Monday, 12 April 2021

Government Presses Ahead with Sweeping New Permitted Development Rights


The government is pressing ahead with its plans to allow a new Permitted Development (PD) right in England to allow for a change of use from Commercial, Business and Service Use (the new broad Use Class E) to residential use (Use Class C3) without the need to submit a planning application.

This will go significantly beyond existing rights, allowing, as well as retail, places such as restaurants, medical facilities, indoor sports, gyms and creches to benefit from the change use to residential under PD rights for the first time.

From 1 August 2021, when the new PD right takes effect, a change of use from Class E to residential will only require prior approval.

Prior approval is a more limited process than applying for full planning permission.

Councils will consider transport (particularly safe access); contamination; flooding; noise; adequate natural light; the impact on the new residents from nearby industrial, waste management, storage and distribution uses; and certain losses of nursery or healthcare services.

In a conservation area, where it is proposed to change the use of the ground floor, prior approval will assess the impact of that change of use on the character or sustainability of the conservation area.

To qualify for the new PD right, a building must have been vacant for at least 3 months immediately before the date of the application; must not contain more than 1,500 square metres of floorspace; and must have been used for at least 2 years as Class E or its predecessor use classes.

These constraints were introduced following the consultation the government launched back in December.

As is normally the case with PD rights, the new right only applies to a change of use.

However, if external alterations are required, for example new doors and windows, then planning permission will be required, although that process would be limited to the external alterations only, not the wider implications of the development.

The new PD right will not apply to pubs, including those with an expanded food offer, theatres, and live music venues, all of which are outside Use Class E, and so in those cases a full planning application would still be required.

The conversion of betting and pay day loan shops, launderettes and hot-food takeaways is also excluded.

There is no requirement in the prior approval process for the local authority to consider the impact that the loss of retail or other service uses might have on the area.

This has led to concerns that the new PD right could lead to the complete hollowing out of some town centres, with mass conversion to residential use.

The numerous objections that the government received to its consultation that were along those lines appear to have been ignored.

The very broad Class E has only existed since September 2020, and was itself the subject of a legal challenge, albeit an unsuccessful one.

There is no requirement for section 106 agreements when PD rights are granted, and so how will councils ensure there is sufficient infrastructure in place to support potentially mass residential conversions in town centres?

Such planning obligations, used when full planning permissions are required, typically concern matters such as affordable housing, open space, education, libraries, and health centres, to name just a few.

Individually the size of conversions will be constrained by the 1,500 square metres ceiling (so that rules out converting large retail premises or out of town sheds), but collectively if smaller conversions are spread out over a town centre the impact could still be huge over time.

Perhaps some local authorities will see enough scope or leeway in the prior approval process, especially regarding noise, to be able to limit development to sustainable levels.

Concerns have also been expressed about the 3-month vacancy requirement.

The government says that restricting the PD right to buildings that are already vacant will protect existing businesses.

However, the 3-month period is surely too short if that is the real aim.

The pandemic has forced many businesses to close that were previously viable, and unless it is extended (again), the commencement of the new PD right will coincide with the ending of the moratorium on forfeiture of commercial leases.

There’s nothing to stop landlords simply leaving premises empty deliberately or exercising break rights so as to take advantage of the new PD right, as they would only be foregoing a short period of loss of rent.

It will take a while before the impact of this new PD right can be accurately assessed, especially against the backdrop of all the other consequences of the pandemic, but it clearly marks a significant change in the planning regime.

Tuesday, 16 March 2021

Breathing Space for Debtors – How will the New Scheme affect Landlords, Tenants & Property Owners?

The Debt Respite Scheme (Breathing Space) comes into force on 4 May 2021 and will give someone in debt the right to legal protections from their creditors for a limited moratorium period.

The scheme will only apply to individuals, not anything else with legal personality (for example companies), and although the focus is on consumer debts, it will also apply to mortgage and rent arrears.

The scheme will pause enforcement action and contact from creditors in relation to an existing debt and freeze any interest and late payment charges.

The FCA explains that the intention is to give people in problem debt the time to receive advice and potentially enter an appropriate scheme to resolve their debt.

There is no maximum amount of debt that can be included in a breathing space.

There will be two types of breathing space:

·       Standard Breathing Space – available to anyone with a problem debt, giving them legal protection from creditor action for up to 60 days, with a midway review. A debtor can only benefit from one breathing space in any 12-month period.

·       Mental Health Crisis Breathing Space – only available to someone who is receiving mental health crisis treatment, certified by an Approved Mental Health Professional, and will last for as long as the treatment lasts, plus 30 days (no matter how long the treatment lasts). There is no limit on the number of Mental Health Crisis Breathing Spaces.

Anyone who cannot or is unlikely to be able to repay their debts can apply to a debt adviser authorised by the FCA for a Standard Breathing Space, or they can apply to a local authority where they provide debt advice to residents.

It includes joint debts even if only one debtor applies.

The debt adviser will initiate a breathing space if they consider that the debtor meets the eligible criteria; the requisite conditions are met; and the debts are qualifying debts. The government website sets out more detail on how these tests are to be satisfied.

The Insolvency Service will send an electronic notification to creditors telling them about each debt owed to them in a breathing space and the date the breathing space started.

It will also keep a register of people whose debts are in a breathing space, and a date a breathing space ended or was cancelled in the last 15 months.

The breathing space is not a payment holiday.

Creditors cannot enforce a breathing space debt during a breathing space or charge interest or fees on it, but the debtor is still legally required to pay their debts and liabilities. They should continue to pay what they can, and the creditor can continue to accept payments.

A debtor must also pay certain ongoing liabilities if they can. 

