Abnormal Costs Funding: How to Finance Site Extras in England

Abnormal costs are funded the same way as the rest of a scheme, through the debt and equity stack, but lenders treat them as the riskiest line in your budget. To fund them well, price them early with evidence, carry a proper contingency, and pick a structure that releases money when the ground throws up a surprise. This guide covers what counts as abnormal, what lenders want to see, and the structures that work in England.

TL;DR

• Abnormals are site-specific extras (remediation, piling, retaining walls, off-site highway works) that sit outside a standard build cost.
• Lenders fund against a cost plan. A vague abnormals line, or none, is the quickest way to a lower offer or a decline.
• Homes England ordinarily recommends a contingency of at least 10% of infrastructure, construction and abnormals. Many developers budget less.
• Fund abnormals through senior debt, mezzanine, JV equity or a bridge for the enabling phase. Which one fits depends on your margin and timetable.
• Intensive upfront scoping is cheaper than changing the specification mid-build.

Table of Contents

• What counts as an abnormal cost
• Why abnormals make funding harder
• What lenders want to see on abnormals
• Sizing the contingency
• Ways to fund abnormal costs
• A worked example
• Reducing the risk before you ask for money
• Our perspective
• Talk to us about funding a site with abnormals
• FAQ
• Sources

What counts as an abnormal cost

The Homes England glossary describes abnormal costs as additional or unusual costs you may face when developing a site. Its examples are ground remediation, such as removing Japanese knotweed or dealing with old mine shafts, plus specialist foundations like piling and retaining walls.

In practice, on English sites, the usual suspects are:

• Ground: contamination, made ground, poor bearing capacity, mining legacy, groundwater.
• Ecology: invasive species, protected species mitigation, biodiversity measures.
• Structures: demolition, retaining walls, party wall and neighbouring-structure protection.
• Utilities: diverting or reinforcing services, substation requirements.
• Off-site works: Section 278 highway improvements and similar obligations tied to planning.

The point is not the label. It is that these costs are specific to one plot and cannot be taken from a rate per square foot. Government viability guidance gives a sense of scale: in one Greater London scheme, £180,000 for demolition and remediation made up 12% of the construction budget. On a tight scheme, that is the difference between profit and break-even.

Why abnormals make funding harder

A development lender is underwriting three things: the land, the cost to complete and the exit value. Abnormals hit all three.

They squeeze profit on cost. A scheme is viable only if the value generated exceeds the development costs with an allowance for profit. Add £150,000 of unplanned piling and the margin a lender relied on can disappear.

They are hard to price. Standard build costs usually exclude them. Cost planners distinguish between a standard contingency of around 3 to 5% and a higher, risk-adjusted contingency for abnormal line items, because ground conditions and heritage constraints carry more uncertainty.

The market is not forgiving. The Southern Construction Framework’s Q2 2025 market intelligence forecast overall construction costs rising 2.7% by Q2 2026, with some trades rising faster. A cost plan that was right at purchase can be stale by the time the lender values it.

What lenders want to see on abnormals

Specialist development lenders do not need your abnormals to be small. They need them to be evidenced. Expect to be asked for:

1. Site investigation reports: Phase 1 and, where flagged, Phase 2 ground investigation, plus ecology and arboricultural surveys.
2. A QS-prepared cost plan: abnormals itemised separately from the base build, with quantities and rates rather than a lump sum.
3. A priced mitigation strategy: the remediation or foundation design, not just a number.
4. Contingency shown separately: and sized to the risk, not copied from a template.
5. Planning conditions mapped to cost: which conditions carry spend, and when it falls due.
6. Contractor position: fixed price, design and build, or measured, and who carries ground risk.

The National Infrastructure Commission’s work on cost drivers points the same way at a larger scale. It finds that poor planning, weak design-to-budget iteration and late changes to specification drive overruns. The ICE makes a similar argument in its piece on why projects go over budget so often. A residential scheme is smaller, but the lesson transfers: rigour before you buy is cheaper than discovery after.

Sizing the contingency

There is no single right figure, but there are useful reference points:

Sources: CM3 and Homes England. These are benchmarks, not lender rules. Each lender sets its own approach, so check before you finalise a budget.

A practical approach: hold a modest contingency on the base build, and a separate, larger one on abnormals where investigation is incomplete. As reports come back and the unknowns become knowns, the abnormals contingency can be converted into fixed costs. Lenders like seeing that discipline.

Ways to fund abnormal costs

There are five common routes in England. They are often combined.

1. Senior development finance

Most lenders fund build costs in stages, released as a monitoring surveyor certifies work. Abnormals can sit inside the facility if they are in the cost plan. The advantage is price. The catch is that the leverage is calculated on total cost and on completed value, so a large abnormals line can reduce what you can borrow against the land. Our development finance page explains how this works.

2. Mezzanine finance

Mezzanine sits behind the senior debt and tops up the stack, which is useful when abnormals stretch the equity you need to put in. It costs more than senior debt, so it works when the margin can carry it. We cover how layered facilities are put together in how to structure a development finance deal when margins are tight and the shifting development finance landscape.

