Residential conversions: merger risk

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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 pcihome 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.