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Office to Residential Change of Use – Permitted Development Right… the next chapter
The long-running saga of the ‘will they, won’t they’ debate around the office to residential permitted development right (PDR) appears to have come to an end… sort of…ish…maybe. I have written previously about the uncertainty the delay in any further announcement has caused and the negative impact this was having on the instrument’s ability to deliver housing. There has been, for quite some time, a need for the Government to either commit to the long term future of this PDR or end it and find another means to help the delivery of new homes. It was no surprise that the Coalition Government stayed relatively quiet on the matter pre-election – being as the PDR had not been universally popular and was hardly a vote winner. But in the last two weeks, the now Conservative Government announced they were ‘Fixing the Foundations’, a ‘productivity plan’ including a whole chapter dedicated to ‘Planning freedoms and more houses to buy’. If ever a title suggested that the PDR for office to residential change of use was up for discussion it was this one. But alas, not a single word on the matter. But now, whispers abound that something is on the cards. In fact, in the days following the Government’s new Plan, the industry rumour mill went into over-drive and a common consensus was reached (albeit without a single formal word on the matter – save for Greg Clarks’ open ended ‘continuation’ of PDR comment, reported last week). The PDR is to be extended (either indefinitely or for a further fixed period) and all area exemptions are to be removed. The author had no insider knowledge confirming the proclamation, however having heard and read identical from many a source, I have no reason to doubt that it is likely to be the case. More excitingly, the announcement was said to be due to be made (and Statutory Instrument laid) on Tuesday last week! Only, of course, it didn’t happen. The reason it didn’t (so we understand) was due to some serious lobbying from the Mayor’s Office and London Boroughs, among others. And, it has to be said, for good reason. If the exemptions are removed, the only means for a Local Authority to ‘protect’ its existing office stock is to issue an Article 4 Direction, which, under current legislation requires a notification period or 12 months prior to it coming into force (it is possible to install an immediate Article 4 Direction – however the Local Authority can then be subject to compensation claims). Some areas have already made Article 4 Directions; the areas covered would be ‘protected’. Most areas have not and neither are they exempt from the current PDR and therefore normal service would resume should the PDR be extended. However, for some areas, a serious issue could be just around the corner. The entire City of London, RBKC, most of Westminster, central parts of Islington and Camden as well as the Isle of Dogs, to name a few, would lose their current protection by exemption. All of the office stock in RBKC (excluding listed buildings) would immediately be at ‘risk’ of conversion. This is a Borough with an average residential value of £1,081/sq. ft.[1]. Likewise Westminster, with average values of £889/sq. ft., would find its West End and fringe commercial markets particularly vulnerable. And who knows what would happen to the City of London, where policy currently identifies only 10 site specific areas where residential use might be appropriate. All this ‘protection’, gone, overnight. Protection in these areas, and others, is clearly required. The purpose of the PDR was never to strip London of its commercial centres, weakening its global commercial position. But ensuring this protection is in place will now cause further delay. The question is how to deal with Article 4 Directions in these areas. The current PDR expires in 10 months’ time. If the extension to the PDR has to be delayed for 12 months to allow Article 4 Directions to be made and come into force, then many extant prior approvals which are unimplemented (or possibly those part-implemented, depending on the definition of ‘begun’[2]) will expire. If these local authorities proceed with immediate Article 4 Directions, under current legislation, they may risk substantial compensation claims. I suspect local authorities are preparing their Article 4 Directions as I write. They will have to be well-researched and justified, or they risk a Secretary of State veto (or at the very least, amendment e.g. to the extent of the area they cover), so it is no easy or quick task. Potentially, the Government may extend the current PDR for a set period (say 3 or 5 years, or even indefinitely) with current exemptions expiring on a set date within this period (say 31 December 2016). This would give those areas with a current exemption adequate time to make an Article 4 Direction and for it to come into force after a 12 month period. The development sector, as ever, would simply like a little clarity and certainty on what’s coming next… [1] http://www.theguardian.com/business/2015/jun/23/surreal-estate-kensington-chelsea-properties-soar-to-11635-a-sq-metre [2] This issue was enough to have its own blog  – see previous comments on this matter here 

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