How to change the destination of a commercial premises?

In Summary

Transforming a commercial space into a residence or other use requires following legal procedures and completing necessary steps with the competent authorities. Here are the steps to carry out a change of use in full compliance.

What is a change of use?

The change of use of a space involves modifying its original purpose to assign it to a new function. Each space, whether commercial, residential, or for another purpose, has a designated use established at construction or last modification. This use, often determined by the Urban Planning Code, corresponds to the intended purpose for which the property is designed and used.

Examples of change of use

A typical change of use can include converting a commercial space (such as a shop or restaurant) into residential or office. For example, an old bakery might be converted into an apartment or a space intended for artisan work could become an office area. Such transformations often respond to market adaptations or reallocation strategies in urban environments.

The importance of the Local Urban Plan (PLU)

The Local Urban Plan (PLU) plays a crucial role in executing a change of use. This document sets the urban planning rules applicable to each geographic zone within a municipality. It defines the potential uses for land and buildings based on local development goals, environmental considerations, and economic dynamics. The PLU classifies different parts of the municipal territory into zones with specific uses (residential, commercial, industrial, etc.).

To have a change of use validated, it must comply with the provisions of the PLU. For example, if a commercial space is located in a zone where only commerce is allowed, converting it into a residence might be impossible. Additionally, some PLUs impose further restrictions, especially in heritage protection zones or neighborhoods aimed at preserving local businesses.

Difference between change of use and change of destination

It is important not to confuse change of destination and change of use. Although these concepts seem similar, they follow different rules. The change of destination concerns reallocating a building from one functional category to another (e.g., from a business to a residence). The change of use, on the other hand, aims to modify how a property is utilized without changing its functional category (e.g., switching a standard apartment to short-term rental).

Thus, a change of destination is definitive and attached to the building, while a change of use is often temporary and can be personalized based on occupant needs.

Administrative formalities related to the change of destination

To undertake a change of destination, certain administrative procedures must be followed. Depending on the scope of work, you will need to submit either a prior declaration or a building permit application. This formal requirement is crucial to ensure the project complies with urban planning regulations and zone-specific rules. For example, interior remodeling might only require a prior declaration, whereas work affecting facades or structure will require a building permit.

Administrative procedures

Check the Local Urban Plan (PLU)

Before starting a change of use project, the first crucial step is to verify the Local Urban Plan (PLU) of your municipality. The PLU is an administrative document setting the rules for land development and utilization within a city or urban area. It determines the possible uses for lands and buildings in different geographic zones, based on urban development, economic growth, and heritage preservation objectives.

Why consult the PLU?

The PLU is essential to ensure that the proposed change of use is legally permitted. Each zone within a city is assigned a specific use, whether residential, commercial, industrial, or public services. Therefore, in certain zones, the PLU might prohibit converting commercial premises into residences to maintain local economic activity or preserve the commercial character of a district, especially in city centers. Consequently, a change of use project contrary to the PLU guidelines will be automatically rejected by urban planning authorities.

Zones and their restrictions

The PLU usually divides the territory into several zones, each subject to specific regulations. These zones can be:

• Urban zones (U): Mainly intended for construction and activity areas. Changing the use of these spaces can be more easily permitted, provided it respects the rules of the relevant zone.
• Agricultural zones (A): Favor agricultural constructions. Changing the use to residential or commercial is generally restricted or prohibited, with exceptions.
• Natural zones (N): Protected for environmental and landscape reasons. Changes of use in these zones are highly regulated and often very limited.
• Protected zones: Certain specific areas (such as historic centers or heritage districts) may have additional rules to safeguard architectural heritage. Even simple change of use might require detailed review by local authorities.

Steps to consult the PLU

To obtain these details and determine if the change of use is feasible in your space’s zone, you should:

1. Contact the urban planning department of your city hall. This department is responsible for providing information on urban rules and supplying a copy of the current PLU.
2. Consult the PLU online, if a digital version is available. This allows for quick overview of the applicable rules for your project without needing to visit in person.
3. Ask specific questions about potential restrictions. Clarify if exceptions or exemptions can be granted, especially if your project might have particular benefits for the community (e.g., revitalizing a district).

