This week the Government published legislation which will trigger a major overhaul to the well-established use class system in England. The new provisions will come into force on 1 September 2020.
It is very much a case of out with the old, the current system was formed in 1987, and in with the new. Landlords, tenants and all property professionals will need to erase the well versed Classes A1, A3, B1 and D2. The individual commercial classifications have been revoked in favour of a new use class which is entitled ‘Commercial, Business and Service’ and will be referred to as Class E.
Class E will cover a broad range of uses including: retail, cafes and restaurants; financial and professional services; indoor sport and recreation; medical or health services (to visiting members of the public); crèche, day nursery and day centres, offices, research and development and light industrial.
The new Class E provides substantial flexibility moving forward. Changing between operations within the same use class is permitted development and does not require planning permission. It follows that a change from retail to a restaurant, an office, a gym or a nursery can all now be undertaken without the requirement to submit an application. The provisions allow for a mix of uses within buildings and premises and this could include flexible use premises to be a retail unit in the day and then a restaurant in the evening.
The Government has stated that the changes will provide flexibility for businesses to adapt and diversify to meet changing demands. It will certainly provide landlords significant opportunities in terms of the securing the most valuable use of their assets. Buildings within Class E can be marketed across multiple sectors, maximising the potential pool of tenants.
There are some noteworthy (and expected) exclusions from Class E. Drinking establishments (formerly A4), ‘hot food takeaways’ (A5) and cinemas and bingo halls (D2) have been excluded and now fall within the ‘Sui Generis’ use class and will need bespoke planning permissions. This ensures that pubs and cinemas are protected given their community value and the full impact of a ‘hot food takeaway’ can be assessed before any operation.
The principle to create a more modern and agile use class system is sound. However, enacting such a change cannot be done in half measure - the tap is either on or off. Through this new legislation, the Government has effectively diluted established planning controls in favour of an approach that ‘lets the market decide’. The effects will be interesting to see over the coming months and years.
Will a simplified use class reduce vacancy rates? Will certain sectors be ‘priced out’ as some community uses are now forced to compete with restaurants and offices? Will town centres retain a diverse mix of uses or will flexibility actually result in a reduction in the range of services?
The changes to the use class system will also have wider impacts for the property market. For example, the comparable evidence used in the rent review process for a particular tenant could now encompass multiple commercial sectors given they all sit within the same Class E. It’s a brave new world and one where the full effects are not yet known.
We expect some authorities will explore what powers they have to retain a greater level of control (similar to Article 4 Directions which removed permitted development rights allowing changes from offices to residential). It’s clear that many will feel decisions on use and mix are still more appropriately determined at the local level. The legislation here however is more complex as a change within the same Use Class is not defined as development. Any support or resistance to the new provisions are likely to differ between areas where demand remains strong or there are higher levels of vacancy.
We all hope that a flexible planning system will support commercial uses and promote investment and economic growth by reducing barriers, timescales and uncertainty. The new legislation will provide a system that supports more fluid commercial concepts and, in turn, that should ultimately help businesses better meet consumer needs. Only time will tell if that proves to be the case.
Legislation has also been laid in Parliament which sets out additional permitted development rights intended to boost housing supply and revitalise town centres in England read more here.