A forward commitment is a legally binding agreement to purchase a property once construction is complete, without funding the build. In UK property development finance, forward commitments differ from forward funding by shifting all construction and cost risk to the developer. These are often used by institutions or funds seeking future income streams while avoiding delivery risk. The buyer commits to a fixed price, typically subject to predefined conditions such as tenant lease terms, completion timing, and building standards. This model gives developers access to an exit route but requires strong delivery capability and capital to fund the build.
In structuring terms, forward commitments typically sit alongside or downstream of a Forward Funding Facility as a distinct exit strategy rather than a construction funding mechanism, requiring the developer to fully finance delivery before sale completion. The agreement is usually formalised through a Pre-Sale Agreement, which sets out detailed conditions precedent around practical completion, tenant covenant strength, and specification compliance. From a delivery perspective, developers must carefully manage programme risk and leasing milestones, as delays or failures to meet agreed criteria can defer or jeopardise the contracted sale. Timing sensitivity is often monitored against metrics such as Refinancing Execution Timeline Buffer, particularly where interim debt funding is in place.
View glossary entry