Special cases of large cities

In some large cities such as Paris, Lyon, or Marseille, urban planning rules may be even more stringent. The PLU might be supplemented by specific plans aimed at maintaining a balance among housing, commerce, and green spaces. For example, priority zones may encourage conversions of commercial spaces into housing to address housing shortages. Conversely, in certain commercial districts, the PLU might prevent such transformations to preserve economic attractiveness.

Risks of non-compliance with the PLU

Ignoring the PLU or undertaking projects without ensuring compliance with urban regulations can lead to serious penalties. Your change of use project might be canceled, and you could be compelled to restore the property to its original state. Additionally, fines may be imposed for unauthorized works.

File a request for prior declaration or a building permit

When your change of use project complies with the Local Urban Plan (PLU), the next step is to officially submit procedures to the relevant authorities. Two types of procedures exist: the prior declaration of works or the building permit application. The choice depends on the extent of modifications planned for the space.

The prior declaration of works

The prior declaration ofworks is a simplified administrative process. It is necessary when the change of use does not significantly alter the exterior appearance of the building or its load-bearing structure. This approach is generally sufficient if converting a commercial space into a residence without major facade modifications or new openings.

When to use a prior declaration?

A prior declaration is mandatory when the project involves:

• Interior layouts without affecting load-bearing walls or façade.
• Reconfiguration of internal spaces, such as adding partitions or updating electrical and sanitary installations.
• Changing the use to another without visible external impact, for example, turning an office into an apartment.

The building permit application

A building permit is required when works affect the structure of the building or its external appearance. It is a more complex process than the prior declaration, requiring an in-depth review of your project by urban planning services. This permit is necessary for works modifying facades or impacting the surface area of the property.

When to request a building permit?

The building permit is needed in the following cases:

• When works modify the façade of the building, such as adding windows, balconies, or redoing the storefront.
• If the project affects load-bearing walls, such as during demolition or structural shifts.
• For an expansion of living area over 20 m² or if exceeding the limits set by the PLU.

Procedures for each process

Submission of prior declaration

For a prior declaration, you must complete the Cerfa form n°13404. This form must be accompanied by various documents, such as:

• A site plan indicating the building’s location within the municipality.
• Photographs of the current situation.
• A detailed description of the planned works.

The city hall has a one-month processing period to review your request. If no response is received within this time, the request is considered accepted by default.

Request for a building permit

For a building permit, you must complete the Cerfa form n°13409 and submit more detailed documents, including architect plans if structural changes are involved. Supporting documents can include:

• A site plan to depict structural modifications.
• Facade plans before and after work to illustrate proposed changes.
• A description of materials used, especially for openings and finishes.

The review process typically takes two to three months, during which authorities may request additional information or reassess parts of the project. If no response is given after this period, the permit may be tacitly granted.

Costs and implications

Filing a prior declaration or a building permit generally does not incur direct administrative fees, but some municipalities may implement development taxes depending on the scope of work. It is also important to note that any refusal of a prior declaration or building permit can be contested within two months, through the city hall or relevant authorities.

Consequences of non-compliance

Submitting a request for prior declaration or a building permit is mandatory to ensure the legality of works. Carrying out modifications without following this process exposes you to penalties. This could include an obligation to restore the property to its original state or substantial financial penalties. Additionally, illegal works can complicate future sale and lead to administrative shutdown.

Obtain co-ownership approval (if applicable)

If the commercial space you wish to convert is located in a co-ownership building, it is essential to review the co-ownership rules before beginning any process. This document sets the operating rules of the co-ownership and may contain specific clauses regarding the use of units within the building. In other words, you need to ensure that the planned change of use (e.g., converting a commercial space into residential) is permitted by the co-ownership regulations.

Why review the co-ownership rules?

The co-ownership regulations define the rights and obligations of each co-owner and specify the authorized uses for different types of property within the building. If the regulations state that certain units must remain for commercial use, converting a space into a residence might be forbidden. Such restrictions often aim to protect the balance between business and residential activities and to maintain harmony between private and professional spaces.

