Should I buy neighbouring property even if it doesn’t have correct planning permission?

We own a rental property, a former commercial property, divided in two, in a small east-coast town. We applied and got planning permission to change its use to residential and all is above board.
Several of the neighbouring buildings, which are similar to our own, came up for sale after the crash and were sold for a fraction of the price they would have achieved if they had been residential rather than commercial. The new owners applied for change of use and all were turned down. However, they all refitted these former office premises and installed tenants without planning permission.
One of these premises has come up for sale and the question is would I be unwise to consider purchasing this and continuing to rent it out, in terms of insurance, tax obligations, the Residential Tenancies Board [RTB], water charges and so on – and the fact that it has no planning permission [for residential use]? More than seven years have elapsed, and the council does not seem to be too bothered.
Planning permission is required for any material change of use relating to any land or building. While not explicitly defined, changing the use of a building from commercial to residential is widely regarded as a material change of use and therefore planning permission, as you rightly sought and acquired for your own property, is necessary. As a result, the neighbouring property you are considering purchasing is what is known as an “unauthorised development”.
In many cases, if a property has been used as an unauthorised development for more than seven years it becomes statute barred from enforcement by the local authority (ie too much time has passed for council to enforce rules) and this often provides an element of comfort to the buyer. However, it is widely understood that an unauthorised change of use does not become statute barred where the use of a property is a condition of the planning permission originally obtained. Furthermore, the fact that planning has been sought and refused for adjoining properties should alert you to potential issues should you buy without permission. We are also now in the midst of a housing crisis in the country where we would anticipate that it could be more difficult to reverse a residential development to commercial use.
Therefore, while you may purchase this unauthorised property, the principle of “caveat emptor” (buyer beware) applies and you will be responsible for any remedial works required to comply with the conditions of any enforcement by the local authority (to include reverting to the permitted use) or of any retention permission if granted.
A lending institution will seek what is known as “good marketable title” and this includes compliance with planning permission. What this means for you as purchaser is that unless you are a cash buyer your solicitor will have to negotiate a “qualification on title” that is acceptable to the bank (basically the bank acknowledging the defect agreeing to proceed), whereby they reserve the right to withdraw loan approval if such qualification cannot be agreed. You must bear this in mind when it comes to selling the property as well, as depending on the financial climate of the day the lending institutions may not be so agreeable to offering such qualification to a potential buyer.
You will also be restricted from any further development of the property, even development that would be otherwise exempt under planning legislation. Any development whatsoever to an unauthorised development is deemed an unauthorised development, and as seven years will not have passed from any new development, it will be liable to planning enforcement.
There is also the question of rights and entitlement under other legislative codes which may be affected. For example, there is case law to suggest that benefits which normally apply under landlord/tenant legislation will not apply when dealing with an unauthorised development. Furthermore, if the property was to become the subject of a compulsory purchaser order in the future, you may not receive full compensation if the development is unauthorised.
Notwithstanding the above, the other factors you have specifically outlined will, in the main, not be impacted by the lack of planning permission. You will still be able to obtain insurance (subject to you disclosing the position to the insurance company), pay property tax, register with the RTB and pay your water charges whether it is an unauthorised development or not.
Our recommendation to you is that you negotiate a contract with the vendor which is subject to a grant of permission/retention permission being forthcoming within a reasonable period of time, say six months, for example. This secures the property for you pending the grant of permission but allows you to walk away if permission is refused. You will have to negotiate with the vendor as to who will pursue the application and cover the costs.
Rory Langan is a trainee solicitor at P O’Connor & Son Solicitors, Swinford, Co Mayo
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