An examination of the current planning position on amalgamation of units. In recent years there has been a strong trend in the central London residential market for the creation of substantial residential properties through the reconversion of previously subdivided houses, the amalgamation of purpose-built flats or adjoining houses, and lateral amalgamation of units. As a consequence, there has been increased focus on decisions regarding amalgamation.

Read the full article

This article was first published in Property Law Journal (July/August 2017) and is also available at http://www.lawjournals.co.uk/.

In 2015, the Government removed permitted development rights from pubs listed as Assets of Community Value (ACVs).  As previously reported, pubs which are listed as ACVs, or have been nominated to become ACVs, require planning permission for changes of use or demolition, which otherwise could be carried out under permitted development rights.

Noting the importance of pubs to local communities, some local authorities have made Article 4 Directions to remove permitted development rights from pubs. The London Borough of Wandsworth made an Article 4 Direction in August 2016 removing specified permitted development rights for changes of use, demolition and alteration for 120 identified pubs and bars.

Following Wandsworth’s lead, the London Borough of Southwark introduced an Article 4 Direction removing permitted development rights from all 188 pubs in Southwark in March 2017.  The Article 4 Direction means that planning permission will need to be obtained for specified changes of use, demolition, demolition or construction of gates, fences and walls, and exterior painting.

After discussions in Parliament in connection with the then Neighbourhood Planning Bill, the protection afforded has been further extended by the Government to cover all pubs rather than just those listed as ACVs. Section 15 of the Neighbourhood Planning Act obliges the Secretary of State to as soon as reasonably practicable make an order to remove permitted development rights for changes of use and demolition of pubs, and to grant permission for pubs to change to pub and café/restaurant use.  This requirement has been met by the making of the Town and Country Planning (General Permitted Development) (England) (Amendment) (No 2) Order 2017, which comes into force on 23 May 2017.

The order removes permitted development rights so in most cases pubs will instead have to apply for planning permission to:

• change to a shop;
• change to a restaurant or café;
• change to a state funded school;
• change to a temporary flexible use; or
• to be demolished.

The order includes a new permitted development right, to allow pubs to change use to “drinking establishments with expanded food provision” and vice versa without planning permission.

The order demonstrates the importance of pubs to the Government, by requiring a planning application for a change of use other than to a pub restaurant.  While this change negates the need for communities to list their local as an ACV to prevent changes of use without planning permission, listing could still be pursued.  A local planning authority can consider ACV status as a material consideration on a planning application, and so ACV listing could be an extra factor the local planning authority has to take into account when considering an application to change the use of a pub.  This then offers an extra layer of protection for communities wanting to keep venues operating as pubs.

Last month we blogged on the High Court’s judgment in Dunnett, which refused to quash the Secretary of State decision not to grant a Certificate of Lawfulness in respect of the use of office to residential Permitted Development rights where a condition on the office consent was effective in excluding GPDO rights. The condition stated that “The use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.”

The Court of Appeal has now upheld the High Court’s judgment.

The result? Uncertainty prevails.

Trump reigns

The Court of Appeal noted that there is no bar to (cautiously) implying terms into planning conditions: doing so is an objective, fact-dependent exercise in which the Court asks ‘what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole’ (applying Trump International ([2015] UKSC 74).

Deconstructing the condition

Against that backdrop, the Court of Appeal held:

1. The words ‘and for no other purpose whatsoever’ were, in this case, enough not only to control the B use of the property, but also to exclude future reliance on PD rights. The wording that followed – ‘without express planning consent from the Local Planning Authority first being obtained’ (the “Tail”) – just made the exclusion ‘the more abundantly clear’.
2. The Tail cannot sensibly include a planning permission granted through the GPDO. The appellant argued that it was necessary to read into the Tail ‘or the Secretary of State’ because of the unavoidable possibility of the Secretary of State granting planning permission on appeal against a refusal by the LPA. Once that is read in, the Appellant submitted, it must include Secretary of State decisions through the GPDO as well as Secretary of State decisions on appeal as there is no basis for including one but not the other. The Court rejected this: it is not necessary to imply ‘or the Secretary of State’ at all because appeal rights do not depend on conditions; they are conferred automatically by statute.
3. Further, if the Court were to accept the appellant’s argument, the Tail would include all means of granting permission and would therefore have no limiting effect at all. The LPA could not have intended to include useless wording.
4. The reason for the condition and the site’s planning history reinforced the findings above by reflecting the council’s intention to maintain close control over the site.

Comment – it depends

Unhelpfully, given Trump, implied meaning will always depend on context. That said, as a result of this judgment:

• It will be very hard to show that stating that uses are ‘limited to’ a particular use will, alone, be enough to exclude PD rights.
• Words such as ‘for no other purpose whatsoever’ will likely do the job, but ‘for no other purpose’ alone may hang in the balance.

