Changing use of premises

The problem

Your restaurant business is doing well and you have decided to buy the lease of nearby shop premises, from which to run another restaurant. The change of use of the new premises raises issues which must be sorted out before committing.

The Law

The rules which apply to the use of a building are rather like a triple-decker sandwich. Restrictions on use are imposed by planning legislation, the building may be subject to covenants against using it for certain purposes and, if the premises are leasehold, the lease will contain restrictions on use.

Each layer of regulations exists independently of the others and, unless an occupier of a building uses it in accordance with all three sets of restrictions, difficulties may arise.

Subject to a number of exceptions, the general planning rule is that development on land may not take place without permission from the planning authority. Development includes a change of use.

Under the Use Classes Order 1987, the most common uses of land and buildings were categorised into use classes. Restaurants, pubs, snack bars, caf‚s, wine bars and shops for the sale of hot food are in class A3.

As a general rule, changes of use within a class don't require planning permission. In some cases, "permitted development" - for example, a change of use from restaurant use to shop premises (class A1) or to financial and professional services (class A2) - won't require planning permission where the requirements of a General Development Order 1988 are met, and provided any existing planning permission doesn't expressly prohibit such a change.

Expert advice

If you're contemplating acquiring premises, it's important to make sure that any restrictions contained in the planning permission, such as that the restaurant use shall not be carried on outside certain specified times, won't affect your plans.

Many catering premises are leasehold, in which case the lease will contain restrictions. Even if planning permission permits a wide use within a particular class, the lease may be very exact as to the permitted use.

Some leases impose an obligation on the tenant to use the premises for a stated purpose. This means the tenant won't be able to leave the premises vacant without breaking the terms of his lease. As a tenant, you will want to be able to sell your lease easily, and the more restrictive the lease, the smaller the market.

If your lease has a restrictive use covenant, it's usually best to try to include a provision which says the landlord won't unreasonably refuse consent to a change to another use. If your lease restricts the use of your premises to a tapas bar, you won't be able to sell the premises other than to another tapas bar proprietor.

If the lease allows a wide choice of use, this may result in the rent being higher than if the use were restricted. A landlord's valuer will argue that the wider the potential market for a particular lease, the greater will be the competition for taking the premises, which will push up the rent which might reasonably be expected.

Yet another layer of restrictions may be contained within the freehold.

Whether you're planning to buy freehold premises or lease them, it's important to make sure the freehold is free of any restrictions which might prevent you from conducting your business in the way you want. Freehold land is sometimes subject to "restrictive covenants", which are intended to stop people from carrying on certain activities or constructing certain works on the land affected.

Sometimes, it may be possible to apply to the courts to have a restrictive covenant varied, but this is an expensive and time-consuming process, and most restaurateurs will prefer to find new premises.

Check list

• What do you want a particular building for? Does your proposed use fit snugly within the restrictions?
• Even though you may be happy with the restrictions, will they nonetheless limit the number of potential buyers, should you wish to sell your property?
• Do you need somebody's consent for a change of use?
• Will your proposed use of the premises lead to problems with neighbours and other business users?
• Will your use generate traffic with comings and goings of customers, and could it lead to complaints?

Beware!

Careful consideration of the use of premises before commitment will pay dividends by avoiding future problems.

Contact

John Spencer-Silver
Rooks Rider solicitors
Tel: 020 7689 7000
E-mail: jssilver@rooksrider.co.uk