In short – Yes, in a lot of instances you can. From 2015 onwards, changes in certain regulations made it far easier when it comes to converting commercial premises into private dwellings. Conversion offers a great opportunity for property buyers, with more and more homeowners taking the opportunity. With home working practices more prevalent following on from the coronavirus pandemic, the availability of commercial premises could be higher than ever.

As we have already discussed, 2015 is when big changes were made to regulations in the UK, when the government overhauled the General Permitted Development Order (GPDO). This made it a much easier process to change the purpose of a building from commercial to residential and gave developers more scope to meet the ever-increasing demand for housing.

Following the changes, many commercial buildings are now eligible to be converted to residential. There are some exceptions, such as buildings within conservation areas or national parks, which can include areas of natural beauty, or with scientific/archeological interest, Listed Buildings, or buildings within hazard zones or military testing sites.

Just because they are exceptions, however, it doesn’t mean that it can’t be done. It will require full planning permission, along with some technical drawings, so you could commit a lot of money to the project, only to find you aren’t allowed to proceed.

It is also worth considering the use class, which all buildings in the UK are placed in. Broadly speaking, these classes are as follows:

A class – Shops, restaurants, and businesses that provide professional services
B class – Offices, storage facilities, and warehouses
C class – Residential properties, and other places of habitation (e.g. hotels, care homes)
D class – Miscellaneous uses, and includes schools, doctor’s surgeries, cinemas, and other leisure facilities

In order to convert a commercial building into a residential property, you’ll need to apply for a change of use to be granted. This is not the same as planning permission, and the two operate independently. On some occasions, you do not need planning permission at all to convert a property, which is subject to the class of use it was originally. Provided you have prior approval from the local council, some examples include shops, retail warehouses, hair and beauty salons, and banks. It also requires the building to be less than 150 square meters or less, and planning permission may still be needed if you plan on changing the exterior appearance of the building. This can include moving windows and doorways, which you may want to do for a glass-fronted retail space for example.

Insuring a Commercial to Residential Conversion

Insurance can become a complex area when dealing with commercial to residential conversion, as there are a number of aspects in play. It is essentially an unoccupied building, undergoing renovation, where the use of the property is also being changed, potentially part-way through the project, and part-way through the insurance policy as well. For this reason, obtaining a suitable insurance option is definitely a worthwhile consideration before you commit to making the purchase.

Generally, the biggest choice for the insurer is whether the property will be treated as commercial unoccupied, or residential unoccupied, which is usually determined by whether a change of use has been granted or not. Therefore if you expect change of use to be granted before you purchase the building (and therefore, before you need to arrange insurance on it) it is worth checking with insurers to see if it helps matters. Residential unoccupied properties tend to be a little more flexible in terms of timeframe and requirements, so may end up being more cost-effective.

Working with a knowledgeable, flexible insurance partner is highly recommended in this situation. Certain parts of the project may hinge on either change of use or planning permission, so being able to alter your cover quickly and easily to adapt will definitely help as you’re busy making sure the project stays on deadline. GSI Insurance Services (Southern) Ltd. are specialists in commercial insurance, unoccupied insurance, and properties undergoing renovations, so combining all of these aspects is well within our reach. Give us a call on 0800 612 9376 to discuss your requirements!

Budgeting

As is often the case with any renovation project, they can have a habit of running into unexpected additional costs, so it is well worth leaving some space in your budget to account for that.

Your budget not only needs to include the purchase of the property, the cost of the work, and the insurance, but also you may need to cover the cost of a planning permission application, stamp duty, cost of a conveyancing solicitor and surveyor, and a prior approval fee of around £200. Commercial properties will also generally have more limited insulation and soundproofing, so you may want to consider more upgrades to make the property more energy-efficient, and quiet.

If you don’t have the funds available to pay in cash, then self-build mortgages and bridging loans can be available to fund the cost of the project and the works if needed. Speaking to a professional financial advisor is the best way to come to an arrangement that best suits your needs.

Advantages

Converting a commercial property can be a very profitable venture, in both resale value and rental income. The commercial property market is usually more competitive, which can drive down prices lower than in the residential market. Therefore, converting it into a home is likely adding immediate value. Plus, if a property has been on the market for a while, there is usually an opportunity for further negotiation on price.

Commercial property is usually in a beneficial location for homeowners, either in city centres, or at the very least close by to public transport.

Often, a commercial property acts as a bit of a “blank canvas” with large, open spaces that can be reconfigured to meet a particular need. If it can be used as an HMO or divided into separate units, that is another way of extracting the most value. Besides, a single unit can be sold on its own if you need a cash injection for your next project.