In years gone by, converting a commercial property into residential wasn’t always easy. But in 2015, the law changed – making it far easier to undertake these projects.
Further updates to Permitted Development rights came into force in 2021, opening up even more opportunities to create beautiful homes from shops, cafés, offices… you name it!
Property buyers up and down the country are capitalising on these profitable prospects. If you’re considering a commercial conversion, here’s what you need to consider to get your project off to the best possible start.
Why convert a commercial property?
First things first, why would you even consider converting commercial premises?
Well, these renovations have the distinct advantage of a pre-existing building. Especially if it’s in good condition, you might save on the costs of a new build and keep some fascinating history too.
Business premises (such as corner shops, cafés and greengrocers) are often relatively cheap. Prices are certainly less than residential homes, meaning potential for adding value. Commercial properties probably won’t come with a chain, and the owners will likely want a quick sale too. This could leave some room to negotiate on price…
Since they used to be functioning businesses, commercial buildings are often in pretty fantastic locations. Transport links? Tick. Proximity to the high street? Check. You get the picture. Especially if you’re converting with a view to resale or rental, this is a major advantage.
Last but not least.
It’s a brilliant blank canvas! There’s so much scope to reconfigure, decorate, and create exactly the look you want. It’s an exciting and unusual prospect for homeowners and architects alike.
So, what are the main considerations if you’re eyeing up a potential plot?
Converting a Commercial Property: A Step-by-Step Guide.
1. Watch out for “exceptions”
By this, we mean double-checking there aren’t any restrictions on your property. While most commercial buildings are now eligible for conversion, a few exceptions exist.
- Listed buildings – with special architectural or historic interest.
- Buildings in areas of outstanding natural beauty or scientific interest.
- Buildings in national parks or conservation areas.
Some of these are still acceptable for residential use, but will probably need planning permission and architectural drawings. If you’re unsure, check with your local council before signing on the dotted line.
2. Identifying the “use class”
The next step is finding out what “use class” your property falls under.
The categories were updated in 2020, including:
- Class B – such as industrial, storage or distribution centres.
- Class C – including hotels, care homes, prisons and residential properties.
- Class E – such as shops, cafes, restaurants, nurseries and offices.
- Class F – including museums, libraries, places of worship, shops selling essential goods and swimming pools.
- Sui Generis – any buildings defined and excluded from other classes, such as theatres, launderettes, fuel stations or taxi businesses.
You can read more about these classifications on the Planning Portal website.
To convert any business into a residential home, you’ll need to apply to your local council to change the use class. Remember though, this isn’t the same as planning permission!
3. Looking at planning permission
Checking whether you need planning permission essential before committing to any purchase.
There are various considerations here, including the size of the existing building and whether you’re making changes to the exterior appearance or extending the property. This includes altering windows or moving doorways (common projects on shopfronts and offices).
Unless your project falls under permitted development rights (which we’ll cover next), you’ll need planning permission. The government encourages the use of empty buildings though, so you may find planning permission isn’t that difficult to secure.
Talk to your local planning authority in the first instance. They’ll advise on local restrictions and even offer “pre-application advice” to help you understand any policies in place.
4. Check permitted development rights
If you’re not planning exterior changes, you might be able to convert a commercial property without planning permission. This is thanks to something called “permitted development rights”.
With more and more high streets falling into decline, the government made new laws (which came into force on 1 August 2021) to help convert Class E buildings into residential use – without planning permission.
Given this covers such a wide range of businesses, including shops, restaurants, workshops, gyms and offices, the chances are your commercial property probably falls into this category.
There are conditions though:
- Permitted development doesn’t apply if your property is over 1,500 square metres.
- Councils can consider whether ground floor conversions are acceptable in a conservation or flood area.
- Properties must be vacant for at least three months before any applications are made.
- You can’t build extra storeys on top of the existing structure.
- Every habitable space must have natural light and meet minimum space standards. This means the floor area of a one-bedroom flat (with a bathroom) must be at least 39 square metres.
- If the building is a nursery or health clinic (for example), it could be turned down if there’s a lack of similar facilities in the local area.
5. Are there any leasehold issues?
It’s common for commercial properties to be “leasehold”.
A leasehold agreement allows the use and occupation of a building, for a specific amount of time. Many new flats are sold by developers with lengthy 999 years terms. Many others have just 99 years (or less), so check this carefully.
During this time.
Properties can be bought and sold, but the lease terms don’t change. Over time, this means properties become less attractive for mortgage providers.
Generally speaking, most mortgage providers won’t lend on buildings with less than 75 years on the lease. If this impacts your purchase, try and negotiate an extension with the landlord.
It’s also important to check whether your lease includes clauses preventing alterations or requiring landlord consent. While consent can’t be “unreasonably refused”, this can add unwanted complications to your project.
6. Work out your budget
Last but not least, it’s time to assess your budget.
As well as the property purchase cost, don’t forget to include things like planning permission applications, prior approval fees, stamp duty, solicitor and surveyor expenses – as well as the help of structural engineers, architects and building teams.
If you’re getting a mortgage, you’ll probably need a “self-build mortgage” (often paid in instalments as building work progresses) or a “bridging loan” (which provides upfront funding but comes with higher interest rates). A specialist mortgage broker can help you secure these kinds of loans.
Any renovation (commercial or otherwise) will likely throw up unexpected challenges, so make sure you’re leaving a contingency fund too. Around 10-20% should be plenty!
If you’re considering converting a commercial property, get in touch with our expert team at EV Architects. We can help with every stage of the project and create a truly stunning space.