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Commercial to Residential Conversion Considerations Explained

View profile for Claire Battye
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With new permitted development rights recently being announced regarding converting commercial property into residential housing our Commercial Property Team look here at the reasons behind the changes, the positive effect this could have on the Hampshire housing market, and what to look out for if you, or your clients wish to buy office space to convert into residential housing.

There has been much speculation about the new rules and the impact that they will have on the property market.  In effect the new rules mean that class B1(a) offices can be converted into class C3 residential properties without prior planning permission.  The rules are only applicable to commercial office properties and not industrial, research, storage and distribution or retail properties, which were originally included in the proposals.

The new rules are part of the Government’s Plan for Growth, which was announced in the 2011 Budget, and it’s easy to understand the possible reasons behind them.  Since the beginning of the recession in 2008 we have seen more and more commercial properties become vacant as businesses have downsized or failed.  Coupled with that is the impact that the recession has had on home owners’ ability to buy their own property, particularly first time buyers.  The new rules are designed to tackle both issues at once, filling empty commercial property while creating more homes, more jobs and boosting the town centres that have empty offices adversely affecting their local economy.

While all the intentions behind the introduction of the changes are good, there are of course concerns, and factors that people considering buying  a commercial property for conversion need to take into account before proceeding with the purchase.  While the new rules allow alterations to be made to the inside of the property, no alterations can be made to the outside without planning permission.  The cost of the labour involved must be added to the price of the property as this is likely to be extensive, and   the location of the property must be carefully considered.  Surroundings that make a commercial property thrive aren’t the same surroundings that you’d want for your home, for example a commercial property may not be near a school, it may be situated in a business park or close to a busy town centre so will suffer from the noise, or   may be located on a busy commuter route.

VAT is also a factor when considering commercial to residential conversions.  All sellers, developers and buyers should take advice on VAT before proceedings.

It is likely that there will be further rule changes to follow.  There is the possibility that the rules will be extended to allow redundant agricultural buildings to be converted into small scale commercial premises.

No matter what changes the future may bring, we would always recommend that if you are considering converting any form of commercial property into a residential property, whether you are a developer or a prospective home owner, that you seek appropriate legal advice as there are many factors to consider, and many potential pitfalls.

For more information or advice on converting commercial property into residential property, contact the Commercial Team on 02380 717717.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.