You may think you already spend too much time in the office; how about living there?
Office to Residential Conversion
For an initial fixed period of three years from 30 May 2013 The Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2013 permits a change of use of office buildings (Class B1(a)) to residential dwellings (Class C3) without the need to apply for planning permission.
With stagnant demand for new office space, and the spectre of vacant property rates, this measure will be of considerable interest to commercial landlords and investors alike. However, the change is perhaps not as far reaching as one might first assume.
First, there are a number of exempt geographical areas within the order itself. These exempt areas include, for example, blanket exemptions for the whole of the City of London and the whole of the Royal Borough of Kensington and Chelsea. In other boroughs, smaller areas of nationally significant commercial areas are excluded, such as the Royal Docks Enterprise Zone in Newham.
Second, local authorities may apply for an exemption for other commercial areas on the grounds of their trade importance, or look to restrict permitted development rights by way of an “Article 4 direction” (which would be revealed by a local authority search), or conditions attached to a planning application.
When carrying out due diligence on office buildings, potential converters will need to be aware that although the actual change of use may be permitted, planning permission may well still be required for the conversion where there are associated external or structural works. The new policy does not affect the need for building regulations approval for relevant works.
Additionally, prior to commencing a conversion, the developer will need to apply to the local planning authority for a decision as to whether the local planning authority will need to approve proposals relating to the transport and highways impact of the development and/or potential contamination of flooding risks resulting from the conversion. It remains to be seen how stringent each planning authority will be in considering these issues.
Other issues to be considered on purchase include stamp duty land tax (the higher residential rates may apply when the space has already “become” residential and whether VAT is payable or can be disapplied. Indeed, in the case of a large scheme with associated works requiring planning permission, there could be a payment due for Community Infrastructure Levy or the imposition of a requirement to provide affordable housing resulting from the conversion to residential space. Owners of leasehold office properties will be further burdened by any restrictions in their leases, and the relationship between their space and other space in a shared building.
While converting redundant office space to more valuable residential accommodation may seem like an excellent way to add value to investments and bring properties “back to life”, we strongly suggest that you speak to us and seek specialist advice as to whether planning or other consents may be needed.
PLEASE NOTE: this briefing note contains information about current legal issues and is only intended as a general statement of the law – it does not give legal advice. No action should be taken in reliance on this note without specific legal advice.
For further information please contact:
Martyn Emmens
Solicitor, Property
Telephone: +44 20 7845 7435
Email: martynemmens@iwg.co.uk