Planning for serviced accommodation probably causes more online and offline debates than any other area.  As a confusing and poorly understood area, it’s probably no surprise that people have such strong opinions that aren’t necessarily backed up by facts!

We feel it’s important to have an accurate and nuanced understanding of planning for serviced accommodation, so we’ve produced this definitive guide to help you to understand the facts behind planning.

THE ENGLISH PLANNING SYSTEM

Under the English planning system, sites are assigned a “Use Class”, designated by a letter and a number. For instance, a shop would fall under A1 Use Class, a restaurant A3 and most offices B1. The difficulty with serviced accommodation arises because there is no specific Use Class designated, and so it may fall into a number of different Use Classes.

The Scottish planning system is substantially different to England, while Wales is based on the same classes but with some revisions and differences.

CAN YOU OPERATE SERVICED ACCOMMODATION UNDER C3?

In order to understand the answer to this question, we must first look at the definition of the C3 Use Class, as defined by The Town and Country Planning (Use Classes) Order 1987:

C3 Dwelling Houses – Use as a dwellinghouse (whether or not as a sole or main residence) by:

(a) a single person or by people to be regarded as forming a single household;

(b) not more than six residents living together as a single household where care is provided for residents; or

(c) not more than six residents living together as a single household where no care is provided to residents (other than a use within Class C4).

It is interesting to note that the definition specifically states that the property does not need to be a sole or main residence, which would otherwise rule out serviced accommodation. Similarly, there are no limitations given on the length of stay allowed under the use class.

This leaves two key criteria which serviced accommodation must fulfil in order to fall within the C3 use class:

1) The property must be a “dwelling house”
2) It must be occupied by not more than one “single household”

DWELLING HOUSES

The definition of a dwelling house is not given in The Town and Country Planning (Use Classes) Order 1987, so instead we must look to case law. Case law is used in situations like this where definitions are unclear, and courts must decide what definitions should be used. These decisions set a “legal precedent”, which is then followed in all future cases.

The definition of a “dwelling house” was decided in 1982 by Judge McCulloch in the case of Gravesham Borough Council v Secretary of State for the Environment. His ruling was that “…a dwelling house is characterised by its ability to afford to those who use it, the facilities required for day to day private domestic existence”.

To paraphrase, he ruled that a dwelling house does not have to be used as a home, it only needs to be capable of being a home. Therefore any property that contains somewhere to cook food, a bathroom and sufficient living space – the main facilities required for “day to day private domestic existence” – can be considered a dwelling house.

On this basis, most serviced accommodation would be considered a dwelling house under planning law, and therefore could potentially fall under the C3 use class.

SINGLE HOUSEHOLD

The second criteria is that the occupation should be by a single household. Three definitions of what constitutes a single household are given; a, b and c – of which a and b are relevant.

C3(a) is defined as “a single person or by people to be regarded as forming a single household”. This definition covers any guests who are travelling on their own, with a partner or as a family.

C3(c) is defined as “not more than six residents living together as a single household where no care is provided to residents (other than a use within Class C4).” This would cover any non-related group of people travelling together, such as a group of contractors, so long as it would not fall under C4 use.

The definition of Class C4 is given as:

C4 Houses in multiple occupation – small shared houses occupied by between three and six unrelated individuals, as their only or main residence, who share basic amenities such as a kitchen or bathroom.

In order to fall into the C4 use class, the property would need to be a guests “only or main residence”, which will clearly never be the case for serviced accommodation. As a result, any group of up to 6 unrelated guests will fall into the definition of a single household.

This also means that serviced accommodation “by the room” can never fall into the C4 use class. Many people are doing so, and reporting that councils do not either understand or care about it. It is important to remember however that this is technically a breach of planning control.

Because Serviced Accommodation can never be under C4 usage, HMO regulations, licensing and Article 4 directions are never applicable.

MATERIAL CHANGE OF USE

Based on the two key criteria established, for entire properties rented to a single group of up to 6 guests, serviced accommodation will usually fall under the C3 use class.

There is, however, an exception even for properties which fulfil both of these criteria, which is for properties where a material change of use is deemed to have taken place.

Guidance for what constitutes a material change of use for serviced accommodation has been defined by case law. Nearly all serviced apartments will qualify as a “Furnished Holiday Let”, which having been around for a substantial amount of time have generated various test cases.

In 2012, a holiday let operator named Sheila Moore was served an enforcement notice by her local council. She had purchased a nine-bedroom property in 2007 and provided the entire property as a holiday let to large groups of guests. The council had concluded that this amounted to a material change of use, and so had served the enforcement notice. She appealed the enforcement notice, and after several unsuccessful appeals the case eventually ended up being heard by Lord Justice Sullivan in the Court of Appeal.

Lord Justice Sullivan established that whether the use of a dwelling house for commercial letting as holiday accommodation amounts to a material change of use will be a question of “fact and degree in each case”.

He established that whether a material change of use has occurred depends on the character of the use – in other words, who is staying in the property, when are they staying and how are they using the property. He also stated that the character of use can be judged by its impact on the neighbours. The areas he highlighted for consideration were:

  • Parking – If guests are bringing many more vehicles than would be expected for a typical family, this may constitute a material change of use
  • Patterns of arrival and departure – if guests are regularly coming and going at unusual hours of the day, this may constitute a material change of use
  • Number of guests – if the number of guests staying in the property is more than might reasonably be expected to live the house, this may constitute a material change of use
  • Frequency of “Party type activities” – if parties are occurring on a more frequent basis than might be expected at a residential property, this may constitute a material change of use
  • Refuse and recycling collection – if a lack of organisation around refuse and recycling collections are causing a visible impact to local residents, this may constitute a material change of use

HOW TO OPERATE SERVICED ACCOMMODATION UNDER C3 USAGE

To summarise, in order to operate serviced accommodation under the C3 use class for, you must:

1) Operate the property as a single unit (e.g. not let by the room);
2) Ensure that most of your guests form a single household either because they are related, or because there are not more than 6 guests;
3) Ensure that no material change of use has occurred by minimising the impact on the neighbours.

