Commercial premises for sale: how to convert it into a home?

Shortage of properties, excessively high prices, desire for an atypical home, etc.: there are many reasons why a property buyer might view commercial premises in a different light. However, a commercial premises is not, legally speaking, a residential property and cannot be substituted as such so easily.

The law sets out rules that must be followed, at the risk of incurring fines or even being prohibited from completing the project. If your dream leads you to such an acquisition, here are some tips for proceeding in the best way.

What authorisations are required?

The first question concerns the facade of the building. If, like many commercial premises, it has a shopfront that you wish to remove for obvious privacy reasons, it will be necessary to submit a planning permission application to the town hall. This rule generally applies to any significant transformation affecting the external appearance of the property, as well as to modifications to the load-bearing structure.

If the works only concern the interior, a prior planning declaration may be sufficient. However, in a commune with more than 200,000 inhabitants, a change of use will also need to be applied for from the town hall – which has the right to refuse it.

Checks not to forget

Before carrying out the necessary works, it is also essential to ensure that the project is not contrary to the local Local Development Plan (PLU). This may set out particular rules regarding ground-floor premises in buildings. In some communes, the policy to preserve local shops may, for example, prohibit conversion into residential premises.

In the case of premises located within a co-ownership, it is necessary to check that the co-ownership regulations do not prohibit the conversion planned. The premises must also be served by essential utilities (water, electricity, telephone). A vote must finally be held at a general meeting, authorising the change of use of the premises by unanimous agreement.

Furthermore, if the total floor area exceeds 150m², it is mandatory to appoint an architect to secure all the works.

Termination of the commercial lease

The premises in question may be occupied and operated by a professional tenant: it is necessary to terminate the commercial lease before proceeding with any conversion. It is then possible to refuse the renewal of the lease when it expires, without paying any indemnity to the tenant and on the grounds of conversion to residential use.

If the lease is recent, there is the option to give notice to the tenant at the end of each three-year period. An eviction compensation must then be provided, or the provision of an equivalent and available commercial premises.

Carrying out the right works

A commercial premises does not meet the same requirements as a residential dwelling. In order to give it all the characteristics expected of a home and to make the operation a success, several points must be considered:

• The final dwelling must offer a surface area of more than 9m², with a ceiling height exceeding 2.20m.

• If there is no connection to potable water or telephone, a significant cost must be planned in the budget;

• The electrical installation must, if necessary, be brought up to residential standards;

• Pay attention to the energy performance and the rating of the future dwelling on the DPE (Energy Performance Certificate), which may have a certain impact on the comfort and value of the property, but also on potential letting;

• Most commercial premises have neither a kitchen nor a bathroom: the installation of these essential facilities for a dwelling may represent a significant budget;

• New openings, windows and doors will probably need to be made, in the same way.

What about insurance?

Three different types of insurance can be taken out, depending on the nature of the project. Firstly, during the carrying out of works, building damage insurance will protect you from defective workmanship. In particular, it will enable you to be compensated for damage covered by ten-year insurance as soon as a loss is observed, before any investigation into the liability of the contracting company or management of a dispute which then becomes the concern of the insurer.

Then, if you plan to live in the dwelling, you will need to take out standard buildings and contents insurance.

Finally, if you wish to let the converted property, you will need to take out insurance specifically for non-occupying owners.

Beware of fiscal consequences

An oversight here could put you in trouble with the authorities, as the conversion of a commercial premises into a dwelling has consequences, particularly fiscal. This results in the removal of the local business tax (CET) and changes the council tax for those still concerned.

Council tax is also calculated using a cadastral rental value and will not be the same for commercial premises and a dwelling. It is necessary to make a declaration of change of use, to be submitted within 90 days after conversion to the relevant cadastral office.

Once the change of use is effective, the authorisations obtained and the necessary declarations made, you are free to occupy the new dwelling, let it or even sell it as habitable floor space.

Note that the conversion may only concern part of the premises, which will then become a mixed-use premises, partly residential and partly professional. Moreover, even if it becomes purely residential, a company can still be registered at the address of the premises, i.e. at the director’s home.