The 2014 reforms of the Community Infrastructure Levy Regulations have provided more flexibility for developers and landowners undertaking re-development of existing buildings by making it easier for them to deduct from the chargeable floor area created by the development the area of existing premises affected by the development. This is of particular relevance for those who wish to change the use of existing buildings by taking advantage of permitted development rights to convert commercial space into residential accommodation.
Where property is converted to a new use, the calculation of CIL is based on the floor area of the development unless the existing floor space can be deducted from the calculations. The old rules required that existing floor space could only be disregarded for CIL calculations following a change of use if the space could be shown to have been lawfully used for a period of at least 6 months in the last 12 months prior to the development taking place. This was often potentially problematic for developers wishing to convert redundant buildings because the requirement for lawful use seems to be interpreted as meaning ‘actual’ and lawful use, meaning void space did not count, even if subject to a tenancy which is continuing and even though the space is empty.
Often the buildings have already been out of use for a longer period than allowed by the old rules or the period during which the property would remain empty would exceed the permitted period either because the developer needs to obtain planning permission or carry out additional conversion works before completing the change of use or simply because the conversion works themselves will not be carried out without exhausting the available time.
A key date is the date when the development which includes the change of use is commenced. Where only internal refurbishment is required, which does not need planning permission, the change of use under the permitted development rights will only occur at or towards the end of the conversion works.
The new rules which came into effect in February 2014 relaxed the test for the existing floor space to be discounted, so as to require only that the relevant space has been lawfully used for a minimum of 6 months in the past 3 years. This allows owners and developers to claim a CIL reduction for a greater number of properties than before, particularly the large number of empty secondary offices scattered around many towns and cities. It also ensures that there is a much reduced risk of the discount being lost as a result of the delays in the planning and construction process which precede a change of use. Developers will still need to monitor their projects to ensure they are completed prior to the permitted development rights for such conversions lapsing in May 2016. Although Government is suggesting an extension beyond 2016 it seems likely that the criteria for properties to benefit from permitted development rights for such changes of use will be tightened up to give Councils greater rights to object.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.