If a debtor doesn’t pay an ongoing liability during the breathing space, the debt advisor might decide to cancel a Standard Breathing Space.

A creditor can challenge a breathing space moratorium within 20 days of it being granted and ask for it to be reviewed. 

Where a debt adviser refuses to cancel the moratorium following a challenge, the creditor may apply to court. Where a court has cancelled a moratorium, they can require the debtor to pay any interest, fees or charges that accrued during the moratorium period in respect of the debt.

Landlords and tenants

Landlords are already prevented from evicting residential tenants until 31 May 2021 under the latest government extension of the temporary Covid-19 ban.

From 4 May 2021, if a landlord is notified its tenant has the benefit of a breathing space, they must not, during the breathing space, contact the tenant under any circumstances for the enforcement of a paused debt, or seek to enforce the debt by any means, including serving notice under grounds 8, 10 or 11 of the Housing Act 1988, or taking possession having served a notice.

This is not a cancellation of the rent arrears, simply a temporary moratorium on enforcement.

However, it’s important to remember that no interest or other charges may be added to a debt that has been paused under a breathing space, and so the relevant provisions of a lease that enable the landlord to charge interest and other charges relating to the arrears will be temporarily suspended in respect of the qualifying arrears.

A landlord will still be able to contact a tenant about any other matter, which includes ongoing liability for rent and other payments.

There is an important distinction in the new scheme between debts accrued prior to the breathing space (which may benefit from the moratorium) and debts incurred during it (which may not).

If a tenant falls behind with its ongoing liabilities during the moratorium, its landlord can inform the debt adviser, who has the power to cancel the breathing space.

A 60-day moratorium is not that long in the context of a landlord and tenant relationship, and as there can only be one breathing space in any 12-month period this does not seem to be an unreasonable fetter on landlords’ powers, although many landlords won’t see it that way having had to endure over a year of the forfeiture ban.

The period may of course be much longer under a Mental Health Crisis Breathing Space.

Landlords with large portfolios will have to ensure they have systems in place to ensure that interest and charges do not accrue during a moratorium, and that any automated action that might otherwise be taken in respect of arrears is paused.

Mortgage Debt

Mortgage payments are treated similarly to rental payments where the mortgage is secured on the debtor’s primary residence.

You can include arrears on mortgage payments that exist at the date of an application for a breathing space, but not ongoing mortgage payments. If an ongoing payment is missed, then it could mean the debt adviser stops the mortgage payer’s breathing space.

Business Debts

Business debts owed by sole traders who are not registered for VAT may qualify for a breathing space, and so the scheme may apply to a commercial tenant who otherwise qualifies and where the lease is in their own name.

Business debts do not qualify if the debt only relates to the business (not the debtor personally) and the debtor is VAT registered, or the debtor is a partner in a business with someone else.

Guarantor loans can be included in a breathing space, but the protections do not automatically extend to the guarantor. The guarantor can apply for their own breathing space if they are eligible.

Council Tax and Business Rates

Council tax and business rates are both treated in the same way.

If all instalments of council tax or business rates for that financial year have fallen due and have not been paid, they will qualify for breathing space relief. If a debtor has been served with a “further notice”, the remaining liability for that financial year is also a qualifying debt.

Any council tax or business rates that have not fallen due however are not qualifying debts.

Thursday, 11 March 2021

COVID-19: Eviction Ban Extended for Commercial and Residential Tenants

 The government has announced the ban on commercial evictions is extended to 30 June 2021, and the six-month notice period and bailiff enforced eviction ban is extended to 31 May 2021 to protect residential tenants.

The government says it will consider the best approach to move away from emergency protections from the beginning of June, taking into account public health advice and the wider roadmap.

Commercial tenants

The restrictions on forfeiture of busines tenancies for non-payment of rent are to continue in England until 30 June 2021 (which corresponds with the position in Wales).

The government is also extending the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords, which will increase the total number of days’ outstanding rent required for CRAR to be used to 457 days’ between 25 March and 23 June, and 554 days’ between the 24 and 30 June.

The government’s current position is to support commercial landlords and tenants to agree their own arrangements for paying or writing off rent debts by 30 June. This is supported by the code of conduct published by the government last year, setting out best practice for these negotiations. But, if these discussions do not happen and there remains a significant risk to jobs, the government says it is also prepared to take further steps.

The government is launching a call for evidence on commercial rents to help monitor the overall progress of negotiations between tenants and landlords.

The call for evidence will also set out potential steps that government could take after 30 June, ranging from a phased withdrawal of current protections to legislative options targeted at those businesses most impacted by COVID-19.

The government’s position remains that any businesses that can pay all or any of their rent should do so.

There is to be a review of commercial landlord and tenant legislation later this year, which will consider a broad range of issues, including the Landlord and Tenant Act 1954 Part II, different models of rent payment, and the impact of coronavirus on the market. 

Residential tenants

The restrictions on residential evictions in England will continue until 31 May 2021. It is not yet clear whether the current exemptions (for example where there are 6 months arrears or more) will be varied at all. [UPDATE 24/3/21 - the new regulations have now been issued and there is no change to the exemptions.]

The increased notice period of 6 months will continue to apply until 31 May 2021.

Court arrangements and rules introduced in September 2020 have been extended to the end of July 2021 to ensure that the most serious cases, such as anti-social behaviour or fraud, are prioritised and landlords will be required to provide the courts with information on how the pandemic has impacted their tenants.

For claims issued before 3 August 2020 the service of a reactivation notice has been extended to 30 April 2021.

A new free mediation pilot is also under way to support landlords and tenants to resolve disputes without a formal court hearing.