The conversion of a property may add to its value and increase its rental yield. The type of property conversion you decide on will depend on your budget and the permission granted for conversion work by your Local Planning Authority (LPA).
It is important to choose the right property to convert, the right type of conversion and, to ensure the work is compliant with building regulations and planning rules.
Property conversions can usually be described by one or both of the following terms:
- Splitting: This takes an existing building and splits it into smaller units, e.g. from a large house into smaller apartments, or from a one to a two bedroom property
- Change of use: Conversion of a property from one use to another, e.g. from a pub to flats
Understand the local housing needs
Conducting thorough market research to identify trends and gauge local demand will highlight the type of conversion that will be best suited to a given area. If the research indicates that more young families are moving to the area, for example, then adding an extra room to a one bedroom house could be a viable option.
KFH can provide expert advice and guidance to developers and investors on local demand, including up to date sales and rental data, which can be used to inform your plans. Contact our Land and New Homes division to discuss your requirements
Planning permission is required for most major changes to existing buildings, including extensions, conversions and change of use. In some situations, additional permissions may be necessary, such as if the building is listed, or the property is in a conservation area.
Although certain common building projects fall under ‘permitted development rights’ and do not require planning permission, building regulations will apply to most building work. It is therefore recommended that conversion proposals are discussed with your Local Planning Authority and Building Control Service (BCS) prior to instructing an architect.
In some circumstances it may not be absolutely clear if planning permission is required or the work is classed as a permitted development. While not compulsory, obtaining a Lawful Development Certificate (LDC) can be useful if you ever need supporting documentation to prove that the building work is lawful.
Splitting larger properties into smaller flats or apartments can be a costly process, but if the conversion is well-managed and meets the area’s demands, it can increase return on investment.
The process may require the services of an architect, and the following factors should be given consideration:
- Council tax: Buildings with common areas ordinarily attract a single rate of council tax, but separate, self-contained units may vary
- Utility meters: Utility meters must be installed for each flat or apartment, and must comply with government approved standards
- Energy performance: An Energy Performance Certificate (EPC) must be provided for all buildings, detailing the energy efficiency of the building
- Fire safety: Converted flats and buildings with common areas must adhere to government regulations, e.g. smoke alarms must be placed at every level of the building and regularly tested
- Sound insulation: Under Building Regulations 2010, every building must be insulated to protect against noise and reverberation from other parts of the building and adjoining buildings
- VAT: Renovation and conversion work on a property is subject to VAT, although a lower rate is payable on buildings that qualify under the 2001 Urban Regeneration Scheme. More information on this can be found in VAT Notice 708
- Insurance: Public liability cover may be required when conversion work is undertaken, and buildings insurance will be required throughout ownership of the property
- Tenure: Permission will need to be granted by the freeholder, and if you are the freeholder you will need to decide whether the new units will pay a ground rent on a leasehold basis, or whether the freehold will be shared
Change of use
The Town and Country Planning (Use Classes) Order 1987 groups the various uses of buildings and land into categories known as 'Use Classes'. When the present and proposed uses fall into the same class or there is a ‘permitted change and planning permission may not be required.
Nonetheless, it is important to discuss any proposals with the relevant Local Planning Authority and Building Control Service before starting any work to avoid what could be expensive and time-consuming remedial action, such as restoration or even demolition.
If you convert a property into a house in multiple occupation (HMO) – a property three or more stories high and housing five or more people from two or more families – the landlord or building manager will be required to obtain a specific licence.
KFH has been helping developers and investors in London for over 35 years. To find out how we can help you, contact us today.