Returning period houses to residential use

With residential property prices in key locations seemingly going one way only and with no shortage of commercial property on the market due to factors such as rising rates and a difficult business environment, buying a commercial property in an area you desire, and converting it for residential use, can make sense.

“A lot of my clients, both investors and first-time buyers, are looking at this route to market,” says Jong Kim, a town planner and managing director of multi-disciplinary practice Masterplan Associates, pointing to both growing demand and a lack of suitable residential property as drivers of this trend.

With vacancy rates around Merrion Square said to be of the order of 20 per cent, the same cannot be said of commercial property.

Peter Kenny of estate agent Colliers agrees, also pointing to a price gap that may exist between a property that is in commercial, as opposed to residential use.

The number of pre-63 residential investment properties that have come on the market also present an opportunity to convert from multi-unit back to residential accommodation.

External space
For Max O'Flaherty, a director with Aughey O'Flaherty Architects, opting for this route could create a "magical" home.

“In terms of windows and light, it can be an amazing thing,” he says.

However it’s very much a case of “try before you buy”, the experts warn.

“You’d want to be quite careful in terms of assessing the suitability of the property,” says O’Flaherty, adding, “A lot of commercial uses don’t care too much about things that would be essential for a home, such as natural light and orientation.

“You need to think how suitable the property is for reconfiguration. A lot of commercial properties have no external space, no terrace or garden and may have maxed out any open space.”

It is also likely that such properties will be over-serviced in some ways – with five toilets, for example, and an abundance of wiring and sockets – and under in others, with a tiny kitchen and no proper bathroom.

And if it’s a protected property, it will bring its own challenges (to see if a property is protected go to: http://iti.ms/1cCzWlW).

“You should be aware that if it’s protected it absolutely will cost you more to refurbish, as you have to use traditional construction methods,” says Kim, advising putative converters to discuss this with a conservation officer in Dublin City Council.

On the other hand, Georgian buildings were, after all, designed for residential use, so the conversion process will likely be more straightforward.

Planning permission
Looking further afield to newly-built retail developments in the suburbs, which may have large glazed windows and very little light and ventilation in the back, the conversion can get a bit trickier.

“It could be quite difficult to reconfigure it so that it makes a pleasant place to live,” O’Flaherty says.

Funding may be another challenge.“By definition it’s the less obvious route, so it might be slightly harder to get through as the banks are more conservative,” he adds.

Once you have determined that the property would be suitable for reconfiguration, the next step – once you have purchased it – is to apply for planning permission.

By definition it’s a change of use that you’ll be seeking and, if it is a Georgian or protected structure around the heart of Dublin city, attaining this shouldn’t present any great difficulties.

“Quite often, in principle, there’s support for a change back,” says O’Flaherty.

“We have never been refused permission and we’ve done lots of them,” says Kim, “The council wants to see protection of structures and if it’s going to be empty, it will deteriorate.”

However, it can be a little bit more difficult if you’re looking to convert a premises into a multi-unit structure, rather than a family home. “The more units you try and get, the more difficult,” Kim says.

Such a route will necessitate meeting additional requirements, and documentation, such as a fire safety certificate and a disability access certificate.

A planning search is recommended in the early days to see if anyone has been refused permission to convert before you go down the road of buying the property.

Another difficulty – of a financial nature – is dealing with development levies. Dublin City Council levies a rate per square metre for a change of use, which can easily run into tens of thousands (see panel).

Contributions are calculated at 50 per cent of the applicable rate (€86.40 per square metre of development/change of use), but where contributions under a section 48 scheme were paid in respect of the former use, the contribution payable on the new proposal will be net of the quantum of development previously paid for.

Conservation grants
And, depending on how long the property you purchase is zoned as commercial, you might also face commercial rates.

However, if you opt for a Georgian or protected building, you may be in line for either a grant or tax relief on the costs of conversion and restoration and an exemption from development levies.

Firstly, the Government is set to reintroduce conservation grants, which were suspended for the past three years.

Under the Built Heritage Jobs Leverage Scheme, applicants can apply for a grant of between €2,500 and €15,000 with a total fund available of €5 million. These grants can be used not just for Georgian buildings, but also protected buildings. (see buildingsofireland.ie) The only caveat is that you must provide matching funding provision and the deadline for this year’s round of funding applies this month.

Another source of potential financial support to would-be converters is the Living Cities initiative. Launched in 2012, and extended in last year’s Budget, it is designed to encourage people back to living in the centres of Irish cities.

The initiative enables residents of pre-1915 buildings to claim tax relief, at a rate of 10 per cent a year, over a 10 year period, for the cost of refurbishment works. The tax relief applies to eligible properties in Waterford, Limerick, Cork, Galway, Kilkenny and Dublin.

The Irish Georgian Society can also provide useful support. According to Emmeline Henderson, assistant director and conservation manager with the society, the society is about to reintroduce its grants for the conservation of historic buildings and these can be used as matching funding. A typical minimum value of about €1,000 and running up to €50,000 will apply.

Grants from the society are offered on the merit of the building, its architectural significance and the need of the building. While the society gives a priority to buildings that are in community use or are open to the public, private individuals can also secure grants.

“It’s the building we’re judging it on,” says Henderson. It’s not just Georgian buildings that qualify – “anything post-1700 up to 1950” may be suitable.

Converting from commercial
"We tend to have a preference for Georgian buildings, but Victorian and Edwardian buildings will also be judged on," she says. "Ideally we would love to see buildings originally designed as residential converted to residential." Which is good news for those considering converting from commercial to residential.

In addition, but limited to properties within the area, is the South Georgian Core Initiative. Under this plan, Dublin City Council has agreed to waive development levies charges on those converting historic buildings within the South Georgian Core from commercial to residential.

The council is also preparing templates to help people convert these properties back to their original use.

Period properties: commercial, residential or both
If you are in the market for a converted property, you could consider one of two adjoining properties on Dublin's St Stephen's Green.

The mid-terrace properties on the southern side of the green are within the Georgian Conservation area and, under the Dublin City Development Plan, have been zoned “to protect the existing architectural and civic design character, to allow only for limited expansion consistent with the conservation objective”.

As Jong Kim of Masterplan Associates, notes, “any proposal must be in keeping with this objective”.

He suggests three potential uses for the properties: 1) a single family home; 2) a mixed-use development with commercial on the ground floor and residential units above it, and 3) three apartments.

For the first option, while planning permission would be required, the purchaser would not need either a fire certificate or a disability access certificate. On the other hand for the other two, you would need
to fulfil the requirements to get these.

However, potential converters of commercial properties need to beware of additional charges. In October 2011, the Pharmaceutical Society of Ireland’s premises at 37 Northumberland Road, Ballsbridge, Dublin 4, was sold for €1.5 million and the new owners applied to convert the premises back from commercial to residential use.

According to planning documents filed with Dublin City Council, as part of this process the owners were faced with a development levy of €52,467.70 on the grounds that “investment by Dublin City Council in local authority works has facilitated and will facilitate the proposed development. It is considered appropriate and reasonable that the developer should contribute to the cost of same.”

Upon appeal, the levy was reduced to €33,830, on the basis that a smaller floor surface was deemed to be for residential use.