Living in a commercial property is likely not something many buyers have considered. However, in periods where residential house prices are very high and mortgage rates are rising, this can be an attractive option. But is it viable from a legal standpoint? The answer doesn’t come as a simple yes or no unfortunately, but that doesn’t mean you should be put off.
If you’re thinking about buying a commercial property to live in, continue reading to find out what you need to know.
What is a commercial property?
In law, a commercial property is any building that generates money for the owner. This doesn’t necessarily mean it’s used for commercial activities. Commercial buildings come in many types, including:
- Offices
- Warehouses
- Hotels
- Factories
- Restaurants
- Retail shops
- Healthcare
Multi-use buildings (where tenants are both residential and commercial) can also be classed as commercial buildings. This is the case so long as a majority of the building’s tenants are commercial tenants. Multi-use buildings can therefore be used as a facility for a variety of businesses.
As you might expect, commercial properties and residential properties have many differences. Here are the four main ones our commercial conveyancing experts have identified.
Price
In most cases, commercial buildings are larger than residential ones. This, along with the fact that many commercial buildings are located in high-traffic geographical areas, makes them more expensive. As a result, these are investments made only by those with large amounts of disposable income or groups of individuals.
Purpose
Although they can be lived in, commercial properties are primarily intended to function as business premises. This means they are designed to accommodate the working practices of whatever business, or businesses are making use of the property.
Lease terms
Commercial properties typically come with longer lease terms than those for residential properties, although this will vary case-by-case. It’s not unusual for a commercial lease to last 5 or more years depending on the building. Whereas most residential properties will be leased for between 6 months and a year.
Occupants
Commercial properties are rarely occupied by their owners. Instead, it is often occupied by a range of business tenants who lease the property. Commercial properties can be owned by a group of investors, as well as an individual.
Why might you want to live in a commercial property?
When comparing residential and commercial properties as buildings to live in, there are a number of benefits in choosing the latter. The first reason to buy commercial property is the abundance of open space. As mentioned above, commercial properties are typically bigger than residential properties because they need to house more equipment. This gives the tenant lots of scope to decorate the interior of the property, whilst also often letting in natural night.
Further flexibility is provided by the central location that comes with many commercial properties. This adds value through convenience, as it can be easier to commute to the shops or to work. Especially if you’re leasing in a multi-use building where your offices are. It also means commercial properties in prime locations can be significantly more affordable than residential ones.
You can choose a commercial property that used to contain businesses which align with your interests. For example, if you’re a painter or an artist, a small gallery would have lots of large walls that are ideal for displaying pictures and artwork.
Using a commercial property as a residential space
Let’s say you have found a vacant commercial property that you want to live in. This means you need to apply to change the building use from commercial to residential. While this is perfectly achievable, the first thing to consider is the type of building you’re interested in. The insurance company has to be convinced that changing the use of the building is in their best interest.
The greater commercial potential a property has, the less likely it is to be converted to a residential property. However, if the space is small and located in a highly residential area, the application for.
Sometimes a commercial property that’s listed for sale comes with planning permission for it to be converted to residential. In other cases, converting a commercial property requires that planning permission is obtained. To do this, you must apply to the council’s local planning authority (LTA). An application for planning permission can cost between £80-£200 depending on where the property is.
Permitted Development Rights
Another option for those wanting to convert a commercial property is to invoke Permitted Development Rights (PDR). This statute allows certain extension and modification work to be completed by property owners. However, PDR does not apply for all kinds of commercial buildings. The types of buildings it covers are:
- Shops and properties where light industrial work is intended work is intended to be carried out, including warehouses, factories, and workshops.
- Offices.
- Properties with premises that are no larger than 150 square metres.
The UK government has expanded regulations in recent years to make it easier to convert Class E commercial properties to Class C3 residential properties. Nevertheless, there are some stipulations to be aware of. These are as follows:
- The property can’t have more than 1,500 square metres of floor space.
- Any changes to the external appearance of the property must be consistent (to a certain degree) with the surrounding area.
- The property must meet the minimum habitability standards set out by the UK government.
- The rules only apply to properties in England.
Barriers to commercial property living
One of the key differences between residential and commercial properties is that the latter often comes with additional legal considerations. This increases the likelihood that certain aspects of the property will interfere with its ability to be lived in. Considerations include:
- Contractual breaches – a freehold or leasehold contract could contain a restrictive covenant that explicitly prevents the property from being used for residential purposes. The tenant’s employment contract can also create conflicts depending on certain factors.
- Breach of planning use – in the UK, buildings are assigned use classes which determine their function. Local councils have the power to take enforcement action when a person is using a property for something other than its intended purpose.
- Invalid insurance – a building’s insurance might not accommodate someone sleeping in it overnight and their possessions that come with it.
- Breach of trespassing laws – individuals need written permission to sleep somewhere they do not own. Under English and Welsh law, this is considered a tort which can have severe consequences.
Experienced commercial property solicitors
As you can see, there’s a lot of potential factors that can affect commercial property transactions. That’s why it pays to seek expert legal support in the form of commercial conveyancing services. Toomey Legal are experienced in all areas of commercial property law, even corner cases like applying to change the use of a building. Contact us today.