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GUEST ARTICLE: Amalgamating Property And Navigating The UK's Planning Maze

Taylor Wessing

18 August 2017

It is funny how certain aspects of life go in circles. For a while, it was a common for large residential units, such as some of the grand terraced houses of central London, to be split into flats to achieve stronger returns and values. For various reasons, however, that trend may have run its course and now there are examples of distinct properties being melded together. This "amalgamation trend" carries a number of implications. And lawyers at Taylor Wessing provide some arguments about the process, and the pitfalls to avoid. The editors of this news service are happy to publish these views and invite readers to respond; they don't necessarily share the views of guest contributors. (Details about the authors of this item are shown at the bottom of the article.)

Email tom.burroughes@wealthbriefing.com

For many years now, city centre developers have largely focused on maximising the value of residential property by splitting it into separate units. Demand for city centre residences has long outstripped supply. Moreover, the law on this is clear - converting a single house to two or more dwellings constitutes in a material change of use under s.55 of the Town and Country Planning Act 1990. As a "development", it requires planning permission and the current housing crisis is fertile ground for planning approval.

But while parliament and the planners have thought about sub-dividing living space, a growing number of property owners and developers are looking for ways to do just the opposite and enlarge the units available to create generous family homes.

Many central London properties in prime areas are actually purchased on long leaseholds. Even provided that your lease covers all the land and airspace you need, as tenant you will likely be subject to restrictive covenants on alterations, either by way of an outright ban or a qualified consent process, which means that your freeholder will still have to provide approval to your development.  

Assuming you have purchased a freehold of a London town house, it is initially reassuring to learn that a fundamental principle of property law provides that a freeholder owns (in the broadest sense) everything ad coelum et ad inferos (between heaven and hell). Attempts to maximise living space by developing towards either of these are still regularly thwarted however.

Ups and downs
Adding an extra level on a house might well be complicated by listed building or conservation area restrictions. You may have no air rights to enable the works and can foreseeably run into problems involving estate restrictions or other title restrictions limiting development.  

A number of high-profile media stories about (often mega) basement excavations have meanwhile stoked resistance to them and councils to clamp down on going underground.

Side by side?
So can you go side to side, between adjoining terraced homes, with lateral amalgamations? Or can you go up, or down, within the envelope of an existing building, into apartments above or below the one that you own?

Although from the outside it might will be possible to effect an amalgamation without the world even knowing, the development of larger residential units in this manner cuts through a range of issues in the real estate sector - restrictive covenants, licence for alterations, lease extensions and planning law and policy and interpretation.

Leasehold    
In a lease it is common for the structure to be excluded from the demise of the flat. This means that not only will you, probably, need consent from the landlord to carry out the works to open up the space between the properties, but you will also need to buy the wall. The wall will be common parts and as such subject to the Landlord and Tenant Act 1987 restricting disposals without first offering the property to the qualifying tenants in the building, subject to certain exceptions.

There is also the question of the term of the lease and what happens if one property has a different lease length to the other. The purchase of the wall will require a supplemental lease which in itself will bring about the surrender and re-grant of the main lease which could cause issues with qualification under the Leasehold Reform Housing and Urban Development Act 1993.

One other point to note is that if the tenant is a "non-natural person" and by enlarging the Flat the tenant may be liable under a different charging regime for tax, such as ATED.

The planning play
Planning law clearly has some way to go to catch up the amalgamation trend. The legislation, while excluding internal works from the meaning of "development", is silent on whether combining dwellings will definitely constitute a material change of use development under s.55.

The need to apply for, and the ability to achieve, planning is not therefore an objective s.55 judgment. The amalgamation of dwellings may not automatically be a material change of use; whether planning permission is required will depend necessarily on the facts of each case and consideration of local planning policies.    

Recent decisions in the Royal Borough of Kensington and Chelsea, and again in the Courts, have restricted the amalgamation of smaller residential properties into larger ones, and shown us that planning is, as ever, all about whether or not the impacts are material. And materiality is a concept that changes over time and scope. It considers not only whether the character of the area will be affected (unlikely) but whether public interest considerations are to be taken into account. In the tense and febrile environment of the lack of housing supply, particularly in central London, the impact of the loss of a small number of residential units on a case-by-case basis has therefore been very heavily scrutinised.

Looking at a recent High Court case, the Royal Borough of Kensington & Chelsea (which currently has approximately 87,000 housing units - in a variety of sizes, scales and values) is forced to control tight margins to deliver on challenging targets for additional housing over the next five years. The availability of brownfield land in the Royal Borough is very limited.  In its view, the loss of just approximately 50 units per year by way of amalgamation is inappropriate, so it brought about a change in policy. In all three recent Court cases, the seemingly minimal unit losses have been deemed material.

The Courts have not yet considered whether a small scale development like residential amalgamation could be off set? Can an individual who wishes to amalgamate properties re-provide the loss of a unit elsewhere? It is difficult, almost impossible, to pre-empt the response of a local authority here. Offering up an additional unit or two may well be the next step however that could well render developments on this scale unviable.

In the meantime, check the position with the local planning authority before you knock through. Read the local planning policies. Consider your local area. A certificate of lawfulness, issued by the local planning authority to confirm that your works do not require planning permission, will be more comfortable to live with than a gaping hole in the wall.