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BLB’s Head of There are many reasons why a partial change of use for commercial property is desirable. But a typical example is utilising part of industrial premises for office use. Changing business needs may mean existing on-site office facilities are too small or otherwise unfit for purpose. Or perhaps there’s a need to relocate office-based activities to the manufacturing unit to reduce overheads.
If you lease the premises, there are two principal considerations in any proposed change of use – landlord’s consent and change of use class.
Landlord’s consent
As a commercial tenant, you will likely need your landlord’s consent for any change of use. Depending on what the lease says, that may apply even if the proposed change is non-structural. For example, perhaps an area within the premises is suitable for redesignation as office space. Remember, proceeding without the necessary consent breaches the lease, potentially leading to lease forfeiture proceedings.
Flexibility within the lease is key to ensuring any necessary changes are possible. And the first place to check is in the definitions section of your lease, with the relevant part often described as ‘Permitted Use’ or ‘Authorised Use’.
In most cases, the lease prevents a landlord from withholding their consent unreasonably. The landlord must also provide a timely response. As to what is a reasonable time, in most cases, think in terms of days or weeks, not months. An unreasonable delay by the landlord or the imposition of unjustified conditions constitutes an unreasonable refusal.
But more generally, it’s not always clear whether a decision to refuse consent is unreasonable. So, each case is very much dependent on its circumstances.
Change of use class
An extensive statutory framework controls using non-residential buildings and land in England. To that end, the Town and Country Planning (Use Classes) Order 1987 (as amended) sets out a host of ‘Planning Use Classes’. And the general position is that you require planning permission if your proposal constitutes a ‘material change of use’, i.e. between different use classes.
A complicating factor is that the legislation does not define ‘material change’. Instead, it’s a matter of fact and degree, determined on the merits of each case.
Permitted development
However, The Town and Country Planning (General Permitted Development) (England) Order 2015 (as amended) grants additional rights allowing change of use between some classes, albeit subject to certain limitations and conditions. For example, industrial premises fall within Use Class B2 (General Industrial), and there are permitted development rights for changes from Class B2 to Class B8 (Storage and Distribution).
Office use falls within Class E (Commercial, Business and Service). Unfortunately, there is no permitted development right to change from Class B2 to Class E. So, you will require planning permission to use part of your industrial premises for office use.
But you may find your lease authorises use for Classes B2 and E, in which case, there’s no issue with a change to office use, subject to obtaining the landlord’s consent for any physical alterations.
Dilapidations
As a commercial tenant, always consider future dilapidations in any work undertaken to the premises. ‘Dilapidations’ is the term for your landlord’s claim against you for the cost of putting the property back into a good state of repair and decoration at the end of the lease.
See: Dilapidations Claims: tips for commercial tenants
Heads of terms
In conclusion, constantly changing business needs mean your lease should ideally contain as much flexibility as possible. So, bear that in mind when negotiating heads of terms, and please get in touch with us for any advice.