Permitted Development

Introduction

Since September 2020, the law surrounding Permitted Development Rights has changed, providing developers with greater opportunities to convert commercial buildings into residential property without having to obtain planning permission.
To provide a clear overview, this dedicated booklet explains:

• The meaning of Permitted Development Rights

• How the law has changed from September 2020

• Permitted Development Restrictions

• Converting Commercial to Residential Property

• What Developers need to consider

• How HJ Collection can help

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What are Permitted Development Rights?

Permitted Development Rights is Government Legislation that was originally granted by Parliament. As a result of general planning permission, the legislation permits property owners to make changes to the structure and its use without submitting a planning application. Since 1948, when the UK planning system was established, Permitted Development Rights have evolved significantly and vary depending on location. For example, Permitted Development Rights vary in Scotland compared to England.

As a general rule, if you want to change the use of a building from one 'use class' to another, for example, from an office into a restaurant, you will need planning permission. A growing number of changes in use class, however, are covered by Permitted Development Rights, which means no planning permission is required.

 

Five years ago,  the  General  Permitted Development Order (GPDO) amendment was introduced, which allows individuals to convert a commercial property into a residential dwelling without securing planning permission, provided the conversion is within the Permitted Development Rights, or within the same use class. 

 

Permitted Development Rights have been updated again as of September 2020, allowing developers to convert commercial and retail buildings into housing without submitting a full planning application, thus extending the Permitted Development (PD) Rights that already permit the conversion of office buildings. A new Class ZA Permitted Development Right has also been introduced to help 'deliver much needed new homes and revitalize town centres', allowing the demolition of commercial buildings to be replaced by either a detached block of flats or a detached house.
However, there are a number of restrictions that apply to the building that can be demolished, as follows:

• If the old building was constructed after 31 December 1989;

• If the building is listed;

• If the footprint of the building exceeds 1,000 square meters; and

• Unless the old building has been vacant for at least 6 months immediately prior to the application for prior approval.

In addition, new changes to Permitted Development Rights allow property owners to add two additional floors to existing houses without submitting a planning application. This will allow developers to expand buy-to-let properties into Houses of Multiple Occupations [HMOs], or homeowners to increase their living space without moving.

Permitted Development Restrictions

Permitted Development Rights are not applicable to all buildings. Currently, it is illegal to build without a planning application if the building falls under one of the following circumstances:

• Conservation Areas National Parks

• An Area of Outstanding Natural Beauty A Listed Building/ Schedule Monument

• If the property is located within an area of scientific interest

• A Safety Hazard Area

• A Military Explosives Area

 

Permitted Development Rights may be restricted or revoked in a number of situations, in particular when a property's changes are likely to have an adverse effect on the local community, under what is known as an Article 4 direction. This is also likely to be the case if the property is listed. Note that Permitted Development Rights will vary by the local authority, so it is important to research your local area before beginning any changes to your property.

Converting Commercial to Residential Property

Due to the amendment to the General Permitted Development Order (GPDO) in 2015, commercial properties are increasingly being converted to residential uses. The number of commercial conversions across the UK increased by 40% between 2016 and 2017.
Under the GPDO, however, it is not as straightforward as it seems to convert a commercial property into a residence. You should understand how to finance the building at various stages of development before undergoing the conversion process. Unless you are a cash buyer, the commercial property will initially be financed and owned under a commercial mortgage agreement.

This means any finance or funding raised will be based on the commercial value of the property as opposed to its potential residential value. Only after a 6-month period or after the conversion work commences can you revalue and refinance the property under a residential mortgage. In contrast to renovating a house into an HMO, for instance, converting a commercial property to residential use requires a greater level of investment due to the scale of the work that is required.

Is Commercial Property a ‘good’ investment?

In spite of the difficulties involved in financing the redevelopment of a commercial property into a residential dwelling, the process represents an excellent investment opportunity. The shift in working culture brought on by the COVID-19 pandemic has caused business organisations to relocate to remote locations or create hybrid office environments whereby employees split their time between the office and their homes. Furthermore, a growing number of commercial properties have become vacant in recent years, as more and more retail outlets have moved their business online. This trend will likely increase as small businesses struggle to survive during the current economic decline, creating a "buyer's market."

Further, as commercial properties are strategically located within town and city centres, they provide easy access to transport links, high streets, and other relevant amenities. Thus, the location of these properties provides an ideal opportunity to create a residential development sure to appeal to young professionals trying to find a new, modern home close to their work and social life.