3. Joint venture equity

Where debt is capped and your own cash is spoken for, a JV equity partner can fund the gap, including enabling works. You give up a share of profit, but a scheme that would not otherwise proceed becomes deliverable.

4. Bridging for the enabling phase

Some sites need remediation, demolition or a structural fix before a development lender will advance. A short-term bridging loan can fund that first phase, with a refinance into development finance once the risk has been removed and the site is de-risked. This only works with a clear exit, so the plan for the refinance must be credible from day one.

5. Your own equity or land value adjustment

Sometimes the best funding for an abnormal is a lower land price. If surveys uncover a problem after you have agreed terms, renegotiating the price is often cheaper than financing the cost at a margin. Viability guidance recognises abnormals as a legitimate input to land value, so use the evidence.

A worked example

Take an illustrative scheme (not a client case): nine houses on a former garage site in the West Midlands. The base build is estimated at £1,800,000. Ground investigation finds contamination and poor ground.

• Remediation: £120,000
• Piled foundations: £95,000
• Retaining wall to the neighbouring boundary: £40,000
• Abnormals subtotal: £255,000, or about 14% of the base build

Here is what a careful developer does. They take the abnormals to the lender as a separate, itemised block backed by the site investigation. They add a contingency on that block, say 10% (£25,500), because the remediation strategy has not yet been signed off. They ask whether the lender will fund the figure inside the facility, or whether a mezzanine or equity layer is needed to keep the cash in the scheme. And they check whether the seller will accept a reduced price.

The same project with a single line labelled “extras” would likely come back with a lower offer or questions the developer cannot yet answer.

Reducing the risk before you ask for money

Funding is cheaper when the abnormals are smaller and better known. A few habits make a difference.

Investigate before exchange. Spend on surveys while you still have a conditional contract. The cost is small compared with a mispriced site.

Bring a cost planner in at feasibility. CM3 notes that it supports developers at concept stage with cost intelligence to inform land appraisals, feasibility studies and funding discussions. Project management advisers make a similar point: instructing at feasibility, before design is fixed, offers the highest return, because budget and procurement route are still open. The same adviser reports that fees typically sit between 4% and 10% of construction cost, higher for smaller or more complex schemes. On a site with large abnormals, that is a fee worth weighing against the risk.

Design to budget. Foundation and structural design drive a large share of abnormal spend. Remote engineering capacity such as civil and structural engineering support for UK consultancies and contractors can help a team iterate designs to a budget before the cost plan goes to a lender.

Freeze the specification. Changing it during delivery costs far more than scoping it properly at the start, as the NIC findings above stress.

Our perspective

We see the same pattern on abnormals again and again. The deals that fund smoothly are not the ones with the cleanest sites. They are the ones where the developer arrives with the problem already mapped, priced and evidenced.

Our role is to structure around the reality of a site. For a scheme with heavy enabling costs, that can mean senior debt for the build, a mezzanine or JV equity layer for the gap, and in some cases a bridge to get through the first phase. We work with specialist lenders, family offices and private credit funds beyond the high street banks, and we act as a single point of contact from first conversation to completion.

Our advice is simple. Do not hide abnormals in a lump sum, and do not hope the lender will not ask. A lender who finds an unexplained gap in a cost plan will assume the worst. A lender shown a surveyed, itemised and contingency-backed budget will often lend on it.

— James William Dawes

Talk to us about funding a site with abnormals

If you are appraising a site with remediation, piling or off-site works, we can help you test the funding structure before you commit. See our development finance service, or get in touch through our website with your cost plan and site reports. For wider background, our guides cover types of property finance for UK developers and structured property finance.

FAQ

Will a development lender fund abnormal costs?

Often yes, provided they appear in a costed, evidenced budget and the scheme still shows enough margin. Lenders usually release funds in stages against certified work. If abnormals reduce leverage too far, a mezzanine or equity layer can fill the gap.

How much contingency should I allow for abnormals?

There is no fixed rule. Cost consultants talk about 5% or more for abnormal items, and Homes England ordinarily recommends at least 10% of infrastructure, construction and abnormals. Size it to how complete your site investigation is, and confirm the lender’s own expectations.

What can I do if abnormals appear after I have bought?

First, check your contingency and the facility terms. If the overrun is real, options include drawing on a cost-overrun reserve, adding mezzanine or JV equity, or reducing the scope. Speak to your broker and your monitoring surveyor early, before the shortfall holds up a drawdown.

Are abnormal costs the same as a cost overrun?

No. An abnormal is a known site-specific cost that is planned for. An overrun is spend above the budget, which can be caused by abnormals that were missed, inflation or design changes. Good planning turns the first into a line item so it does not become the second.

Sources

• Glossary for Homes England cashflow, GOV.UK
• Financial viability for housing-led projects, GOV.UK
• Market Intelligence Q2 2025, Southern Construction Framework
• Cost drivers of major infrastructure projects in the UK, National Infrastructure Commission
• Why do infrastructure projects go over budget so often?, ICE
• Developers cost planning and project management, CM3
• What percentage do project managers charge in the UK?, Iconic Project Management

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