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Converting commercial property into residential housing

View profile for Michael Rabbett
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Converting commercial property into residential units is big business. An old factory bought for £250,000 and converted into 10 residential units, each valued at £150,000, could net a massive profit for the developer willing to make the investment. Such development projects are currently in vogue. The government is actively encouraging commercial to residential conversions and there are plenty of old offices, shops, and industrial properties up for grabs.

In 2013, the Town and Country Planning Order introduced what is known as ‘Class J’ development, which removed several constraints from these kinds of developments. It introduced ‘implied permission’ for properties being used as offices to be converted into dwelling houses without the need for full planning applications.

With a surplus of old office buildings and a constant and rising demand for affordable housing, the move was welcomed by the building industry but came up against criticism from other quarters as the measure was seen as eroding planning laws.

However, Class J allows developers to make the most of previously unusable and low value property, often in prime central locations. If you are thinking of moving into property development, here are some top tips for maximising your success rate and staying on the right side of the law.

Does the property qualify for Class J development?

There are several pinch points that could block your plans immediately. While the 2013 Order took the brakes off development for office-to-residential plans, you will need to check if the property has been:

  • used within Class B1(a) (offices) definitions immediately prior to 2013
  • a Listed (grade I or II) building or monument
  • part of a safety hazard area or formed part of a military explosives storage area Permission for a change of use may not be required if the building was previously classified as an office but will be needed if it was a warehouse or any other kind of commercial building. A building under Class J regulations cannot if it was used for anything other than offices. It’s important to note that some types of offices are exempt from Class J classification, including estate agents or accountants’ offices, so double check before you start knocking down walls.

Access

Building status is not the only thing that dictates if conversion can proceed. One key aspect to consider is access. Commercial property in a town centre may be desirable but, may prove logistically challenging if there is limited access (for example, located in a pedestrianised area). Class J doesn’t mean you have instant permission to get started on a development and the Local Authority may challenge the plans based on accessibility issues alone.

Change of use vs conversion

While Class J permits change of use without planning permission, the need for conversion means that planning permission may have to be sought. Redesigning the layout of a building or extending it could require planning permission, even if the building falls within the Class J guidelines.

Removal of hazardous material

A lot of commercial property built in the 1960s and ‘70s has one very big problem – asbestos. Its removal and disposal is strictly regulated, and can be extremely costly. If you’re a first-time developer then make sure that you don’t have to factor the removal of hazardous material into your costs as it could effectively wipe out any profit margins at a stroke.

Additional costs

Conversions can be subject to additional costs such as the Community Infrastructure Levy (CIL). This is based on the increase in floor area (and can be payable even when there isn’t an increase). CIL is designed to generate income for Local Authorities to put infrastructure in place that will help the development of communities. It’s advisable to double-check as to whether your conversion is subject to CIL by talking to your solicitor and local planning authority.

Covenants and deed guidelines

One last check needed before you start work is on the property title deeds. It is essential that you check thoroughly to ensure there are no covenants restricting use to purely commercial operations (which is often the case with old inns and pubs), or that make conversion into residential property impractical. With older properties, it may be worth asking a conveyance specialist to dig through the records and double check that your 21st century development will not be scuppered by an obscure clause written a hundred years ago.

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