Since the law changed in 2015 in the UK with the introduction of The Town and County Planning (General Permitted Development) Order, the process of changing the usage of a property from commercial to residential has been simplified.
Between the law's 2015 inception and 2019, 54,000 new residential properties were converted. As a result, there are now a substantially higher number of buildings that have previously been used as commercial properties that can have their usage changed to residential living.
The broadening of this scope offers increased opportunities to developers. However, there are some hidden complexities that property developers should explore before committing to a project to ensure that they fully comply with all the legalities and end up with a successful and lucrative project.
Why convert a commercial property for residential use?
Commercial properties have been a useful commodity for conversion for a long time because they are generally spacious and ripe for development to residential use. This has been even truer in the past year as commercial properties have become less attractive as office or warehouse space. There is simply reduced demand for commercial premises since more employees have been home-based remote workers.
What's more, with an increasing number of commercial premises remaining empty as a result of the pandemic, this has lowered rental potential for commercial landlords and made more properties available to have their use changed. Combined with the fact that there is increased demand for housing in 2021, it has almost become a necessity for some developers to convert older commercial properties into new homes.
Can a commercial property be converted to residential?
Many commercial properties can be converted from commercial properties, such as shops, restaurants or offices to residential homes or apartments. However, before you embark on a conversion, there are several steps to consider first. Importantly, not every property is eligible for a change of use from commercial to residential and it is essential to ensure that the property you have in mind does not fall under this category of exemptions.
What are the exemptions?
Although the majority of commercial premises are eligible to have their usage changed, some commercial buildings cannot be converted into residential, including:
Buildings that are located within National Parks or Conservation Areas
Buildings within designated Areas of Natural Beauty
Buildings that have a listed status
Buildings in an area that is hazardous to safety or within a military explosives zone
Buildings in an area of scientific interest
Is planning permission required?
Planning permission may be required when you are changing the use of a property. However, you will not need planning permission if the conversion takes place under the Permitted Development rights or you are not changing the "use class" of the building.
Up until recently, UK buildings were divided into four different classes: A, B, C and D:
Class A buildings encompassed shops and restaurants
Class B buildings included offices and warehouses
Class C buildings referred to residential buildings, hotels and care homes
Class D buildings included schools, doctor's surgeries and leisure premises
As of 1st September 2020, Class A and D have been revoked, and several buildings from within the Class B category have been recategorised. Many of the buildings within these old classes now fall within one of the following new classes:
Class E governs buildings used for commercial, business or service use
Class F1 is for learning and non-residential institutions
Class F2 buildings include any buildings for local community uses
Sui Generis is the classification given to any building that falls outside the defined limits of any other use class.
You can find more detailed information on building classes and changes here.
Even when there is a change of class, you may not need planning permission, though you might require approval from your local council. For example, shops, banks, retail showrooms and some other commercial premises that are smaller than 150 square metres will need you to apply to the council for a change of use.
However, even with these properties, if you intend to change the building's exterior or move any windows or doors, then planning permission may still be necessary. Additionally, planning permission is also often required for larger premises.
What is "Permitted Development"?
Under the GDPO, there are many cases where change of use may be permitted without planning permission. This can include premises where a developer is changing the use class of a building. However, that is often subject to prior approval.
Prior approval simply means that a developer must seek approval from their local planning authority before commencing work on the building to ensure that certain features of the development are acceptable and they can proceed with developing the premises. The process is relatively simple and you will need to send an application to your local planning authority for this prior approval.
What are the benefits of converting a commercial property?
As a developer, you will find that many commercial landlords are willing to sell for competitive prices, especially in the current climate, which gives a huge scope for a lucrative development project. What's more, many commercial properties are desirably located in urban areas where higher resale prices and residential rentals can be achieved once the project is complete.
Ultimately, a commercial building gives you the chance to refurbish the property in the style that you want without having to start from scratch as you would with a new-build property, allowing for quicker turnaround times on the development.
For more information about residential and commercial property development, selling land, housebuilding and construction, contact us and our team of experts will be happy to assist you.