close
Alex Ground, partner at Russell Cooke

Permitted Development Rights for office to residential conversion - an update

The Conservative Party promised to extend the Permitted Development Rights after the General Election. The issue now remains will they be extended and when? Alex Ground explains the key issues to consider.

The UK government introduced a temporary Permitted Development Rights (“PD Right”)  in 2013 allowing offices to be converted into homes without the need to apply for full planning permission.

"The PD Rights have had a mixed result, with some areas having poor quality office space removed and driving up rental values."

Prior to the election when the Town and Country Planning (General Permitted Development) (England) Order 2015 was published there was no extension of office to residential rights. However, the Conservative Party promised to extend the PD Rights after the General Election. The issue now remains will they be extended and when.

The PD Rights have had a mixed result, with some areas having poor quality office space removed and driving up rental values. Whilst other areas, particularly where there is a shortage of housing have suffered a decline in available commercial property. The ability to use these PD Rights has lead to a number of interesting points since their introduction:

  1. Class O (formally Class J) only applies if the proposed change is from a use within B1 (a). Whilst some have tried to argue that it is the lawful use that is relevant (which therefore invokes considerations of whether if permission was granted for B1 (a) but has not been used as such since this qualifies) several LPAs have refused applications where the actual use at May 2013 has not been B1 (a). It will be interesting to see what date the government use for lawful use if the rights are extended, whether it remains as at May 2013 or a certain number of years prior to the prior approval
  2. Class O (formally Class J) only applies if the entire unit was used for B1 (a). A plan to convert an office building in north London to seven residential units was prevented as it was held that the offices which occupied a three storey townhouse were ancillary to the primary use of the land for warehousing and distribution which lay to the rear. Similarly in east Yorkshire, the conversion of a 2,100m2 office block to residential was blocked as it formed part of a larger site used for the production of industrial generators which fell within B2. These examples highlight the importance of looking at the entire unit of occupation and ensuring it is solely B1. 
  3. Conditions attached to historic permissions restricting use to only B1 (a) can prevent the change of use being allowed. S73 applications may need to be made to have them varied (and therefore appropriate planning justification for that removal needs providing). 
  4. Buildings within the curtilage of listed buildings do not benefit from PD Rights. The conversion of a building in west London to eight residential apartments did not comply with PD Rights. The building shared a common garden and the same business use occupied both and therefore it was held the building was interconnected and interrelated. It was held that the office block was listed by virtue of falling within the curtilage of a listed building.
  5. The prior approval process replaces the conventional planning application process. Usually where a host of local and national planning policies are required, PD rights only require information on flooding, highways and contamination issues. An appeal decision in 2014 upheld that PD Rights could only be rejected on the grounds of flooding, highways and contamination issues. This is of benefit to developers but can have potential implications for property owners and developers. PD Rights remove the objection process which has potential implications for neighbouring property owners who want to object or develop on neighbouring land. Residential uses are perceived as having a higher threshold in relation to rights of light (common law) and daylight/sunlight (town planning) therefore if the neighboring property has been granted a change of use to residential, then any development next door which infringed rights to light could result in a refusal or an injunction/damages.  
  6. Developers still need to abide by Building Regulations approval and any s.106 Agreements which are required by the Council. A number of local authorities in London, have permitted the conversions under PD Rights but insisted on s.106 Agreements being entered into to ensure development remain car free with obligations attached indefinitely to the Property. The obligations often require that the Property is marketed car free and no parking permits can be applied for. The target market of the flats should be considered as parking may be a key selling point. 

Extension of Time

The uncertainty about the extension of time of these PD Rights has lead to concerns over whether developers can complete their office-to-residential conversion schemes and begin use by 30 May 2016. Questions are being raised as to what constitutes “C3 use has to have begun by 30 May 2016”. The general consensus is that the dwellings would not have to be occupied to fulfill the PD Right requirements.

"In the cases where residential use is not begun by 30 May 2016, the question remains whether local authorities will take enforcement action"

Past case law in relation to change of use has set out that conversion into a dwelling which was not occupied consisted of a change of use. Therefore, provided the dwellings are fully fitted out, it could be argued that the change of use has occurred and development is complete. Developers should therefore ensure they have fitted out the units to avoid the risk of sites losing potential value if they have not yet begun. 

In the cases where residential use is not begun by 30 May 2016, the question remains whether local authorities will take enforcement action and whether any subsequent completion of the scheme and commencement of residential use after the deadline could result in a breach of planning. Local planning authorities have discretion as to whether they take action, however some local authorities who are less supportive of the PD Rights may take this as an opportunity to try and negotiate affordable housing payments by way of full planning application instead of enforcing.

If and when PD Rights are extended the government has stated that blanket exemptions will not be permitted for example in the City of London and rather Article 4 Directions  (these remove defined permitted development rights for usually a much more tightly drawn area than the blanket exemption granted under the regulations) will have to be approved. 

In order to make an Article 4 direction the LPA must satisfy a number of notification requirements to the landowners affected and the general public using site notices and newspaper publication in order that representations can be made. The date when the direction comes into force must also be specified; this date must be between 28 days and two years following the date on which the representation period began. In order to avoid paying compensation for withdrawal of the PD rights the LPA must give 12 months notice before they come into effect.

"It is being rumored that the rights will be extended until 2019. In the mean time developers are urged to fit out units to ensure they are in use by 30 May 2016"

Therefore if the new extended PD rights do come into effect in areas where Articles 4 Directions have not been approved, developers would be advised to move very quickly to put in their applications as there will be a very tight window to take advantage before LPAs undoubtedly make Article 4 directions for the same areas. 

Currently it is being rumored that the rights will be extended until 2019. In the mean time developers are urged to fit out units to ensure they are in use by 30 May 2016 and if the extension comes into effect developers should make the most of opportunities in areas that are currently exempted before Article 4 Directions come into effect. 

Alex Ground is a partner at Russell Cooke