Change-of-Use Risk Factor is a property development finance UK measure assessing the potential financial impact of altering a building’s designated use under planning regulations. This risk arises when local planning authorities require modifications to the intended use, such as converting commercial units to residential or vice versa. Developers must consider potential delays, additional costs, or compliance obligations, which can affect project viability and loan structures. Incorporating the change-of-use risk factor into financial models helps lenders and SME property developers anticipate stress points, optimise loan-to-value (LTV) calculations, and maintain resilience throughout development projects in the UK property market.
This sits beneath Planning & Legal Risk, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Environmental Permit Risk Score, as both are closely related measures used to assess similar aspects of performance or risk. In funding terms, Change-of-Use Risk Factor is most commonly encountered in connection with Fixed Return + Exit Warrants within the property development capital stack.
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