The difficulty will be for wording that is more emphatic than ‘limited to’ but less emphatic than ‘for no other purposes whatsoever’.

It is not a great outcome for investors, who will have to puzzle over the endless and often pointless variations and contortions in condition wording pumped out by decision makers to understand what price planning freedom. A set of standard conditions embedded in the Planning Practice Guidance which make clear how PD rights should be dealt with and provide a level playing field would be welcome.

With thanks to Ralph Kellas for preparing the blog.

Article 3(4) of the GPDO 2015 provides that permitted development (PD) rights will not apply if they are ‘contrary to any condition imposed by any planning permission granted or deemed to be granted under Part 3 of the [TCPA 1990] otherwise than by this Order.’  Must such conditions refer explicitly to the GPDO? If not, what is enough?

Backstory

The Courts have held in some cases that conditions that do not expressly exclude PD rights do not implicitly restrict them (Carpet Décor (Guildford) Limited v Secretary of State for the Environment and Another (1981) 261 EG 56 and Dunoon Developments v Secretary of State and Poole Borough Council (1993) 65 P. & C.R. 101). The cases fall short of establishing that conditions cannot, legally, implicitly exclude PD rights:

• In Carpet Décor, the High Court held that a condition excluding PD rights had to be ‘in unequivocal terms’. This suggests a strict approach, though arguably it does not definitively rule out the possibility of implicit restrictions.
• In Dunoon, the Court of Appeal made several statements – some strict, some looser.  Indicating the strict approach, Farquharson LJ said: ‘The purpose of the General Development Order is to give a general planning consent unless such a consent is specifically excluded by the words of the condition.’ Indicating the looser approach, Farquharson LJ specifically addressed whether a preclusion of the GDO was ‘…to be implied from the words themselves, in the context in which they are used…’. He went on to consider whether the non-explicit wording of the condition was sufficiently ‘emphatic’, ‘conclusive’ or ‘wide’ to preclude the GDO. Sir Donald Nicholls VC, agreeing with Farquharson LJ , concluded that in this case there was ‘no explicit or implicit intention to negative development pursuant to any existing or future [GDO].’ These passages only make sense if implicit exclusion of PD rights is actually possible.

Who Dunnett?

In the first opportunity to revisit this in 2 decades, the High Court decision in Dunnett Investments Limited v SSCLG [2016] EWHC 534 (Admin) suggests that implicit exclusion of PD rights can work.

• The claimant relied on PD rights to change from Class B1(a) offices to Class C3 dwelling houses. Its existing permission included a restrictive condition:

“1. This use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.

REASON: “In order that the Council may be satisfied about the details of proposal due to the particular character and location of this proposal.”

• The LPA failed to determine the claimant’s PD prior approval application and the claimant applied for a Certificate of Lawfulness (which the LPA refused, based on the condition).
• The claimant challenged the decision, relying on Carpet Décor and Dunoon as requiring the strict approach (i.e. that the language must be explicit and unequivocal to exclude PD rights).

The Court rejected this, on the basis that:

1. The second part of the condition serves no other purpose than to prevent the operation of the GPDO. “Without that meaning the second part is irrelevant to the condition”.
2. The words ‘for no other purpose’ prohibit any other purpose including any other purpose otherwise permitted by the GPDO.
3. The word ‘whatsoever’ is “emphatic and, in context, refers to any other use, howsoever arising or under any power. Read together, and considering the plain and ordinary meaning of the words used, in my judgment, it is clear that the GPDO is excluded”.
4. The words “without express planning consent from the local planning authority first being obtained” have no sensible meaning unless they remove GPDO rights.
5. The reason for the condition confirmed that, due to the particular character and location of the site, any other use would need to be the subject of an express application.

The judgment treats the loose approach as ‘entirely consistent with the cases of Dunoon and Carpet Décor’.

Clear as mud

For the time being, the outcome reflects the prevailing uncertainty for landowners, developers and LPAs, because:

• it is unclear which elements of the reasons at 1-5 above were decisive,
• the outcome was said to be fact sensitive.

Dunnett has been appealed to the Court of Appeal and will be heard this month (March 2017). The Court of Appeal could reject the loose approach altogether. If, however, the Court confirms the principle of implicit exclusion of rights, it would be helpful if it clarifies:

• the forms of wording which will do the job (and those that will not); or
• whether the effect of the condition entirely depends on the wording read in the context of the reason and the condition as a whole.

In a period where PD rights are increasingly valuable, the outcome will be important.

With thanks to Ralph Kellas for preparing the blog and researching the cases.

6th April 2016 saw the arrival of The Town and Country Planning (General Permitted Development) England (Amendment) Order 2016.

