An agreement fee is a charge levied by the lender for structuring and committing to a property development finance facility. It is generally expressed as a percentage of the total loan facility and is typically payable upon initial drawdown or financial close. In UK property development finance, this fee compensates the lender for the administrative and underwriting work involved in preparing the funding package. It is separate from interest and other arrangement costs, and is commonly included in the total cost of borrowing calculations
In practice, the agreement fee forms part of the negotiated commercial terms documented within the wider Contractual Agreement and is often reviewed alongside a Side Letter where supplementary lender requirements, fee arrangements or transaction-specific provisions are recorded. Developers should assess the agreement fee alongside all financing costs when evaluating funding options, as it can have a material impact on overall project viability and cash flow at financial close. Depending on deal structure, the fee may also influence how other project costs are funded and accounted for, particularly where items such as a Development Management Fee -> Converted to Equity form part of the broader capital structure.
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