3 Nov 2014

The effects of permitted development

It is now almost half way through the initial three year window, which allows the change of use of offices to residential as permitted development, so it is a good time to take stock of the effect of the changes. At the same time, the Government is consulting on proposals to make these changes permanent and to extend the time limit for approvals given in the period. To recap on the changes introduced in May 2013, applications can be made to the local planning authority for ‘prior approval’ to convert premises in use at 30 May 2013 for office use within the B1(a) (as opposed to A2) category to residences. The rights do not apply to certain predetermined areas (primarily the City of London and nearby nationally important office areas), safety hazard zones and explosive storage areas or to ancient monuments and listed buildings. Authorities then have 56 days to decide whether their prior approval is needed to the proposal on the grounds of contamination, flooding or traffic impact. Conditions may be imposed in relation to the three areas for which prior approval can be required. Some authorities reacted to the proposals by challenging the Government’s refusal to exclude their areas from the provisions and by seeking to remove the rights through mechanisms known as Article 4 directions. The legal challenges failed. Islington Council was a Council, which had led the use of Article 4 Directions, publishing a direction seeking an exemption for its whole area. However, ministers have reserve powers to intervene and reject such orders if they wish. In February this year Planning Minister Nick Boles announced that Islington had “applied its directions disproportionately”. Islington then revised its Article 4 direction to a reduced area but the government determined, in light of the tests set out in national policy and guidance, that the direction remained unacceptably expansive and unjustified and cancelled it. One of the biggest benefits of these permitted development rights to the developer is that they bypass s106 contributions, including affordable housing requirements. Other authorities have responded by refusing applications as if they were planning applications. Proposals for Utopia Village in Camden were rejected by the Council on 15 grounds, many of which related to the failure to provide matters that would have been sought under a section 106 agreement. That decision has been appealed and the Planning Inspectorate’s decision is awaited with interest. In terms of the response of developers to the proposals, the impact has been very patchy. In a few of the London suburbs and better residential locations (for example Oxford, Cambridge and Chichester) there has been significant activity, but elsewhere agents report it as being very quiet. Tim Richards of surveyors Aston Rose believes that possibly the biggest challenge to date is still the shortage of development finance for smaller operators. “We have gained permitted development consents on many decent schemes, but there are not enough developers in the market with the cash needed to deliver these schemes” said Richards. Additionally, many residential developers are more familiar with working on a “knockdown and start again” development model for tired office buildings and these sorts of refurbishment opportunities are outside their comfort zone. In some areas commercial office developers should see the office to residential project as a great opportunity. Tim Richards reports that in some locations, such as Ealing in West London, the existing office stock has all but dried up as a result of the changes, rents are rising and that new build schemes are again becoming viable. Some commentators have expressed concern that a fall in available office space would occur, but it seems that other than in a few hotspots, as above, there has been no material effect and only already surplus office space has been utilised. One major area of misunderstanding remains and that is the right for change of use only. Planning consent is still required for applicable alterations etc. Developers have frequently adopted the approach of obtaining the change of use and then going back to the Planning Authority to propose a much more comprehensive scheme. Some authorities have resisted this approach, but others have taken the view that it is preferable to have a comprehensively designed scheme, to enhance the locality, rather than a converted office building. Anecdotally there appears to be confusion about the May 2016 cutoff date. Some developers and agents have seemed to think (incorrectly) that this is a date by which physical works need to be complete, but because the consent is for a change of use, it is the new use (i.e. residential occupation) that needs to be implemented before the cutoff date. This point could be all set to change. A Technical Consultation Paper published in July 2014 is seeking views on making the changes permanent and at the same time is looking to extend the lifetime of permissions granted in the three year window of opportunity. Suddenly perhaps these changes are going to become part of the accepted pattern of planning law. John Bosworth & Ken Smith of Ashfords LLP in Property News, October 2014)

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