buyers, sellers, developers, investors, and contractors to align payments with project milestones, performance goals, or agreed conditions—rather than requiring all capital on day one.

A Real-World Example

We recently helped a developer purchasing a plot of land with planning permission for a detached property. The land was being separated from an existing garden.

Under the agreement, the developer acquired the land, completed the build, and then—on sale—paid the vendor the agreed purchase price plus 20% of any sale value above £450,000.

For the developer, this deferred consideration arrangement meant lower initial capital outlay. For the vendor, it secured the desired price and an uplift through a share of the gross development value (GDV).

The Lender’s Perspective

While attractive to both vendor and developer, this structure can present challenges for some development finance lenders:

Security concerns – Vendors often want legal protection before giving up ownership.
Joint ownership issues – Vendors may prefer not to be tied into the development loan structure.
Risk balance – Developers might have minimal cash at risk initially, leaving the lender carrying the bulk of the financial exposure.

To gain lender approval, you must ensure:

Clear purchase contracts – Clearly defining ownership, payment schedules, and responsibilities.
Second charge security for the vendor – Allowing recovery of funds if the developer defaults.
Strong GDV evidence – Demonstrating that, even after the vendor’s share, the lender’s position remains secure.

Why the Right Finance Partner Matters

There are specialist development finance products designed to work with deferred consideration deals. Modern building methods allow for quicker completions, making these arrangements increasingly viable.

For smaller developers, they can be a powerful route into ground-up property development finance without the need for huge upfront capital.

💡 Thinking of using deferred consideration to acquire your next site?
We can arrange tailored development finance to match your project needs.
Contact us today to explore your options.

FAQs About Deferred Consideration & Development Finance

FAQs About Deferred Consideration & Development Finance

1. How does deferred consideration work in property development?
Deferred consideration allows part of the purchase price for land or property to be paid at a later date, often after certain milestones—like completion or sale—are met. It helps developers reduce upfront costs while giving vendors the chance to benefit from a share of future profits.

2. Is deferred consideration risky for vendors?
It can carry risk if the project underperforms or stalls. That’s why legal safeguards—like a second charge on the property—are important to protect the vendor’s position. Working with experienced development finance providers can also reduce risk.

3. Can I get development finance with a deferred consideration deal?
Yes—some lenders specialise in funding projects with deferred consideration structures. The key is demonstrating a strong GDV, a clear repayment plan, and security arrangements that protect all parties.

4. What are the benefits of deferred consideration for developers?
It reduces the initial capital needed, enabling smaller developers to take on ground-up projects. It can also improve cash flow during the build, allowing funds to be focused on construction and sales.

5. Do all lenders accept deferred consideration arrangements?
No—many traditional lenders avoid them due to perceived risk. However, specialist property development finance lenders often embrace these structures when the deal is well-planned and security is strong.

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.