Brexit briefing | Real Estate, Brexit |

Stockpiling for Brexit: 5 key Real Estate questions

Overview

With disruption to goods supply chains widely expected at the end of the Brexit transition period on 1 January 2021, businesses which rely on goods from the EU are increasingly re-focussing on contingency plans to stockpile goods. However, finding additional warehousing space is likely to be challenging. Businesses may therefore wish to explore how they can maximise the storage potential of their existing premises.  In this Q&A article, we look at five key questions for businesses which are considering stockpiling goods to mitigate the short-term impact of Brexit on UK-EU trade.

Can I alter my existing warehouse to accommodate stockpiled items?

This will depend mainly on three things:

  • whether the legal title contains enforceable restrictive covenants relating to the use or physical appearance of the warehouse,

  • for leasehold properties, whether the lease restricts which alterations can be carried out, and

  • whether the works fall within 'permitted development' for planning purposes.

Legal title

Restrictive covenants can be used by third parties to control how a property is used and how it looks, e.g. its height, windows or cladding. If the planned alterations are internal only, it is very unlikely that they would be caught be a restrictive covenant. However, if you are planning to extend the warehouse either upwards or outside of its original footprint, this could be a problem. Most properties are now registered at HM Land Registry so it is easy to check whether a property is subject to a restrictive covenant. It is worth noting that even if your property is subject to a restrictive covenant, there is a chance that it may not be enforceable or that insurance could be obtained in respect of any breach, so you should seek legal advice if you find that your property is affected.

Landlord controls

If you are occupying the warehouse under the terms of a lease then, in most cases, non-structural internal alterations are permitted without landlord's consent. However, if you want to alter the structure of the warehouse, e.g. to install a mezzanine level or add an extension, you will usually have to obtain landlord's consent. Usually, the lease provides that consent cannot be "unreasonably withheld", which means that the landlord must provide "reasonable" grounds to withhold consent. 

Permitted development

Warehousing is classified as a Class B8 use and there are permitted development rights attached to warehousing that allow certain kinds of development without the need to obtain planning permission:

  • If the changes are all internal, such as the reconfiguration of space or addition of racking or other internal structures, this does not need planning permission.

  • External alterations or extensions to existing warehousing also do not need planning permission if they comply with certain restrictions and if they are related to the existing use of the existing building. The restrictions limit the height, the maximum permitted floorspace, and the proximity of any extension to site boundaries.

  • There is a standard prohibition on allowing staff facilities to be accessed between 7pm and 6.30am, save by those on site for the purposes of their work, such as security guards.

  • Permitted development rights could also allow you to construct a new warehouse rather than altering the existing one, subject to similar restrictions. You should check that your proposed works fall within the relevant restrictions before work commences, because anything that is not compliant will require planning consent.

Can I repurpose my existing non-warehouse space for storage?

This will depend on whether there are any restrictions on using the property for storage and distribution on the title to your property, and whether your lease contains restrictions on alterations, if applicable.

As detailed in section 1 above, there might be restrictive covenants on the title that control how the property can be used. However, if it is currently an industrial property it is unlikely that storage would be prohibited.

If the property is leasehold, it is more likely that the lease will contain controls on how the property can be used. A lease will usually define the 'permitted use' of a property within one of the classes set out in the Use Classes Order 1987. Storage and distribution is within class B8 and so, unless this is permitted already, you would need to obtain landlord's consent and ideally enter into a short variation of the lease to reflect the newly agreed position. The landlord is unlikely to be under any obligation to consent, and may well ask for a premium for agreeing to this.

REPURPOSING EXISTING PREMISES: PLANNING ISSUES

Repurposing an existing premises for storage will amount to a change of use for planning purposes too. There is a permitted development right to convert up to 500 sqm of an existing Class B2 general industrial building to Class B8 storage and distribution use. Note that this only relates to the actual use of the building. If the change in use will mean that you also need to carry out external works (such as alterations to vehicle paths and external alterations to the building for loading and unloading), these will require planning consent. Any change of use in respect of more than 500 square metres will also need planning consent.

Finally, you should check whether there are any additional premiums or requirements set out by your insurers if the existing use of the premises is changed.   

Can I use my existing premises to store a shipping container?

