199: Shaking-up the use class system in England

What, why, when?

From 1 September 2020, the use categories under the Town and Country Planning (Use Classes Order) 1987 are changing, by creating two new classes of permitted development rights.

The change has come about in a bid to reflect the changing diversity of use on high streets and in town centres following the impact of COVID-19. The change of permitted development rights is needed to broaden the range of services on offer. For example, the rise of online shopping has added to the reduction in demand for traditional high-street retail units, meaning that these spaces need to be repurposed for other uses.

Whilst the changes are aimed at high streets and town centres, in reality the changes mean that there will be a new commercial, business and service use class which is not limited to these locations. Therefore, the flexibility will apply to any buildings within the relevant uses wherever they are in England.

What does this mean?

The changes will mean that for existing buildings which are categorised under use classes A1-A5 (inclusive), B1, D1 and D2 will be abolished and there will be three new use classes, as follows:

• Class E – Commercial, business and service: includes previous uses A1 (shops), A2 (financial and professional services), A3 (restaurants and cafes) and B1 (business)
• Class F.1 – Learning and non-residential institutions
• Class F.2 – Local community

As of 1 September 2020, existing buildings which do not operate under specific controls will be able to change to other uses within that new class, without the need for planning permission, as it will no longer constitute ‘development.’

The categories

• New Class E is the ‘commercial, business and service‘ use class. This will absorb use classes A1, A2, A3, B1 and parts of D1 and D2. It includes retail, food, financial services, indoor sport and fitness, medical or health services, nurseries, office and light industry.
• Class F.1 is ‘learning and non-residential institutions‘ and absorbs the remaining parts of Class D1 which are outside of the new Class E. This includes education, non-commercial galleries, museums, libraries, public halls, places of worship and courts of law.
• Class F.2 is for ‘local community‘ and absorbs part of Use Class A1 and D2. This includes small corner shops, local community halls, swimming pools and outdoor recreational areas.

There is also a sui generis category which will cover anything where there is a ‘material change in use’, thus requiring planning permission.

Existing leases

For existing leases, there is no change if, at the date the lease was entered into:

1. The permitted use does not specify the use class order (ie where it only refers to ‘offices’); or
2. The permitted use refers to a use within a class of the use classes order as at that date.

There is no change because the extent of the use was finalised by referring to what was in the use classes order when the lease was granted.

Where the permitted use clause refers the use classes order ‘as amended or replaced from time to time’, the change of the use class order may impact the permitted user under the lease.

For example, permitted use clauses which refer to ‘retail use within Class A1‘ would automatically be widened to ‘retail use within new Class E.’ This change may be of concern to landlords who will often try and control planning applications for change of use by requiring their consent to be obtained first. However, planning permission may not even be required for a change of use following implementation of the new rules.

New leases

Greater consideration needs to be given for permitted use clauses being drafted in new leases, in order to cater for the new use classes order. This may lead to a more focused permitted use clause with more landlord control over any change. There needs to be balance, as a clause which is too restrictive and narrow may lead to potential adverse rent review implications.

The ‘part use’ section of the new use classes order which allows a change of use of part of a building, use or planning unit to an alternative Use Class E without permission, may lead to landlord’s implementing contractual controls. The tenant will be obliged to keep the landlord informed of the property’s use (or use of part) changes and notify the landlord of the exact use or uses of the property at any given time.

Considerations

Whilst permitted use drafting gives the landlord control over what the premises can be used for in respect of existing leases, when the changes come into effect, it may be detrimental to the landlord if there is an outstanding rent review. The hypothetical permitted use referred to in the old order may be narrower than what may be offered in a new lease (and referring to the new order) at the time of the rent review.

For those leases protected under the 1954 Act, it is not clear whether or how a court would agree to update the permitted use clause to reflect the new use classes, upon a statutory renewal. However, updating for changes in the law is a legitimate ground for seeking to make changes on a renewal.

From a tenant’s perspective, the changes may be welcomed as where a change of use is needed to develop business or unlock a disposal of a property, planning permission will not be required from 1 September 2020. This means that the cost, hassle, delay and uncertainty of the planning process will disappear.

Looking ahead…

In conclusion, it is clear that great consideration will need to be given whether new leases refer to Class E use. The inclusion may be widely welcomed by tenants but landlords will clearly require more control. Leases may continue to refer to specific uses and landlords need to give consideration as to what range and flexibility they want to permit in leases based on their intentions for the property and any wider place-making strategy.