When investing in commercial property in Scotland it is crucial to approach acquisitions with an understanding of Scottish planning law. Overlooking planning issues can lead to costly complications, so buyers should be diligent and proactive. Here we outline the key planning law considerations for investors, focusing particularly on ascertaining the permitted use.
What is the Scottish planning use regime?
In Scotland, planning permission is required for most types of physical development as well as most changes in a property’s use where the change is “material”.
As in England, uses are generally categorised into ‘use classes’ but Scotland has its own use classes legislation including retail (Class 1A), industrial (Class 5), leisure (Class 11) or office (Class 4). It is important to ascertain what use class is authorised at a property. If a property is being used for a purpose that does not match its permitted use, this can pose risks to an investor.
What are the risks if there is no permission for the current use?
If planning permission authorising the current use is absent, the council may require the owner to return the property to its authorised use or even pursue enforcement action. This could affect the value of the investment, limit its potential, or result in unforeseen costs. If the existing use is not authorised, it is advisable to assess the process of regularising the position and the likelihood of success.
What should a buyer look out for on acquisition?
- Period of Use: An important factor is how long the property has been used for its current purpose. In Scotland, there are statutory time limits after which the council would be unable to take enforcement against an unauthorised use. If the property has been used continuously for its current purpose for at least 10 years (without enforcement action having been taken), that use should become the lawful use of the property.
- Existing tenants: Where a property is occupied by an existing tenant whose lease has been in place for more than 10 years, this can be a strong indication that the use will be lawful through 10 years’ use. However, the occupation of a property by the same person/company does not confirm that the use has been continuous for that period, as a business may have changed its operations over that period and/ or the permitted use under the lease may have changed.
- Council records: It is advisable to check the council’s records regarding the property to ascertain further information on the lawful use. Specifically look for any planning applications or enforcement cases on the council’s planning portal or local authority searches (Property Enquiry Certificates) which may indicate how long the current use has been ongoing for. If the council has granted planning permissions in relation to the property, it can sometimes be implied that the council is aware of the use and, if it has not taken action, either considers the use lawful or otherwise considers it acceptable. In some instances you may wish to contact the council and ask for more information, however you need to be cautious that you do not alert the council to a potential breach.
- Seller contractual warranty: When negotiating the acquisition contract request a contractual warranty from the seller confirming that the property has been used continuously for the relevant 10-year period. The seller should be asked to provide evidence, such as leases, utility bills, or other documents, to demonstrate continuous use. This contractual warranty offers some protection if the council later challenges the use.
- Certificate of Lawful Use: If the use has persisted for the necessary period, you can apply to the council for a certificate of lawfulness. This certificate confirms that the use is lawful and provides assurance that the council will not take enforcement action. That certificate is beneficial for future resale or refinancing. Any application will need to be supported by sufficient evidence demonstrating the use has taken place for at least 10 years.
What are the due diligence steps to take?
As part of its acquisition a buyer would undertake due diligence. Key steps include:
- Review the planning history for the property, including previous permissions, refusals, and enforcement actions. This may reveal whether the current use was ever authorised or challenged.
- Investigate the period of use, including gathering evidence of continuous use such as leases, business rates bills, and utility statements. The aim is to identify a clear and uninterrupted period.
- Consider whether to engage with the council to understand their (informal) views regarding the property’s use. This helps assess the risk of enforcement but at the same time may alert the council to a potential breach of planning law.
- Ensure the sale contract includes seller warranties about continuous use. These should be backed up with supporting documents and, where possible, indemnities for any losses arising from planning issues.
- If you are satisfied that the use has been continuous for the requisite period, consider applying for a certificate of lawful use. This formally confirms the position and provides comfort to potential investors / future purchasers.
Practical tips for investors during the acquisition include:
- Engage a specialist planning solicitor early in the process to guide your investigations and negotiations.
- Be wary of properties with ambiguous or undocumented use histories, as these may be vulnerable to enforcement.
- Factor in potential costs and delays associated with regularising unauthorised use, including the risk that permission may not be granted.
- Remember that the council’s lack of action does not guarantee that the use is lawful; a formal certificate provides greater certainty.
Key takeaways
Acquiring property in Scotland without proper planning permission for the existing or proposed use of the property carries planning risks. To mitigate those risks, investors should investigate the period of use and council records, obtain seller warranties and, where appropriate, secure a certificate of lawful use.
Remember that planning law is complex and practices vary from council to council, so thorough due diligence and advice is key.
