Mixed-Use Development Projects: Key Issues For Developers and Occupiers
Q: Why Has Mixed-Use Become More Prevalent?
Mixed-use has become more prevalent primarily as a result of planning policy changes and the idea is that people should work where they live. Partly because of the better returns, there has been new entrants to the mixed-use market. Commercial developers who previously have not been involved in mixed-use development have now entered the mixed-use market.
Q: Are There Any Particular Considerations For a Developer Embarking on a Mixed-Use Development?
There are considerations for developers entering the mixed-use market:
1. The exit: In order to be able to exit the scheme the developer must create a good investment. And that will produce it’s exit.2. The structure of the scheme: How the component parts fit together, how it is managed, how it is run, and who controls what. 3. Stamp Duty Land Tax (SDLT): A commercial developer will be used to seeing rates of SDLT of 4% but on a mixed-use development, where there are residential elements involved, you could see rates of SDLT of up to 15% and this will seriously impact on any development appraisal. 4.Residential rights: Commercial developers won’t have come across residential rights before, but residential occupiers have rights to manage and rights to buy – and these rights could be implemented at any point during their occupancy.
Q: Are there tensions between residential and commercial occupiers of mixed-use development schemes?
There will always be tensions between the residential and commercial occupiers of mixed-use schemes. These include:1. Service charge: Commercial occupiers on a mixed-use scheme will always have to bear a higher proportion of service charge costs than residential tenants.2. Use and nuisance: You can see how a busy restaurant or gym in an otherwise residential building could be viewed as a nuisance by the residential tenants. 3. The rights of residential occupiers: These include the rights to buy and the rights to manage. These rights could seriously impact on investment value for the commercial tenants.
For more information on mixed-use development or to speak to one of IBB’s commercial property solicitors please visit https://www.ibblaw.co.uk/service/commercial-real-estate. For more information on Mixed-use commercial development and considerations for developers please contact one of commercial property solicitors on 01895 207285, or email us at CRE@ibblaw.co.uk. Alternatively please visit https://www.ibblaw.co.uk/service/commercial-real-estate.
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