In 2010, the UK government outlined that the country’s property planning system should fully support and facilitate economic growth; however, in order to achieve this, major reforms were required. Since this point, a number of acts and initiatives have been introduced in the UK, to both facilitate this approach, whilst elevating the existing housing supply and demand crisis.
In line with this vision, in May 2013, the UK Government introduced new Permitted Development (PD) Rights in order to provide greater flexibility around property development opportunities ranging from large home extensions to increasing work space in business premises.
However, ‘Office to Residential’ conversions – often on a very large scale – continue to be the most popular applications. These have been allocated a new User Class J.
Notwithstanding the current chronic housing shortage and developers snapping up vacant offices stock of all shapes and sizes for conversion to residential, in key locations in the South East and other locations throughout England (Scotland doesn’t have these PD Rights), there are risks…and the key risk is timing.
A PD Rights scheme can only be retained permanently if it is completed on or before 30th May 2016. Developers who have thus far failed to work up their scheme’s procurement to an advanced stage are very rapidly running out of road – either because they expected to flip the property and are stuck with it – or simply because they haven’t got their “act together”.
If Practical Completion of a project has not been achieved by 30th May 2016 then Local Authorities may use Enforcement Action at their own discretion, or it may become necessary to make a full retrospective planning application. In addition to the timeline risks, projects started after 6th April 2013 could even be liable for Community Infrastructure Levy charge.
Following the introduction of these revised development rights, The Bridgebank Capital Group has continued to support property developers who have managed their projects effectively and taken advantage of the reforms by providing both the short term finance required to complete acquisitions and the development finance necessary to achieve Practical Completions.
Steve Bryce is head of credit risk at Bridgebank Capital