Since May 2013, redundant agricultural buildings can be converted to residential units without having to apply for planning permission if the plans meet the approval of the local authority. However, it is clear from conversations with those wanting to proceed with such conversions, that interpreting some of the permitted development rules has been giving local authorities a headache.
There are two parts to permitted development: first is the change of use from an agricultural building to a residential unit (MB(a)). So far so good. However, the second part refers to the ‘reasonable’ building operations required to effect the necessary conversion (MB(b)) and this is where we are seeing Mexican stand-offs between councils and people wanting to convert their barns. Another area of confusion which is exercising developers and builders is the levying of VAT – guidance from HMRC is still awaited.
Interpreting permitted development
Some councils have interpreted the legislation as meaning that both parts of permitted development have to be considered at the same time – even if it is only the application for change of use which has been submitted for prior approval. This has meant that we have seen clients’ proposed conversions being rejected on the basis that the building plans for the conversion may be outside the legislation even if those plans have not been submitted for approval. Fortunately, a recent case in Cornwall has shed some light on the matter.
Planning decision, Newquay, Cornwall
Mr Palmer from Newquay in Cornwall wished to convert an agricultural building to a residential unit and applied for the change of use under permitted development, making it clear that that prior approval for the actual design and appearance of the building would be submitted at a later date. Nonetheless, the council refused his application on the basis that it had ‘not been demonstrated whether the structure of the existing building is capable of reuse without the need for significant demolition and rebuilding of external walls which would be beyond the scope of the conversion of the existing building’. And this was in spite of the fact that this element of the exercise had been specifically excluded from the application. Understandably, Mr Palmer appealed the decision, which the planning inspector has allowed.
The basis of the planning inspector’s decision
The council’s decision was based on its belief that the two parts of the permitted development had to be considered contemporaneously. The inspector found that this was incorrect; it was not necessary to do so if the application was being made in respect of one part only, in this case MB(a) relating to change of use to which the council had not raised any objections. The inspector acknowledged that Mr Palmer had submitted further information about the building aspects of the development but that was not relevant to the original application under MB(a). Therefore, the inspector found that ‘applications for permitted development under Class MB can be made in two stages, one for the change of use and one for the building operations’.
Subsequent to this decision, the government has updated its guidance for PDRs relating to barn conversions but has not really clarified the buildings works issue: ‘The right allows for the installation or replacement of windows, doors, roofs, exterior walls, water, drainage, electricity, gas or other services to the extent reasonably necessary for the building to function as a dwelling house; and partial demolition to the extent reasonably necessary to carry out these building operations. It is not the intention of the permitted development right to include the construction of new structural elements for the building. Therefore it is only where the existing building is structurally strong enough to take the loading which comes with the external works to provide for residential use that the building would be considered to have the permitted development right.’ Therefore it is likely that some local authorities will continue to consider MB(a) and (b) together before giving prior approval in spite of the Cornish decision.
What is the VAT rate for conversions under PDR?
That is not entirely clear at the moment. At present, VAT rates relating to building work are as follows: 0% on new build; 5% on qualifying conversions of non-residential buildings to residential use; and 20% on everything else. However, VAT rates are dependent on whether planning permission has been granted and as permitted development does not require planning permission, there is a fear that the 20% rate might apply. However, following discussions with the NFU, HMRC appears to agree that PDR implies planning consent so the 5% rate will apply. This is not a definitive decision and guidance is still to be issued.
The appeal decision will come as a relief to those developers wanting to make a start on converting redundant agricultural buildings as it will enable them to tackle the project in two tranches. However, it does highlight the sensitivity surrounding the look and feel of the final building: if councils feel that a proposed design goes above and beyond what was originally intended under permitted development, namely that the essential, original character of the building is retained, then be prepared to have your application refused. However, some good news: latest government guidance recognises that many agricultural buildings will not be adjacent to villages and therefore the PDR does not apply the test in relation to sustainability of location. It will be down to the planning authority to decide whether or not the location of the building makes it suitable to be converted into a home. Last but not least, although HMRC has suggested that the 5% rate applies to building works, if it decides to change its mind the viability of a number of schemes may well be called into question.