C1 PLANNING USE CLASS

One of the biggest misconceptions around planning for serviced accommodation is that all properties fall under the C1 use class. We have seen above that this is clearly not the case, and if we examine the definition of the C1 use class it is clear why C3 is usually more appropriate:

C1 Hotels – Use as a Hotel, boarding house or guesthouse, where no significant element of care is provided

When we consider serviced accommodation properties let as a whole, it is clear that most of the time it will look more like a home than a hotel! Sometimes, however, an operator may wish to apply for C1 use class for reasons other than being the most appropriate use class – such as to allow investment of pension funds into a property.

Properties available by the room clearly do not fall into the C3 use class, and therefore most often will be within C1.

SUI GENERIS

Sui generis is Latin for “one of a kind”, and its definition in Town and Country Planning (Use Classes) Order 1987 is:

A use on its own to which any change of use will require planning permission, such as theatres, scrap yards, nightclubs, amusement centres, casinos, and large HMO’s.

In circumstances where a property clearly does not fit into other uses classes, sui generis may be an appropriate use class for serviced accommodation.

There is a significant downside with sui generis however, in that with most use classes give you permitted development rights. Permitted development is generally thought of as a way of changing use class without applying for planning permission, but in fact, it covers a number of different areas. With residential property, you can extend your property in certain ways through permitted development, and with commercial properties, you can change the nature of the property so long as it stays within the same use class.

With sui generis, there are no permitted development rights, meaning any material changes or change of use must go through a planning application. This severely restricts the contingency planning for a project – should serviced accommodation not prove successful, a planning application will be required to return it to its previous use. This introduces an element of risk, as no matter how “cut and dry” a case seems, there is always a chance factor when it comes to planning applications!

The most interesting feature of sui generis is that because it is a “one of a kind” planning application, you can apply for dual uses. This is particularly useful for HMO type properties, where you might want to test the model with serviced accommodation, knowing you have a safe fallback option as an HMO. Alternatively, you might wish to have long term tenants over the winter, and let the rooms on a short stay basis over the summer when the demand is highest.

THE 90 DAY RULE

In London, there is an additional layer of complexity when considering planning for serviced accommodation. In 1973, the Greater London Council passed a law stating any stays of less than 90 days were considered a change of use which would require planning permission.

This law remains in place today, however, in the build-up to the Olympics in 2012 there were concerns that many Londoners would be breaking the law by allowing guests to stay in their properties. A temporary law was brought in to allow short stays of less than 90 days – but only for up to 90 days per calendar year. This temporary change was deemed a success, and so in 2015, the Deregulation Act was passed, which permanently amended the 1973 law.

Different boroughs have different attitudes towards short stay accommodation, with the most central boroughs tending to be strict and regularly take enforcement action against breaches. Many of the less central boroughs turn a blind eye, however as any property operating full time as serviced accommodation is a breach of planning control, they could choose to enforce at any time.

BREACH OF PLANNING CONTROL

It is important to understand the context around the law and enforcement of use classes. Often, the press (or less knowledgeable investors) will talk about “illegal properties” when referring to a breach of planning control – which is a far from accurate description!

If the local planning authority is aware of a use that they believe may be a breach of planning control, they will start by sending a letter known as a “planning contravention notice”. The recipient will be asked to provide further information about the suspected breach, in order to allow them to decide whether or not to pursue enforcement action.

In some cases, a planning contravention notice may be sent to a property operating serviced accommodation under the C3 use class. In these cases, it is important to respond clearly, quoting use class definitions and case law as to why the property is not in breach. At this point, most authorities will either choose to drop their enquiries or arrange for an officer to visit the property. Should they arrange a visit, you will have the chance to discuss the situation with a planning officer, and to demonstrate that the property is not in breach.

Should the local planning authority decide they wish to pursue the case, at this point they would serve an enforcement notice. There are two credible options: comply with the enforcement notice, or appeal the enforcement notice, in which case you will be given the opportunity to argue your case to the Planning Inspectorate. It is only at the point that an enforcement notice has served and you choose the ignore it – which would be very irresponsible behaviour – that you would be breaking law and committing a criminal act.

COUNCILS AND PLANNING

One of the reasons there is so much confusion around planning is that many councils and planners do not understand it themselves. As a very niche area, it is something many planning officers simply do not come into contact with on a regular basis.

One oft-repeated myth is that “planning varies from council to council” – all of the planning use classes and case law applies nationally (or at least within England). What does vary from council to council is their level of understanding of, and attitude to, serviced accommodation. The council may try to argue that you aren’t allowed to do serviced accommodation under the C3 use class, but should they try to serve an enforcement notice you would simply appeal. With the law on your side, you would be highly unlikely to lose the appeal.

SUMMARY

With a detailed understanding of the planning law behind serviced accommodation, you can now position your projects in the way that benefits you the most. For most properties, continuing to operate under the C3 use class will make the most sense. In some cases, there may be benefits to changing to C1 or Sui Generis, but always consider your “Plan B” should serviced accommodation not work out as expected!