Tightened rules for HMOs by local councils across the country has led to a rise in planning compensation claims by developers incurring additional costs as a result of the changes, according to law firm Thrings.
The immediate Article 4 directions change the previous allowances for homes to be converted into houses of multiple occupancy (HMOs) by permitted development rights to require planning permission.
These changes also kick started a 12-month timer for developers’ schemes impacted by the decision to make compensation claims.
Ros Trotman, Partner in Thrings’ Planning and Environment team, looks at the impact of immediate directions and why it is vital developers assess whether they are entitled to compensation.
What has changed?
Provided it falls within permitted development rights, converting a home (Class C3) into an HMO (Class C4) can be done without a full planning application.
If, however, an LPA introduces an Article 4 direction, planning permission would be required for any such changes. In many cases, the directions take effect immediately which means:
- No grace period for new schemes.
- No ability to rely on permitted development rights going forward.
- All new C3 to C4 conversions require a planning application.
Many councils are either considering or have already introduced these measures, often citing concerns about housing mix.
Why this matters for developers
For HMO developers, the removal of permitted development rights introduces risk and uncertainty, exposing them to:
- The time and cost of preparing and submitting a planning application.
- The risk of refusal.
- The possibility of conditions that restrict how the property can be used.
In practical terms, schemes that previously worked on a straightforward permitted development basis now require a more detailed planning strategy from the outset.
A potential route to compensation
What is less widely understood is that there may be a route to compensation in certain circumstances.
Where an immediate Article 4 direction removes permitted development rights without prior notice, developers may be entitled to claim compensation if:
- Planning permission is refused; or
- Planning permission is granted subject to conditions that restrict development in a way that would not have applied under permitted development rights.
There is a strict 12-month window from the date the direction comes into force to make a compensation claim.
This means developers with schemes affected by the new direction should be reviewing their position.
You may have grounds to explore a claim if you have:
- Exchanged contracts on a property intended for HMO conversion;
- Incurred professional fees in reliance on permitted development rights; or
- Suffered a reduction in scheme value due to refusal or restrictive conditions,
Each case will turn on its facts, including timing, evidence of loss and the detail of the council’s decision-making.
Trotman says: “We are continuing to see a surge of developers and investors across the country being impacted by Article 4 directions, setting back their plans to deliver new HMOs.
“Immediate Article 4 directions and non-immediate directions which have not given the usual 12-month notice can have a real commercial impact for HMO developers and investors, particularly where acquisitions, funding arrangements or professional appointments have already been put in place on the basis of previously available permitted development rights.
“Diminution in value can be significant if planning permission is not secured. The key is to act promptly and seek advice on next steps and an appropriate planning strategy as soon as possible.
“Understanding your rights – and acting within the requisite timeframes – is essential and our team are on hand to help you protect your position.
“This means assessing whether a claim may be possible and if so, advising you on what losses may be recoverable and what evidence is required in order to engage with the LPA on your behalf.”
Ros Trotman is a Partner in Thrings’ Planning and Environment team
