A Cost Buffer Facility is a type of Second Charge Revolving Facility reserved specifically for unforeseen or variable costs during a property development project. In UK development finance, this facility acts as a contingency line, available if construction expenses exceed budget due to material inflation, programme delays, or scope changes. While not always drawn, having this buffer in place provides lenders and developers with confidence that the project has a degree of financial resilience. Interest typically applies only to drawn amounts, and access may require updated cost reports or revised QS sign-off.
Cost Buffer Facility sits within the broader Second Charge Revolving Facility structure, functioning as a contingent funding layer designed to absorb construction cost overruns without disrupting the primary development loan. In practice it operates alongside instruments such as the Top-Up Facility, although it is more tightly governed and typically only accessible on verified cost escalation. Lenders often require updated QS reports before release, ensuring discipline in drawdowns. The facility may also be constrained by legal protections such as Power of Remedy provisions, which regulate corrective actions and enforcement rights. Its adequacy is frequently monitored through ratios like the Security Coverage Ratio (SCR), which helps assess whether the project retains sufficient collateral headroom under stress conditions.
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