Legal viewpoint: Office conversions present difficulties

Permitted development rights introduced in May 2013 enable change of use from office to residential, subject to a prior approval process allowing local planning authorities to block changes on transport, contamination and flood risk grounds, and a requirement that any residential unit thus created must be in use by 30 May 2016.

The government has now consulted on extending these rights indefinitely, subject to councils also being able to refuse prior approval for proposals likely to result in significant loss of "strategically important" office stock. Until such time as residential and office values even out, this process seems set to remain attractive to landowners. Some authorities and sitting tenants are increasingly trying to resist prior approval bids, so applicants would be well advised to consider the planning and property law issues that arise at an early stage.

Office-to-residential change of use rights only apply if the proposed change is from class B1(a) of the Use Classes Order. Some have tried to argue that it is the existing lawful use that is relevant in applying this provision. If consent has been granted for B1(a) use but the premises have not been used as such, do they qualify under this right? Several councils have refused applications where the actual use at 30 May 2013 was not B1(a).

Some authorities are looking for increasingly detailed reports and evidence where developers claim that highways, flooding or contamination risks are not an issue. Proposed mitigation, if required, needs to be robust in terms of both adequacy and feasibility. Conditions attached to historic permissions restricting use to B1(a) can also be an issue. Applications to vary them may be needed under section 73 of the Town and Country Planning Act 1990, for which appropriate planning justification would have to be shown.

As with any form of development, restrictive covenants or other obstacles that might prevent conversion will need careful investigation. So will the adequacy of implied or express easements that may be needed over third-party private land. Property rights may be adequate for one use but not necessarily for a different one. Long leases may dictate restrictions on use, or landlords’ consent may be needed for works or change of use, so it may be that landlords can refuse or exert leverage over the proposed scheme. If a unilateral planning obligation has to be given, the landlord will also need to sign that.

Until office-to-residential permitted development rights are extended, the May 2016 deadline is approaching rapidly and vacant possession may be needed quickly. Commercial occupiers may have business tenancy security. Leases need to be checked for break rights. Developers also need to assess the risk of a licensee or an "easy in, easy out" occupier having accrued business tenant rights, and to check whether tenants are entitled to statutory compensation.

Alex Ground is an associate solicitor, commercial property group at Russell-Cooke solicitors


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