Quantity Surveyor: What a Development Lender Relies On

A development loan is advanced against an asset that does not exist yet. The developer wants the build funded and the builder wants to be paid, so each has a reason to read progress generously. A lender has neither the skills nor the time to walk a site every month. So it appoints a surveyor whose duty runs to the lender, and it makes that surveyor's report a condition of every advance. The developer usually bears the cost. The client is still the bank.

Independence is the point of the arrangement. The practice information published by RICS, the professional body, says the monitoring surveyor should be appointed by and responsible to the lender. A developer's own QS may be excellent and honest, and is still working for the developer. In 2026 the High Court in England found that a monitor which had earlier acted for the developer on the same scheme, without the informed consent the RICS guidance calls for, was in a clear conflict, in the court's words "marking their own homework". The court also treated advice on the contract sum, overrun risk, programme and costs to complete as within the monitor's job.

The work comes in two parts. Before approval, the initial report tests whether the budget will build the building. The surveyor reads the plans, the building contract, the cost plan and the programme, compares rates with similar jobs, looks at the contingency, and says whether the consents and insurances are in place and the contract type leaves the risk where the lender expects. A lender may also ask for a view of the builder's ability to carry the job.

Then, usually monthly, the surveyor inspects and reports:

Materials bought but not yet fixed to the building are a recurring argument. Many lenders will not fund goods held off site, or will fund them only with evidence of ownership and insurance, because a pallet in a supplier's yard is not security. The last line of the report does the most work, and it has its own page.

A developer is building a childcare centre with four shops beside it, under a US$6.0m fixed-price contract with a 5% retention. The case is constructed for this page like every figure in it. Before this claim US$2.54m has been certified. The builder claims US$640,000 for the month, with the structural frame shown as complete. On site, the surveyor finds about 70% of the upper frame fixed, and steel for the rest still at the fabricator's yard, and certifies US$560,000. The report also lists US$180,000 of work the contract does not cover: ground conditions at the rear of the site that the builder has notified but nobody has yet approved.

The builder's claim was US$80,000 too high, and that part was easy. The harder news is the second table, which the builder's claim could not have shown. The lender does not release the US$532,000 until the developer has put in US$95,000 or the variation has been resolved at a lower price. The contingency and the 5% are the example's, not a market norm.

One limit is worth knowing. The surveyor's figure governs what the lender will advance, not what the developer owes. Construction payment statutes run to timetables of their own for claims. In New South Wales and New Zealand, a payer that does not answer a valid claim in time with a payment schedule can become liable for the amount claimed, which can be more than the surveyor certified. The UK works through payment and pay less notices.

DEFINED IN ONE PARAGRAPH → · DRAWING A DEVELOPMENT LOAN → · PROGRESS CLAIM →

Three professionals are often confused. The valuer says what the finished property will be worth, and that figure sets the on-completion value the loan is measured against. The quantity surveyor says what it will cost to get there. A file needs both, because a well-costed building can still be worth less than it cost.

The contract administrator, in some contracts the architect or the engineer to the contract, issues payment and completion certificates between the developer and the builder. That person acts under the building contract, not for the bank. And the building authority or private certifier decides whether the work complies with the building rules, a separate question from whether it was worth what was paid. The lender's surveyor does not replace any of them, and a QS report is not a certificate of compliance.

The first test comes at approval. An initial report that lowers confidence in the budget should change the deal, through a bigger contingency, more equity or a different builder, and not simply be filed. A developer who resists the lender's surveyor or asks for a friend to do the job has told the lender something.

During the build, the lender reads the sequence of reports rather than any single one. A contingency drawn faster than the work advances, variations that stay unpriced for months, and a finish date that moves a little every time are each ordinary alone and a pattern together. In Issue 08 the file arrives with a builder's tender and not a signed contract, which is a point the surveyor would raise early. The certificate is also the lender's protection if the file later goes wrong: an advance made against a proper report is easier to defend than one made on the builder's word.

ISSUE 08 · BASALT RIDGE → · THE DEVELOPMENT LOAN FILE → · COST TO COMPLETE →