This signals the latest chapter in the story of greater deregulation of the planning system.

It is also a product of its time, cementing the clear link between the Permitted Development regime and housing delivery.

Read the full article.

This article was first published in Property Law Journal (June 2016) and is also available at www.lawjournals.co.uk.

We noted earlier this year that there would be no more office to residential changes of use under ‘Part O’ Permitted Development rights under the new General Permitted Development Order 2015.  At the moment, the right to switch from B1(a) office use to C3 residential with only a prior approval requirement falls away in May 2016.

More or Less?

There have been around 900 applications for Part O prior approval in each quarter of the last year.  As funding for new Part O scheme shrinks due to uncertainties (see below), the Party Conference season is expected to yield a pronouncement on whether Part O rights will be extended.  They may be carried over on the basis that:

• existing Part O rights survive for 3 years from prior approval (or deemed approval);
• new approvals are subject to a requirement to deliver some of the Government’s 200,000 Starter Home commitment;
• there is a limited ability to consider the effect of the loss of strategically significant office supply at the prior approval stage;
• ‘exempted areas’ are retained.

Do or Die

In the meantime, developers and investors must work on the basis that the Part O rights cease to be available after 30 May 2016 unless the ‘use of the building falling within C3… was begun’ by then (under article 2 of the GPDO 2015 and paragraph O.1 of Class O).

What constitutes being ‘in use’ (and how much of any converted building it should cover) is unclear.  The courts have been clear that a change to residential may be taken to have occurred before the ‘relevant premises’ are brought into actual occupation (which includes units being brought into a marketable condition).  The extent to which empty units will be considered ‘in (C3) use’ will potentially be influenced by the extent to which:

• the residential use is capable of being carried on; and
• the previous B1(a) office use is no longer realistically capable of resumption.

If the Part O regime is not extended, the values at stake mean that the answer will inevitably be tested in the courts.

Die Another Day?

Article 4 Directions can be put in place withdrawing permitted development rights.  Whilst the Secretary of State can – and regularly has – prevented them being confirmed, several are now in effect.  There has been confusion around their effect – do they kill the rights or extend them? The GPDO 2015 now states – article 4(2)) – that where a Direction comes into force it will not affect the carrying out of the development where “the prior approval date occurs before the date on which the direction comes into force and the development is completed within a period of 3 years starting with the prior approval date“.  This ensures that Part O prior approvals pre-dating the coming into force of a Direction will remain available regardless of the Article 4 direction.  But, and it is an important but, it does not push the drop dead date for commercial-residential permitted development beyond 30 May 2016.  Where investors and developers know that buildings cannot be brought ‘into use’ before 1 April next year, their valuation assumptions should therefore reflect the risks.

CIL effect

Developers are still regularly, and wrongly, advised that CIL will not apply to Part O changes of use. Care needs to be taken about the assumptions around, and evidence of, lawful use for the relevant period before the change to C3 use takes place to avoid a shock on CIL.

On 6 April an amendment to the Town and Country Planning (General Permitted Development) Order 1995 came into force, placing additional restrictions on pubs which have been listed as Assets of Community Value (ACVs).

We have previously set out the steps for an asset to become listed as an ACV, and the implications once it is listed.

Research undertaken by Planning shows that pubs are the most popular type of asset to be listed as an ACV, and they have been the subject of emotive campaigns for listing.

In January Kris Hopkins, the Community Pubs Minister, announced these changes as a measure to protect the “Great British pub” as a national treasure.

This amendment to the Order means that a pub listed as an ACV, or nominated to become an ACV, cannot change use under permitted development rights, but instead must apply for planning permission.  The permitted development rights which are not available for ACV or nominee pubs are:

• change to a shop;
• change to a restaurant or café;
• change to financial and professional services premises
• change to a temporary state funded school for a maximum of one academic year;
• change to be used as flexible financial and professional services premises, restaurant or café or business premises for a maximum two year period; or
• to be demolished

This pro-ACV stance contrasts with the Government’s response to a Select Committee Inquiry into community rights, in which it refused a recommendation to make ACV status a material consideration in planning applications, except for minor works.

Local planning authorities can continue to decide whether or not ACV status is a material consideration.  This leaves an interesting situation where a ACV pub could require planning permission for change of use or demolition, but its ACV status may not be a material consideration in that application for the same change which but for its ACV status could be carried out under permitted development rights.

Permitted development rights will not be extended.  The new Class O in the general permitted development order (that is to come into force on 15 April 2015) prevents any use of an office for residential purposes from beginning after 30 May 2016.  The recent and contentious approval granting of permitted development rights for Utopia Studios is now looks pyrrhic, as it is unlikely the rights will be able to be exercised before these permitted development rights die.

