Positive covenants are undertakings by the borrower to perform specific actions throughout the life of a property development finance UK agreement. These often include maintaining adequate insurance, complying with planning permissions, completing construction within set timeframes, or providing regular updates and financial information. They help ensure the development stays on track and that the lender is kept informed of key project milestones and risks. Failure to comply with a positive covenant may lead to a breach of contract or event of default under the facility agreement
In practice, positive covenants form part of the ongoing risk management framework within a development facility, requiring the borrower to take active steps that protect both project viability and lender security. They sit within the wider category of Legal Concepts & Obligations and are often considered alongside Negative Covenants, which restrict certain actions rather than requiring them. For lenders, compliance with positive covenants provides early visibility of construction progress, cost pressures and potential delivery risks. These obligations can also influence how interest and repayment arrangements are monitored, particularly where a facility includes features such as Deferred Interest to Exit, where project performance remains critical throughout the funding term.
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