The Government has announced a major overhaul of the outdated use class system that directs how a landlord and tenant can use a building.
The reforms, which take effect from 1 September 2020, will allow buildings to be used in many different ways often at the same time and will change the way high streets look and operate.
The changes will see the scrapping of certain use classes dating from 1987 and the creation of a new all-encompassing use class, called class E. Class E will cover a broad range of uses from retail, restaurant, leisure, office, healthcare, nursery and daycare, and light industrial.
Landlords will welcome these changes, giving them the power to repurpose a building from one use to another to better suit local demand and without needing to seek planning permission, which currently can easily take up to eight weeks to obtain.
For example, an empty retail unit could be changed into office space or a restaurant without the need to seek permission.
Occupiers too will welcome these reforms as it will also allow a building to operate in different ways at the same time – for example, operating as a shop during the day and a restaurant in the evening. Something that has previously been difficult if not impossible.
However, whilst the majority of landlords are likely to see the rental value of their building assets increase given the greater flexibility the new regime provides, there will be some that may see values fall.
A landlord, for example, with a restaurant (A3) building on a high street dominated by retail (A1) is likely to lose that exclusivity and face greater competition. Whilst that is good news for the high street, it may mean the rental value of those buildings falls.
Vicky Hernandez is a partner in the real estate team at Royds Withy King. Her clients have included AllSaints, Ladbrokes, Moss Bros, The Body Shop and Arcadia Group.