Hot on the heels of the substantial changes to the planning Use Classes, as reported in our Winter 2020 edition, the Government has introduced another significant change to the planning system, which again may be relevant to the uses of buildings within institutional portfolios.

Legislation is now in force that paves the way for permitted development rights to convert buildings falling within Use Class E (commercial, buildings and services) to residential dwellings (Use Class C3). This new class of permitted development right is known as Class MA, with potential developers able to take their first steps towards exercising the right from 1 August 2021.

Whilst the provisions will significantly increase the flexibility to convert commercial property for residential use without express planning permission, the provisions are far from a free-for-all. First, there is a requirement to make an application to the local planning authority as to whether prior approval will be required in respect of a number of matters, including contamination, flooding and the provision of natural light within habitable rooms. Where the proposal would lead to the loss of a registered nursery, consideration may also be given to the local impact of this. Second, there is a prohibition on exercising the right in respect of buildings that have not been vacant for three months prior to the date of the application for prior approval; such buildings must also have been in use for one of the uses specified within the order for a period of at least two years prior to the application for change of use.

There are also a number of buildings for which the exercise of the permitted development right has been excluded. These include listed buildings, buildings within Areas of Outstanding Natural Beauty and buildings within national parks. As well as the limitations contained within Class MA, it is also important to investigate whether the building you are considering converting is already subject to a specific condition or limitation contained in a planning permission that would preclude the exercise of permitted development rights, or whether it is in an area subject to an Article 4 Direction of similar effect.

The legislation also includes a size cap, with the change of use being restricted to a maximum cumulative area in any one building of 1500sqm.

Bearing in mind that the new Use Class E embraces a range of uses that exist within an institution’s estate, including offices, many types of retail and restaurants, the new PD right may present an opportunity to make more flexible use of the estate, fill emerging voids in demand or provide an alternative form of investment where some limited residential use would not impact negatively on the student experience. Institutions may be able to explore the possibility of small-scale residential offerings (including for students) within the C3 Use Class.

So far as negative impacts of the new PD right are concerned, we expect that the risks of unplanned/unwelcome residential use introduced by tenants will be relatively low in most cases. Short lease term lengths will probably mitigate against a tenant investing in the conversion works and permitted use definitions and non-alteration covenants in commercial leases should limit this scale of change. However, it is worth checking if any longer leases may have very broadly drafted or no specific restrictions on use such that the tenant may seek to take advantage of the new flexibility.