A Side Letter is a legally binding document used to clarify, supplement, or slightly vary certain provisions of a main agreement, typically without altering the core contract. In property development finance UK contexts, side letters are often used to address specific obligations, provide informal concessions, or confirm certain understandings between lender and borrower. While they sit alongside the main agreement, they carry legal weight and must align with the primary contract to avoid contradictions. Developers may see side letters addressing project milestones, fees, or bespoke lender requirements outside standard facility terms.
In practice, a side letter allows parties to a funding transaction to document specific commercial arrangements without reopening the wider Contractual Agreement. This can be particularly useful where a lender wishes to grant a limited concession, impose additional reporting requirements, or confirm how certain provisions will operate during the life of a development facility. Unlike an Agreement Fee, which addresses a specific cost associated with documentation and execution, a side letter is generally used to record tailored obligations or understandings. It may also become relevant where funding structures involve IRR-Hurdle Preferred Equity, particularly when investors require bespoke rights or project-specific protections.
View glossary entry