A shipping container is a temporary structure and so is unlikely to be prohibited on the title to your property. However, if your property is leasehold, you should check your lease in case the landlord has included controls on how you can use your outdoor space, particularly if it is an access route, a car park or landscaped area on an industrial estate or retail park. If it has, then you will need to apply for landlord's consent.

If a lease is silent on this, then the rule of thumb would be that you are allowed to install one without landlord's consent.

SHIPPING CONTAINERS: PLANNING ISSUES

A shipping container will also not normally require planning permission if it is a temporary structure and is used as a facility ancillary to the main use of the existing building. However, if several were to be placed there, or they were (or became) permanent, or were used for a use not directly associated with the existing industrial building (for example, stand-alone self-storage facilities), or are located where they affect highway visibility, or in a residential area, then they may well require planning consent and you should check with your local planning authority. If they do require consent and this has not been obtained, you may be required to remove them and/or apply retrospectively for planning consent.  If the property is leasehold then your lease is likely to restrict your ability to apply for planning consent without the landlord's consent.

I have a vacant commercial premises – can I repurpose it to offer it to tenants as storage space?

The permitted development right referred to at section 1 above allows you to convert up to 500 sqm of class B2 general industrial use premises to class B8 storage use without obtaining planning consent. Remember, though, that the permitted development right for change of use does not extend to external conversion works, for which you may require planning consent.

If the premises are currently classed as Class B2 general industrial use and you intend to convert more than 500 sqm of it to B8 use, you will need planning consent. Likewise, if the existing building is currently used for any other purpose than B2 industrial (e.g. an office block or shop) then you will also require planning consent.

You will also need to check the title to the premises to ensure that there are no restrictive covenants preventing the change of use and, if your own title is leasehold, that the permitted use in the lease is wide enough to cover this and that subletting is permitted.

We occupy premises on an industrial estate and there will be extra traffic over the access road while we stockpile. Will the estate owner or other tenants be able to object to this?

In a situation like this, it is likely that the right of way that you have over the estate road was granted with the expectation that the premises were to continue to be used for the purpose that they were being used for at the time that the right of way was granted.

The right of way might have been granted with specific controls, in which case you'll need to check the terms of the lease or grant of the right, and comply with those. However, it is usual for a right of way to be granted fairly widely, and so you are only likely to have a problem if the change in use of your premises is held to be a 'radical change in character', and if the extra traffic on the road is a substantial increase in the burden on the road. If the extra traffic is temporary and not substantial, then there is less likelihood of a neighbouring property being able to object that the use is outside of the terms of the right to use the road. However, there could still be problems from a planning perspective.

Complaints

If there are neighbour complaints relating to the increase in numbers of vehicles, the timings of trips, noise from loading and unloading, damage to roadways, or obstruction from parking or turning, then the local planning authority would be required to look into it. If it can be shown that the use of the existing site has intensified significantly, they may require planning consent to be obtained, even though the same activities are taking place.

Their concerns would include matters such as neighbourhood amenity, impact on highways and traffic, and environmental impact. These are normally capped or controlled by conditions attached to a planning consent, so the new intensified use may become lawful under a consent, but subject to restrictions, such as on the number of vehicle trips, hours of operation, external lighting, control of mud and dust on the road, attenuation of noise from reversing alarms, and loading and unloading activities. There is no set threshold where intensification of use becomes unlawful; it is dependent on each location and circumstances.

Key points

Customs and logistics experts giving evidence to the Commons Select Committee on the Future Relationship with the EU recently put the likelihood of material disruption in and around the Channel ports next year at 50-80% (whether or not there is a deal with the EU).  Stockpiling goods is a logical way of mitigating that risk, but commercial warehousing space is likely to be in short supply partly because of Brexit stockpiling and partly because of the run-up to Christmas.  Given these constraints, and with additional pressure on finances because of the impact of the COVID-19 crisis, businesses may wish to explore the scope for maximising the use of existing premises for storage purposes.

Businesses have some time, if they start planning now, to repurpose or adapt their space to allow them more scope to stockpile. If they own the freehold of their premises, then the key will be to check whether there are any restrictions on storage use on the title and whether their current planning consent allows them to make the changes required. If they are the tenant of their premises, then they will also need to check whether their lease allows them to change the use or make alterations without their landlord's consent.

If any third party consents are required, whether from a neighbour, the planning authorities, or from a landlord, businesses should act now to ensure that they are in place before the end of the Brexit transition period on 31 December 2020. 

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