Permitted development rights offer cost advantages to auction investors by making it easier to convert offices into housing. But exemptions apply, writes Robin Cripp, chairman and senior auctioneer at Andrews & Robertson
In recent years the UK government has introduced measures to address the housing shortage, one of the greatest challenges facing our generation. These measures aim to increase housing numbers by providing new homes in existing buildings and unlocking unused brownfield sites. We are seeing an increasing number of savvy investors and developers using the auction room as a way to tap into these opportunities.
What are permitted development rights?
Many types of home renovations or building work require planning permission. However, some forms of development, classed as permitted development, do not require planning consent. These rights allow owners of a building to make certain structural/design changes and changes of use without the need for a planning application. They derive from a general planning permission granted by parliament and are set out in the Town and Country Planning Order 1995.
In May 2013, the government widened the scope for permitted development rules for a period of three years, doubling the permitted amount previously allowed for extensions to homes, offices and shops, and allowing the change of use of offices (B1) to residential use (C3), subject to a prior approval process by the local planning authority. Many offices have a car park and are close to public transport links, which helps to reassure local authorities of the sustainability of such premises for residential use.
Importantly, there is no affordable housing requirement or section 106 agreement cost associated with permitted development rights, and the only areas on which local authorities can refuse are related to flooding, highways and contamination matters. Another attraction of permitted development for investors is that they do not pay the extra 3% surcharge that they would pay if they bought a residential investment.
In some designated areas permitted development rights are more restricted. These are generally in conservation areas. In designated areas planning permission is needed to carry out changes to the building. It does not necessarily mean that changes cannot be made, but simply that the local planning authority will want to consider the proposals in detail first.
Local planning authorities can, in some circumstances, suspend permitted development rights in their area by obtaining an Article 4 direction. The London Borough of Merton, for example, has an Article 4 direction that exempts Wimbledon town centre and Merton’s industrial estates from the widened permitted development rules and reintroduces the need for planning permission for the conversion of offices to houses or flats. The local planning authority was concerned about the impact that the permitted development rules would have on the area’s ability to retain existing businesses and jobs, attract new businesses and jobs, and provide services locally for Merton’s residents, workers and visitors.
The withdrawal of development rights again does not necessarily mean that planning consent would not be granted. It merely means that an application has to be submitted, so that the planning authority can examine the plans in detail.
The view from the rostrum
The supply of permitted development stock in London is now much lower than it was a few years ago and as a result we are seeing a rise in regional permitted development lots coming to the auction room. We are also seeing an increasing number of buyers who don’t seek to develop themselves but instead buy a qualifying property and then sell it on once permitted development rights have been established for a specific scheme.
Case study: the Ikon, Barnes, SW13
In December 2007, Barry Marsh of Leader Securities purchased a former bank located prominently overlooking Barnes Pond in south-west London. The property was occupied on the ground floor by Barclays Bank and an estate agency, with the upstairs floors let to a firm of solicitors.
Having purchased the property at auction the new owners sought to obtain a certificate of lawful development to allow them to undertake a full refurbishment of the building to convert it into a residential dwelling. Although the ground floors of the building were classed as A2 (professional services), confirmation of the use class of the top floors had to be obtained before the London Borough of Richmond Upon Thames could grant the certificate of lawful development. The building works were then completed in 2.5 years.
The end result (pictured above) is a sumptuous residential dwelling, named the Ikon, spread out over four floors with two reception rooms (including an open-plan kitchen and bar), a master suite with a steam room, along with a cinema room, maid’s quarters, two guest suites, and a study. It is a truly iconic building.
This article appears in the latest edition of EG’s Property Auction buyer’s guide, available in newsagents from 20 May. For full and free digital access to the guide, please click here
