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UK Planning issues for property investors

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How to work with UK Planning regulations and authorities

The UK planning process is perceived to be slow, awkward and time consuming. Much has been written in national papers about improvements that are required – this was highlighted in the recent Barker report on housing, commissioned by the Government’s Treasury.

It is important to understand the views of all stakeholders in the planning process. The Planners themselves work for Councils. Elected Councillors represent the public interests. 

if the main public interest in the councillors area is jobs, then getting permission to build a commercial premises on a desolate piece of land in a degenerated area will probably be quite straight forward - if you are promising jobs creation.

On the other extreme, if you want to build a house on a “Greenfield” site just outside a village boundary, the Councillor who represents the public (including many “nimbys”) and the local Planning Department will probably refuse planning permission. This is in part because of likely local public opposition and in part because the plan is not consistent with the Local Plan and Area Planning Strategy.

Do your homework - see the Local Plan and read the Area Planning/Housing Strategy

If you are considering doing any new development work, it is best to go to the Council offices or public library and see the Local Plan. This outlines the local areas assigned for potential future development and those where no development is either needed or allowed. You might be able to buy a copy of this for about 50 pounds. You should also read the Area Planning and /or Housing Strategy or similar such publicly available planning documentation. This will set out what goals and actions the Planning Department has in mind in the coming years.

Clearly if there is a shortage of affordable housing and the council are desperate for suitable sites, and you acquire a building plot in an affordable residential area you are in with a good chance. You can then meet to discuss the possibility of getting Outline Planning Permission for some key worker affordable housing - it will probably be looked at on a favourable basis. If you look as if you are “not” interested in helping the local community, you are only interested in making money, have not seen the Local Plan and seem not to have read the Housing Strategy documentation, your chances of success will go down considerably.

Building a new investment property

If you see a plot of land you do not own and are wondering whether it could be built on, there is less to lose, so I would suggest calling the Planning department and try and get a short appointment to see a Planning Officer to discuss. Take along a plan/drawing, photographs, map and make sure you have seen/checked the Local Plan and Housing Strategy documentation to see if what you will be asking for is appropriate. Best is then to broadly discuss around what type of property could be feasible to be built – single storey? A Terrace? A house? What about a 5 bedroomed large detached two storey house? If this is not possible, what could be built?

If you have a plot of land you own and would like to build say another house on it, I would suggest seeking some professional advice from a local architect. If the architect knows the planners and is on friendly terms with them, it could be beneficial to bring the architect along in support, or even for the architect to see the planner without you – to see what might be possible. The steer is, you have to be open minded, not too pushy and be willing to sketch something out over the table with the planning officer – to get their buy-in and support for the project. Any way the project would benefit the local community will help your case – for example, committing to do all building work with local builders thereby providing local employment. Another example is building a block of 6 flats where you contractually commit to selling three of them to key workers at a set price – to workers the council has lined up that need affordable housing. Note: this may make it more difficult to raise finance so be careful to do your homework before finalising any commitments.

Making alterations or extensions to an investment property

Many investors and home owners only require a simple extension to a house. If the extension is less than 10% of the size of the existing house, it can theoretically be built without planning permission. But, watch out. It still needs to comply with building regulations and I would advise you check your plan for an extension with the local Building Regulations Officer to make sure it will comply. Before the extension is built, make sure your builder knows in writing that they need to build the property to the local building regulation specifications. No good finding out later that the extension does not comply to the building regulations – it may need to be demolished in the extreme. Furthermore, you might think if the extension is non standard in any way, to formally apply for planning permission in any case, to make sure the Planning Department have no problem with your extension – or at least discuss it with them and check to make sure your plans do not need full detailed planning permission.

It is important to get on with the planning Officers – they are professionals with pride and they are trying to please many different stakeholders. Respecting this will help you. Getting an objective view from an architect who is able to support you will also help. Even better is to solicit the support of some other stakeholders (a local petition, builders, employees) to provide evidence that the project has the support from the local community.

The Planning Stages and how these affect property values

There are three types of planning stage. A plot without planning permission, a plot with Outline Planning Permission (OPP), and a plot with Detailed Planning Permission (DPP). A plot of say 20 metres * 50 metres suitable for a detached dwelling in the south of England may be worth 20,000 pounds without planning permission, 100,000 pounds with OPP and 120,000 pounds with DPP. A Greenfield site may only be worth 3,000 pounds without planning permission, but say 140,000 pounds with OPP. Clearly for an investor that can transfer a plot without planning permission into one with OPP or DPP, financial gains can be substantial (albeit you will have to pay capital gains tax on proceeds after costs at 40%).

What is Outline Planning Permission?  What is Detailed Planning Permission?

OPP is a brief description of the type of property that will have permission – for example, one detached two bedroomed dwelling. Before starting building, you will need DPP – this includes detailed plans and drawings, details of what the building will be made of, dimensions, number of bedrooms etc. You might apply for DPP for a 2/3 story house with a bedroom in the roof area, but the planners refuse this idea and want it only to be 1 storey with dormer bedroom. Getting DPP will likely need some negotiation on the details and overall concept. The chance of getting DPP approved after OPP is very high, but the chance of getting exactly the plans you want during DPP is fairly low. Before presenting your architect's detailed plans, make sure you comply with building regulations on things like “right to light” for neighbours, building materials, and access.

Property Development opportunities for Buy-to-let Investors

For an investor, one of the best strategies is to purchase a buy-to-let property where you see potential to add either a large extension or another dwelling or more at a later stage on the same plot. If the purchase has a positive cash-flow, the development opportunity is upside on the chance you may get planning permission. This means your capital will be working hard – exposed to capital gains on the existing property, with good rental income and upside to capture significant capital gain if your plans come to fruition.

Examples of development opportunities on buy-to-let property include;

As you can see, with so many options, many people overlook the potential of the average property to improve. So you have to think “out of the box”. You can use the above check list to see on each buy-to-let property how many of these possibilities the property has. Clearly if it is a terrace house with a flat roof, no cellar and no garden, the opportunities are limited. If you do not like the risk of doing the building yourself, you can purchase the property, apply for planning permission and sell the property with a development plan attached after the DPP has been endorsed – you should realise about half the development value doing this.

Beware of “get-rich-quick” schemes that for instance advertise farm land with potential for planning permission – very few Greenfield sites are given planning permission for construction of dwellings so such a purchase would be very speculative. Theoretically if you believe a plot which costs 5,000 pounds has a 20% chance of getting planning permission, and it could then sell as a plot with DPP for 100,000 pounds, this makes economic sense to purchase. However, you will not be able to borrow money against the plot, will have costs of say 5,000 pounds to get your OPP, and it will take much of your time. So my advice is, don’t mess around on the fringes unless you have a particularly good idea or deal and feel confident you can get DPP. If you do not get OPP, be humble and accept the ruling – don’t “burn your bridges” – you never know if you will be applying again to the same Planning Department. If you want control of such decisions, property development may not be for you.

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