The new Class E: Be wary on user clauses

In the weeks leading up to Christmas many of us would have been keeping an eye on whether there was going to be another lockdown. On that basis you could be forgiven for not noticing an important development regarding the Use Classes Order (UCO) which took place on 20 December 2021.

By way of background, all buildings fall within a Use Class as defined in the Town and Country Planning (Use Classes) Order 1987 (as amended) (UCO 1987).

On 21st July 2020 the Government published The Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 which introduced substantial changes and these came into force on 1st September 2020. The changes to the Use Classes Order (UCO) represented a substantial overhaul of the system in an effort to create flexibility for the use of buildings and regenerate high streets and town centres.

In summary, those changes introduced a broader new commercial, business and service use class (Class E). Previous Classes A, B1 and D1, applicable to retail, office and non-residential institutions and assembly and leisure uses respectively, were removed and new use classes introduced in their place. The new Class E encompasses commercial, business and service, while the new Classes F1 and F2 apply to learning and non-residential institutions and local community use respectively. In the absence of conditions or agreements to the contrary, it is now possible to change use within Class E without the need for planning permission.

Almost immediately after the changes came into force there was a legal challenge brought by a non-government group. One of the group’s challenges was that the statutory instrument should have been subject to an environmental assessment. The first hearing dismissed the challenge, this decision however was appealed. The decision of the appeal was given on 20 December 2021 and again found in favour of the Government and so the new use classes remain intact.

There is however, a possibility that the decision could be appealed to the Supreme Court which means until the resolution of this careful consideration must be given when drafting user clauses in leases. A Landlord will always want to have complete certainty on what its tenant is permitted to use its premises for. So when drafting the lease should you include just reference to the new UCO whilst there is still uncertainty?

Also the different uses falling within the new Class E means that when drafting the user clause in a lease the Landlord needs to be more specific as to what the actual permitted use is. By way of example, a lease permitting any use within Class E could potentially leave a Landlord exposed to a substantial change of use by the tenant but still within Class E. If the property in question is to be used as an office then the lease will probably not have all the provisions required for say the use of the property as a restaurant or shop should the use change. So in any lease drafting it is important for a Landlord to specify the actual permitted use within Class E. There is nothing to preclude the addition of wording to permit the ability to use the property for another use with the relevant use Class but it is advisable that any such change of use be made subject to Landlord’s consent.

Alternatively, the user clause in the lease can still be by reference to the UCO 1987 which does limit significant changes of use due to the more specific categories in each use class. The wording in the lease could state for example, the use of the Property “as offices within Class B1 (a) of the Schedule to the Town and Country Planning (Use Classes) Order 1987…” but include the words “as enacted at 31 August 2020”. By using such wording there is a clear reference point as to the actual use. Such wording can benefit both Landlord and Tenant as there can be no uncertainty or room to make material changes of use which is possible in the UCO 2020.

In summary, until the challenge to the new UCO has run its course there may be potential pitfalls to including a non-specific reference to any of the new use classes. Once the position has been resolved practitioners drafting leases can be more relaxed about such references. Notwithstanding that issue when drafting a lease, the breadth and extent of the new Class E, there does need to be careful consideration as to the exact wording of user clauses to avoid significant changes to the user being made by the Tenant within the same use class.

If you have any queries about drafting leases and the new Use Classes Order, please contact Clayton Beerman or any member of the Property team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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