Residential unit built into commercial premises without permission

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    Residential unit built into commercial premises without permission

    I am co-owner of a freehold building consisting of a residential flat
    upstairs and commercial premises downstairs. It is in a terrace of
    identical residential/commercial units. The upstairs flat is currently
    occupied by the other co-owner, while the shop is rented out and is used
    as a computer repair centre. I am concerned about a recent development at the shop.

    There is a small single-storey projection at the rear of the shop
    which originally contained a kitchenette and toilet (part of the
    original construction). The previous tenant extended back from this
    into a small former garden area, building an additional crude
    outbuilding for use as a workshop or storage room. When I drew up the
    lease with the current tenant, this additional outbuilding was
    included in the plans as a shed. I was led to understand it would be
    made good when finances allowed for use as workshop area. It remained
    untouched for a few years until work commenced relatively recently to
    revamp it. I have since learned, and have now seen for myself, that it
    has been turned into a small, separate dwelling unit with its own
    front door. It is being rented out, allegedly for more than I am
    receiving in rent for the whole commercial premises. I assume there is
    no tenancy agreement and that payment is made cash-in-hand to the
    tenant who runs the shop. There are several aspects of this development
    which are of concern:

    1. There are probably several clauses in the current lease I signed with the
    tenant of the shop which are breached by the new 'flat', but the
    obvious one is in the Transfer section: 'the Tenant is not to share
    occupation of the property and no part of it is to be transferred
    sublet or occupied separately from the remainder'.

    2. I was not consulted in advance about such a
    development. As the freeholder I think I should have been.

    3. I am worried about the possible legal consequences for me as landlord if the
    council or another relevant authority finds out about the new 'flat'. Although
    I have not been formally notified, if this development is illegal then maybe
    this makes me complicit. The dwelling unit is finished and being rented out,
    making it much more difficult for me to ask that it be decommissioned and
    reverted back to what the lease plan states it should be. I am also
    aware such a request would upset the tenant (of the shop). Several
    other owners in the same terrace of shops have built legitimate
    separate flats on the same footprint with a 'B' suffix after the street
    number ('A' being for the upstairs flat).

    4. The additional dwelling unit could invalidate my buildings insurance
    which contains no provisions for it.

    5. The new arrangement benefits the shop tenant in that he is using my
    property for financial gain by renting the 'flat' out. I expect they
    would argue it is to help pay the rent because the Covid crisis means the
    computer shop has not been generating sufficient income.

    The new 'flat' has put me in a difficult position
    because I do not know how best to proceed without
    damaging the currently good relations with the shop tenant. They have
    always paid the rent on time, and to date there have been no major disturbances
    from the new 'flat'. I do not want to go in 'all guns blazing', but feel that
    things cannot be left as they stand. The next rent review for the shop is three years away.
    Any advice on the best course of action for me to take, and of the ****legality**** of the
    new dwelling unit, would be very much appreciated. Thank you in advance for your thoughts!

    Yes if you have knowledge of a breach of planning you are culpable. Therefore what I syggest you do is write to the tenant and require that he applies for a certificate of lawful use from the planning authority - which is not terribly likely to be granted. With a bit of luck the local authority will take over enforcement action or maybe legalise it. At review it would to some extent be taken into consideration, although not fully as it was a tenant creation. I don't think you should pretend you are unaware. Tell the tenant that you dont give consent formally but is there an electrical certificate? Also tell your insurers all that you know and take photos and send through to your insurance broker.
    Best wishes. Flying Freehold is currently in Chicago.

    You could go by the book and send two letters one in open correspondence saying that this is all in breach and must be taken down and the residential use ended immediately to avoid forfeiture, and the second without prejudice to the effect that provided all necessary consents are obtained from the local authority, an EPC obtained, an electrical certificate you will grant retrosepctive licence for alterations and occupancy subject to assured shorthold tenancy only.


      Dear FlyingFreehold,

      Thank you so much for your advice! Having read your answer, I wonder
      if I could check a few points with you before I go ahead.

      - Is it worth speaking to the tenant about the situation first to see
      if a resolution can be found, or is it prudent to put things in
      writing from the outset?

      - Should I myself also inform the planning authority about the
      development? I can ask the tenant to apply for a certificate of lawful
      use but there is no guarantee they will do it.

      - You mention 'at review it would to some extent be taken into
      consideration, although not fully as it was a tenant creation'. Do you
      mean rent review or a review by the planning authority? What would be
      taken into consideration?

      Thanks again!

      Best wishes


        My advice is to write (or probably better still get your solicitor) to write a formal letter saying that this is in breach of the lease and planning law and you require this unauthorised alteration reversed immediately. That way you are in the clear. What would alarm me is the possibility of someone living in a poorly executed shanty type of a flat and being trapped in and losing their life in a fire. You could therefore write a second letter "without prejudice" to the first and say provided the final exit door opens without a key and provided there is a gas safety cert and electric certificate provided within 7 days you will stay your hand in enforcement action if the tenant obtains all necessary consents and complies with all statutory requirements within say six months. However you must make it clear that you do not consent to a breach of planning and breach of the lease but are offering a short period for the tenant either to legalise matters or to arrange for its illegal sub tenant to be rehoused elsewhere.

        Make it the tenant's problem to sort this out. Very important that you get a letter off on a formal basis as above protesting. If by some miracle the tenant gets everything regularised and you grant a variation such that the back of the commercial premises may be occupied for residential purposes then the rental value will be higher as a flat is a more valuable use of land than some ancillary storage space.

        I have had the same problem with back shop parlours being turned into illegal flats without consent and we said it had to stop. The egress route is extremely important. It is not ok for the illegal subtenant to be obliged to exit through the shop. There has to be a door which can be pushed open without a key, ie with a crash pad or push pad, like when you leave the cinema by a side entrance


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