Last week the Government announced that it was making office-to-residential development rights permanent. However, Irwin Mitchell’s head of London planning and infrastructure Martha Grekos believes there is still a long way to go in fixing the UK’s housing crisis.

The office-to-residential permitted development rights were originally introduced in 2013 in an attempt to create more homes from underused office space. The rights mean developers are automatically granted planning permission to convert the offices to residential homes as long as they have completed the prior approval process.

“That usually just means certain things need to be approved,” says Grekos, “whether it’s to do with the traffic, if its in a flood area or whether there is any hazardous material involved. Apart from that the development becomes an automatic process.”

Although the rights are designed to speed up the development of homes there has been discrepancies in the amount of time local authorities have allowed the process to go on for. This is because the timescale for the development to be completed is set based on how the property is used by its occupiers not just how it is converted. However, different local authorities measured a building’s use in different ways.

“Some people were saying that as long as you had 25 per cent occupied and the rest was converted than the conversion had taken place,” says Grekos. “Some were saying the whole building had to be used but some local authorities were saying, actually, as long as the conversion had taken place that would have been OK.”

This caused some difficulty for developers when it came to financing the projects as banks could refuse to fund the work if this point was unclear. The Government’s latest announcement addresses the issue by stating that those who already have gained permission under the current development rights must fully complete the work within three years.

Whether the rights will actually have any impact on the UK’s housing crisis is yet to be seen, but Grekos notes that there is nothing stopping developers from creating high value homes that many people cannot afford.

“It’s worth noting that there’s no consideration for affordable housing via this permitted development regime, and one would question whether other adequate provisions such as the infrastructure needed to support these conversions are in place,” says Grekos.

The size of the property is also something of a concern for those hoping the new rights will produce a huge quantity of housing. The new changes now allow laundrettes and light industrial units to be converted into homes and it is hard to imagine that these will create a great deal of new living space within a large city.

Deals

Deal one: Shoosmiths’ has advised Poundland on all real estate matters concerning its £55m acquisition of 99p Stores.

The deal was completed after the Competition and Markets Authority approved the acquisition, which included over 250 stores. Poundland paid £47.5m in cash plus £7.5m in new shares.

Shoosmiths’ team was led by real estate partner Beth McArdle and was supported by a team of real estate litigation lawyers across within the firm’s national team as well as real estate teams in Edinburgh in respect to the Scottish element of the deal.

Freshfields Bruckhaus Deringer also advised Poundland in relation to the corporate aspects of the transaction. The team was led by corporate partner Oliver Lazenby and antitrust partner Martin McElwee.

Mills & Reeves principal associate Chloe Bucktin advised 99p Stores during the deal.

Deal two: DWF has advised an investment vehicle affiliated with Colony Capital during its £311m purchase of the Gemini property portfolio.

Colony was originally outbid by Värde Partners but a prolonged due diligence process led to the deal being scrapped.

The portfolio was previously owned by property mogul Glenn Maud’s company Propinvest, which collapsed in 2011. CBRE was instructed by administrators at Deloitte to place Gemini on the market in May.

Gemini is made up of 24 assets including Renfew Retail Park in Glasgow, Martineau Place in Birmingham, Regus House in Uxbridge and The Grange in Cheltenham.

DWF’s team was consisted of head of UK real estate finance Geoff Stansfield, real estate partner Lorraine Reader and associate Greg Peebles.