A developer calls on Tuesday morning with a site in BS1 and six units.
Before you open the lender panel, pull comps, or draft a heads of terms, you need one answer:
Is there enough in the deal to justify the next hour of your time?
That answer is residual land value.
Not a full credit submission. Not a QS report. Not a planning opinion.
A fast, defensible residual — run in ten minutes — that tells you whether the site is worth a call back.
This post is for brokers who place development finance every week and need a repeatable gate, not a spreadsheet hobby.
What residual land value actually means
Residual land value (RLV) is what is left for land after you deduct everything else from gross development value (GDV).
In broker terms:
RLV = GDV − development costs − finance − target profit
Or, rearranged for how you actually work a lead:
Can the developer pay £X for this site and still hit a margin the lender will accept?
RLV is not an opinion. It is arithmetic.
If GDV is wrong, RLV is wrong. If S106 is guessed, RLV is wrong. If build cost is a finger in the air, RLV is wrong.
The broker's job at qualification stage is not to be precise to the pound. It is to be directionally right — and to know which inputs are soft before you promise a lender meeting.
The broker's 10-minute qualification stack
You do not need a full viability model to qualify a site. You need five numbers and one margin assumption.
1. GDV (gross development value)
Units × achievable £/sqft (or £/unit), adjusted for tenure split.
Ask the developer:
- How many units?
- What NIA?
- What are they assuming per sqft — and on what evidence?
If they cannot answer, that is useful information. You are not qualifying a site. You are qualifying whether the sponsor has done their homework.
2. Build cost
Total construction including prelims, not just shell and core.
Rule of thumb for a first pass: £/sqm from BCIS or recent comparable schemes in the same LPA band, plus a contingency line you can defend.
3. Professional fees and planning
Typically 10–15% of build for a first-pass residual. Separate planning spend if the permission is not yet granted — lenders treat that differently.
4. S106 and CIL
This is where most broker residuals die quietly.
- CIL is formulaic — charging schedule, net additional floorspace, zone rate.
- S106 is negotiated — per-dwelling contributions, highways, education, affordable housing quantum.
If the developer says "we'll sort S106 at planning" and leaves a zero in the model, your residual is not a residual. It is a hope.
(We cover S106 properly in the next post in this series: What a broker needs to know about S106 before placing a development loan.)
5. Finance cost
Rough-order: total cost × rate × term, or use the developer's existing lender indication if they have one.
At qualification stage, you are not underwriting the facility. You are checking whether finance cost fits inside a plausible cost stack.
6. Target profit margin
Most development lenders want 15–20% profit on GDV as a minimum viability threshold. Some will flex. None will flex to zero.
The residual is what is left after all of the above — including margin.
Worked example (broker shorthand)
| Line | Assumption | |------|------------| | Units | 6 flats | | NIA | 420 sqm | | GDV | £3,150/sqm → £1,323,000 | | Build | £2,400/sqm → £1,008,000 | | Prof fees (12%) | £120,960 | | S106 + CIL | £180,000 (must be evidenced, not guessed) | | Finance (indicative) | £95,000 | | Contingency (7.5%) | £75,600 | | Target margin (18% GDV) | £238,140 | | Residual land value | ~£(395,300) |
In this example the numbers do not stack. RLV is negative.
That is not a failure. That is the gate working.
You have saved yourself a lender call, a disappointed developer, and a credit file that would have been killed on first review.
Your next move is not to force the deal. It is to find which input is wrong — GDV too high, build too low, S106 missing — and have that conversation before anyone gets on a call with a lender.
Three questions that separate a qualified site from a time-waster
Before you book the lender intro, ask:
1. "What is your GDV evidence?"
Comps, agent letters, recent exchanges in the same postcode sector. Not Rightmove asking prices from three streets away.
2. "What is in your S106 and CIL line?"
If the answer is a round number with no agreement or comparable precedent, mark the line as unverified and haircut it — or stop.
3. "What land price are you trying to support?"
Compare their ask to your residual. The gap tells you the conversation you are actually having:
- Ask below residual — viable subject to diligence.
- Ask above residual — negotiation problem, not a finance problem (yet).
- Ask above residual and sponsor won't move — pass.
Brokers who run this check early keep their lender relationships clean.
When the numbers do not stack
This happens more than half the time on cold leads. That is normal.
Your options:
- Send it back — "The residual does not support your land ask at current assumptions. Here is what needs to change."
- Restructure the ask — fewer units, different tenure mix, phased delivery, mezz behind senior (different conversation).
- Park it — permission not granted, S106 not agreed, comps not there yet. Set a trigger and move on.
What you should not do: package a negative residual into a lender submission and hope the credit committee does not notice.
They will notice. Usually in the first five minutes.
What this sets up for the lender conversation
Residual qualification is step one. It is not the submission.
If the residual works, the lender will still ask:
- LTGDV — how much debt against GDV? (Covered in How lenders use LTGDV.)
- S106 structure — what is evidenced vs assumed?
- Sponsor track record — who is delivering this?
- Planning status — outline, reserved matters, conditions discharged?
Running the residual first means you arrive at those questions with a sponsor who has already been stress-tested on the basics.
That is the difference between a broker who introduces deals and a broker who places them.
How to run this faster on every lead
You do not need a new spreadsheet for every site.
You need:
- A consistent cost stack template (same lines, every time).
- A GDV comp check (even rough) before you trust the sponsor's number.
- A separate S106/CIL line — never buried inside "planning costs."
- A recorded assumption log — what is evidenced, what is sponsor-declared, what is missing.
PlanSureAI is built around this workflow: postcode in, constraints and planning context surfaced, viability and pack structure assembled so the broker can see what is published evidence and what is sponsor input — before the lender pack goes out.
The goal is not to replace your judgement. It is to stop you spending an hour on a site that fails arithmetic in ten minutes.
The series
This is post one of three for brokers placing development finance:
- Residual land value — qualify the site (this post)
- S106 for brokers — read the obligations before they kill the deal
- LTGDV for lenders — speak the credit committee's language on day one
Run the residual first. Everything else follows from whether the numbers stack.