Converting Commercial Property to Residential: How Easy Is It?

When the Government, in 2011, made the initial proposal to permit the conversion of commercial property to residential without the need for a full planning application, it got a mixed response to say the least. It is true that the need for housing is not looking as though it is going to be alleviated any time soon, so is the conversion something you should consider and if so, how do you do it?  

The Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2013 introduced “Class J” development, which introduced an implied permission for properties being used within Class B1(a) (offices) to be converted to Class C3 (dwelling houses) without the need for a full planning application.

Converting commercial property to residential

Whether the development of the property is “permitted” is subject to strict conditions:

  • The property must have immediately prior to the 30th May 2013 been used as offices within Class B1(a)
  • If the property was vacant prior to 30th May 2013, its use must have been within Class B1(a) when it was last in use
  • The property must not be a listed building or a scheduled monument; and
  • The property must not be part of a safety hazard area or form part of a military explosives storage area.

Development is not permitted for properties used for any other purpose than as offices; therefore warehouses and other storage facilities cannot be developed under Class J. It is also important to note that the permitted development is for offices within B1(a) only and this does not include offices for businesses such as estate agents or accountants, so care must be taken when considering this option in line with the property’s current use.

Although the development is “permitted”, it does not entirely remove the requirement for consultation with the local authority; they will still have to give their determination as to whether their approval is required in respect of:

  • Transport and highways impact of the development
  • Contamination risks on the site; and
  • Flood risks on the site.

In order to get this determination from the local authority, you will still need to make an application and although the development itself is permitted without a full planning application, it is still not something that can be completed without an application being made to the local authority. 

Developing the property is not as simple as converting the property. There are legal and practical implications that must be considered if the property in question falls within the “permitted development” criteria and the local authority in turn approve the development as above. 

Planning permission may still be required (!)

It is only the change of use that is permitted, not the actual conversion, i.e. if you need to re-design the layout of the building, knock down walls or extend the building, you may need to seek planning permission for these works. Further, it does not get around the stringent regulations for residential property development and the need for Building Regulations Certificates. Therefore, it may not be quite as easy as it sounds.

Additional costs

You must take into account additional costs such as the Community Infrastructure Levy (CIL) that is potentially payable on a conversion from commercial to residential use. CIL is based on the increase in floor area, but is still largely open to interpretation. This is a particularly apt consideration if the property has been vacant for more than six months prior to the planning permission; if it has, CIL may be payable even if there is no increase in floor area.

Similarly, if you are purchasing a property to convert its use to residential, have you considered the VAT implications? A buyer is very unlikely to want to pay VAT on a property that he intends to convert, but this may affect the price negotiations with the seller.

Legal implications

Even if you get consent from the local authority, it does not necessarily mean that you are able to convert the property. There may be covenants in the title documentation to the property restricting its use to commercial that make it impractical for use as a dwelling house.

Whilst the Government is clearly keen to encourage the development of new houses (as shown further by the recent budget in which the residential development of “brown land” was proposed) the permitted development is not “carte blanche” consent for conversion and it remains, as ever, vital to seek and consider the appropriate professional advice before undertaking any project, no matter how large or small.

For further information

Please contact a member of our Commercial Property team.