The Government published its technical consultation on Planning in July 2014, the consultation included proposals to increase permitted development rights for solar power.

Everyone wants to do their bit to help save energy, in particular by using clean, renewable energy sources.  The government is proposing to allow development of non-domestic solar panels generating up to one megawatt without planning permission.

The consultation is not clear as to whether this new right will replace the existing right whereby permitted development rights exist to allow the installation of PV panels on non-domestic buildings with a capacity of no more than 50kW, or to create a wholly new right for those proposals above 50kW but under one megawatt.  Clarifying this issue with CLG, they have confirmed that a new right, in addition to the existing right, is proposed. This new right (for proposals above 50kW but under one megawatt) will require prior approval, where the LPA is to consider siting and design to minimise impact of glare, other typical conditions (i.e. extending beyond the roof line, excluding Article 1(5) land, and heritage assets) will apply.

This is a step in the right direction, a new proposal to allow up to one megawatt capacity without planning permission.  Not only would this be of great benefit to those new, and refurbished, commercial buildings, seeking to add to their green credentials, but also to those parish and town councils that often receive community benefit funding to develop solar panels on buildings within their area, taking away the extra red tape of having to obtain planning permission.

Creation of substantial high end residential properties in Central London by the reconversion of previously subdivided houses, the amalgamation of purpose built flats or adjoining houses and sideways amalgamation of units is a strong trend.  Buyers should consider whether supersized homes need planning permission (and the Community Infrastructure Levy (CIL) liability arising) amidst changing approaches by planning authorities.

Change of use

The Town and Country Planning Act 1990 makes clear that the conversion of a single home into several is a material change of use (requiring permission).  The amalgamation of units into one may also be a material change. The effects in planning/ amenity terms will almost always be non-material though – fewer people, car movements and less noise.  However, Richmond upon Thames v SSETR & Richmond upon Thames Churches Housing Trust [2000] confirms that it is a question of fact and degree to be considered in each case.  The Richmond case also suggested that planning policies and evidence of needs are relevant.  Where these change, there is a risk that permission may be required.

This is important since as well as facing a risk of refusal and planning obligations it can have a significant CIL consequence.  Where permission is required, CIL liability will apply (because change of use to residential is chargeable development, notwithstanding the absence of any new floor area).

Change of plan

Westminster City Council adopted a plan policy in January 2011 resisting the loss of residential units, to preserve housing supply. There have been three appeal decisions since late 2012 in which Inspectors have applied the Richmond approach and, having regard to the new policy objective, refused to issue a Certificate of Proposed Lawful Use for amalgamations without permission.  This casts a shadow over Certificates secured before the change in the policy, because the certainty they provide can fall away if there is a “material change… in any of the matters relevant to determining such lawfulness” before the use begins.  Westminster’s previous policy (UDP Policy H1) was less strict than C14 and it was common for the kind of Certificates that were sought in the three appeals to be issued by the Council.  The new Policy CS14 has effectively (although not explicitly) been treated as a change in circumstances in the appeal decisions. A Certificate granted before the 2011 policy came into force, but never ‘banked’ by bringing an amalgamated unit into use would therefore arguably have little benefit now unless the use began before 2011.

Change of mind?

Kensington and Chelsea are considering a similar move.  Its current Housing Diversity policy (CH2) seeks to prevent the loss of HMOs or more than 5 residential units.  It also requires any amalgamation scheme to be subject to a Section 106 obligation preventing further amalgamations in future.  Leaving aside the practicalities of how that is intended to work, applying the approach in the Westminster appeals, the policy and supporting text makes clear that any amalgamation of HMOs or more than 6 units is considered material (and therefore requires a planning application).  The status of house reconversions and sideways mergers are less clear.  The Council’s emerging policy is potentially more restrictive – prohibiting any residential amalgamation unless it is either within a property originally built as a single dwelling or the unit created is not “very large”. It also requires all “new residential developments, including conversions, amalgamations and changes of use” to be designed to achieve minimum space and other standards.  Whether this means that any amalgamation is development requiring permission, or just that developments which do not comply with these requirements require permission, is unclear.  It is significant in that sense that the draft planning policies relating to housing were not submitted for examination to the Planning Inspectorate at the end of September 2013 as originally intended.  The Council is continuing to review the evidence base and draft policies.

Bear in mind

There are three key things for buyers and developers to watch out for where amalgamation is planned:

• Be aware of changing policies — Richmond suggests they will have a real effect on how some changes of use are approached.
• Be careful about relying on dated certificates of lawfulness– use it or potentially lose it.
• The Richmond decision would benefit from scrutiny in the higher courts in terms of whether a change in policy can, properly, make something a change of use which was not a change of use before.