Conversion of commercial/industrial and retail premises to residential use under permitted development rights. Following an amendment to the legislation in August 2021 (Permitted development commercial to residential), the scope for converting commercial buildings for residential use increased, and qualifying projects could be completed without full planning permission. In this guide, we will provide a comprehensive overview of the recent changes relating to commercial to residential permitted development, including the law and legislation, the approval process, and a consideration of the advantages and disadvantages of such a project for 2022 and onwards.
The law – Permitted development commercial to residential
In April 2015, The Town and Country Planning (General Permitted Development) (England) Order 2015, better known as GPDO 2015, came into force. It defined as ‘permitted development’, some of the most common modifications to private dwellings, such as extensions, loft conversions, and additional storeys. Under the order, they can be implemented without need for full planning permission, requiring only prior approval by local councils. Approval can only be refused for valid environmental reasons, such as flood risk, conflict with conservation or AONB (Area of Outstanding Natural Beauty) requirements, and so forth.
In August 2021, spurred by the decline in office working and retail trading during the pandemic, these rules for permitted-development conversion were extended to buildings designated Use Class E. The rights themselves are termed Class MA (Mercantile to Abode) rights. Use Class E was created in September 2020, grouping most types of commercial property – retail, offices, restaurants, clubs, health facilities, beauty salons, crèches, gyms, etc – previously classified under separate categories. Notably takeaways, pubs, wine bars, and betting shops are excluded from revised permitted development commercial to residential legislation.
Rather than just permitted-development extensions, these commercial properties can be converted wholly to residential use without full planning permission. Only prior approval from the local council is required, with the same environmental safeguards as those in GPDO 2015.There are several restrictions. The three main ones are that the building must have been in Use Class E for at least two years; it must have been vacant for at least three months; and its total floor area cannot exceed 1,500 square metres. Small shops are excluded if there is no other shop nearby, as are halls and other amenities intended mainly for community use.
Prior approval permitted development
In order to convert a business premises to residential use, first establish that the building comes under Use Class E. That’s not necessarily straightforward. For example, while permitted-development rights don’t attach to historic or listed buildings, they may also be inapplicable to the setting for such buildings. The definition of ‘setting’ is broad; local authorities can exclude entire districts from permitted-development under GPDO Article 4 if they think the character or some other aspect of the area might be disturbed.
Even if a building is evidently Class E, permitted development commercial to residential rights may be unavailable for non-evident reasons. Effects on groundwater, noise, drainage, local employment-promotion policies, flood risk, amenities access, and a host of other considerations may thwart the developer. In any case, external modifications, such as additional windows or doors, are not allowed. They require a separate planning application. In short, permitted-development rights are fraught with traps for the unwary. To avoid disappointment, not to say unnecessary expense, it’s best to consult the local authority directly before making plans.
Once the research is done, an approval application form can be downloaded from the council website and elsewhere. Among other things, it asks for a detailed description of the work, including a plan, and its impact on the area, its residents, and its users.
A Review of permitted and non-permitted commercial buildings
Commercial property types that previously fell under Classes A1, A2, A3, B1, D1 & D2 will now be grouped together under the new Class Use E, while Classes A4 & A5 will be excluded, as are buildings that are historical or intended to be used by the community.
What commercial building types can be converted under Use Class E?
If conditions are met, the Class Use E permitted development commercial property types are as follows.
- Retail shops
- Offices – Financial and Professional Services
- Gyms, Indoor Sports, Recreation, and Clubhouses
- Medical and Health Facilities
- Beauty Salons
- Day Nurseries, Crèches and Day Centres
Under Class Use E, what are the non-permitted development (permitted development commercial to residential) types?
The following property types do not fall under Class Use E.
- Small Shops, if there is no other small shop nearby
- Community Halls and amenities intended for communal use
- Drinking Establishments
- Hot Food Takeaways
- Concert Halls
- Listed/ Historic buildings
The creation of Class MA and Use Class E has made it more feasible to convert a range of commercial building types for retail to residential use, providing they meet set criteria. Although there are a number of commercial properties that are excluded, this new class is certainly a positive and potentially very lucrative change for property developers.
A new lease of life for the high street
These recent class amendments can help pave the way for a revival of high streets in towns and cities across the UK that have seen a sharp decline over the years because of changes in consumer behaviours, brought on by the success of online shopping and the popularity of accessible retail parks.
As a result, many high streets must change and adjust to a more residential and leisure-based approach, promoting the idea of ‘city centre’ living. It is hoped that by providing more flexibility in regard to the commercial use of a building will encourage more tenants and purchasers, boosting national and local economies.
New opportunities for property developers
This presents a fantastic opportunity for property developers looking to buy well-located real estate or repurpose vacant properties in their existing portfolio – something that was much more difficult prior to August 2021.
Overall floor space of any converted property must be less than 1,500 square metres, which is more than enough room to develop a large apartment complex, and depending on an impact assessment, a residential conversion development may also take place in a conservation area. This opens up a range of diverse possibilities that can breathe fresh life into vacant buildings that are not deemed commercially viable as a business.
Even small-scale residential conversion projects can deliver a significant return on investment, generating capital in a shorter space of time when compared to a buy-to-let investment property.
The key disadvantages for many property developers are of course the many pitfalls regarding commercial permitted development rights that could pour cold water on any planning proposals. This is nothing new, however, extensive research is required to highlight factors that are not completely clear and may see the proposal rejected.
In addition, many residential properties require external modifications to enable access, improve ventilation and lighting, and ultimately create an abode that is up to standard. Unfortunately, such modifications would require a separate planning application, further complicating the process. Therefore, any developer looking to take advantage of Class MA must take into account all considerations that could restrict a building’s use, or prevent its change of use.
Class MA (Mercantile to Abode) rights allow for the permitted-development conversion of commercial properties that fall under Use Class E. This means the number of building types that can be converted into a residential abode is much greater than before 2021.
Much larger properties can also be converted, with the minimum floor space increased to 1,500 square metres from 150 square metres, and in terms of location, only the following areas are not permitted under Class MA:
- AONB, SPA, the Broads, National Park, and World Heritage Sites
- Site of Special Scientific Interest (SSSI)
- Safety Hazard Zone
- Military Explosives Area
- Listed Building
- Scheduled Monument
This presents new and profitable opportunities to property developers and entrepreneurs, while repurposing vacant buildings to support the local economy and revive the high street.
Of course, like any development project, there are many considerations that need to be factored in before any planning permission is sought, but the recent changes have undeniably made it much more possible to convert a commercial property into a residential property, creating new business opportunities.