Blog | Lease Advisory | Owner Lease Renewals | Permitted Development

The reform that can redefine the real estate sector

On 1 September 2020 two radical changes to the planning system came into effect in England. The first one is focused on an overhaul of the Permitted Development Rights legislation, making the rights permanent and expanding them. The other reform is focused on the current long-standing Use Classes Order in favour of increased flexibility in the hope of supporting the recovery of UK high streets and towns.

Permitted Development Rights (PDR)

The PDR changes will make it easier to demolish vacant and redundant buildings and re-build them as residential within the old footprint. There is a long list of conditions developers need to satisfy before the project gets the green light, and local authorities will be able to object on more grounds than previously, however, they will be required to present their decision within eight weeks, after which the applicant can appeal to the planning secretary in England for non-determination of the prior approval application. The new use classes will not affect the types of properties that fall within the remit of Permitted Development Rights and will only apply to properties that previously fell within uses B1(a)(b)(c) or C3 on 12 March 2020. According to these caveats, the building must be free-standing, built before 1990, not listed or located in a conservation area or a national park and be smaller than 1,000 sq m.

Use Class

The overhaul of the Use Class Order will make it easier to change a building’s use classification within towns across England without the need to obtain planning permission. The changes will see us wave goodbye to Classes A1, A2, A3, B1, D1 and D2, which will be replaced with a new Class E defined as ‘Commercial business and service’. This new class will cover a wide range of uses, including retail, financial and professional services, cafés and restaurants (currently A1-A3); offices, research and development and light industrial (currently B1a, b and c); clinics, health centres and nurseries (currently D1), and indoor sport and recreation (currently D2). The reform will see the introduction of two new use classes: Class F.1 (Learning and non-residential institutions) which currently sits within use class D1, and F.2 (Local community) which currently sits within use class D2.

As we would expect, there have been some exclusions from Class E to protect uses with community value, for example ‘cinemas and bingo halls’ (currently D2) and to prevent unrestricted conversion to uses with potentially negative externalities, for example drinking establishments (currently A4) and hot food takeaways (currently A5). These now fall within Sui Generis use and will need planning permission for change of use to or from. In principle, this would allow for a more fluid use of space, for example, a shop that functions as a restaurant or gym in the evenings, however, aside from practical considerations, current leases probably restrict that, encouraging tenants to stick to the original use as defined at the point of signing the lease.

In future, it is possible that leases which allow the tenant to use the full range of Use Class E will attract a higher rent because of the flexibility they offer to the occupier. Without planning restrictions, changes between uses under Class E will become a simple negotiation between the landlord and the tenant to agree on the scope of permitted use. It will be interesting to see whether super flexible shop fit-outs (like the Adaptive Retail Space offered by Sook, which allows retailers to rent shops for as little as a couple of hours, with a pre-designed fit out) will enable some spaces to be used by a variety of occupiers in a single day. Could this in turn lead to greater revenue generation per square foot and higher rents, as well as more affordable spaces for small businesses? It is worth noting that the changes will not affect most current lease user clauses, and if lease drafters want to refer to a specific use type, for example, office, they can do so by referring to the subcategories of Class E, for example Class E (g), which specifies office use. So far, we have only seen landlords trying to keep the status quo and replicate old user clauses, but we may see some property owners taking advantage of the new freedom to grant wider uses if that means being able to charge higher rents. The medium-term impact these new changes will have on a rent review are yet to be seen, and we will continue following the practical implementation of this promising reform.

If you would like to get in touch with John Banbury, please contact him: or +44 (0)7870 689003

John Banbury

Partner Lease Advisory & Business Rates

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