Need for the general meeting approval

Even if the co-ownership rules do not explicitly oppose the transformation, you must obtain approval from the co-owners’ general assembly to undertake works that might affect the building. The general assembly votes on important decisions regarding the co-ownership, such as renovation projects or changes of use.

Which situations require co-ownership approval?

• Transformation of common areas: If work or the change of use involves use or modifications of common parts (hallways, entrances, elevators), approval from co-owners is mandatory.
• Impact on other co-owners: If converting a commercial space into a residence directly affects other occupants, such as increasing the number of residents or altering shared charges, the general assembly must decide.
• Potential nuisances: Certain changes of use might cause disturbances (noise, increased traffic), requiring co-owners’ consent to prevent future conflicts.

Steps to obtain approval

1. Consult the co-ownership syndic: Before any process, it’s recommended to discuss the project with the syndic of co-ownership, who can guide you on procedures and inform you of restrictions in the regulations. They can also advise on how to present your project at the assembly.
2. Present the project at the general assembly: You will need to introduce your project during the next co-ownership general assembly, providing all relevant details about the works planned, their impact on the building, and other co-owners. This meeting usually occurs annually, but you can request an extraordinary assembly for specific discussions.
3. Prepare a complete file: Ensure to prepare a detailed dossier including works plans, the estimated impact on the building, and any other information to persuade co-owners to vote in favor. Remember, some owners might oppose if the project could cause disturbances or additional costs.
4. Achieve the required majority: Depending on the planned works, you’ll need to secure a simple or qualified majority during the vote. Generally, an absolute majority is required for works affecting common parts or changing the use of spaces. If approval is granted, you can proceed with the works.

Plan for necessary works

Transforming a commercial space into a residence often involves significant renovations to meet habitat standards and legal obligations. These works are essential to ensure that the new dwelling is comfortable and compliant with current regulations. Here are the main steps to consider during planning.

1. Connection to essential networks

The primary concern in converting a commercial space into a residence is connecting to water, electricity, and gas networks. Commercial premises are generally not equipped to meet domestic needs in terms of consumption and appliances. Therefore, it is necessary to:

• Upgrade electrical installations to meet safety standards for a residence, including separate circuits for kitchen, bathrooms, and appliances.
• Verify connection to the water network to ensure potable water supply meets quality standards for living spaces. Additionally, a wastewater drainage system must be installed or updated to meet domestic requirements.
• Install or modernize the gas network if heating or cooking relies on gas. If the space lacks a connection, work for urban network connection must be planned.

2. Fitting out essential rooms

To convert a commercial space into a functional residence, certain rooms need to be created or adapted according to housing standards:

• Creating a bathroom: It’s essential to install complete sanitary facilities: shower or bathtub, sink, toilet, and proper ventilation. This room must meet ventilation and insulation standards for optimal comfort.
• Setting up a kitchen: The kitchen requires dedicated space for electrical fixtures and water supply. Appliances such as a sink, cooking hob, and refrigerator must be integrated. Kitchen furniture suitable for residential use should also be planned.

3. Compliance with habitable standards

All dwellings must meet the minimum legal comfort and safety criteria defined by Decree No. 2002-120 of January 30, 2002. These standards include:

• Minimum living area: The dwelling should offer at least 9 m² with a ceiling height of 2.20 m.
• Adequate ventilation: Each room should have natural or mechanical ventilation to ensure air circulation and prevent humidity issues.
• Sufficient natural light: Living rooms must have windows or openings to the outside providing natural light. If not present, windows or roof windows may need to be added, possibly requiring a building permit.

4. Safety and accessibility

Besides comfort criteria, converting a commercial space into a residence must comply with current safety standards:

• Installing fire safety systems: Housing must be equipped with smoke detectors conforming to standards. Depending on layout, fire doors or electrical updates might be necessary to reduce fire risks.
• Accessibility standards: If the dwelling is to be rented or located in a new or recently renovated building, it must meet certain accessibility standards for persons with reduced mobility (PRM), including ramps, door widening, or bathroom adaptations.

5. Thermal and acoustic insulation works

Regulations also require residences to meet insulation standards for energy efficiency:

• Thermal insulation: Walls, ceilings, and floors should be well insulated to limit heat loss and ensure comfort year-round. Openings (windows, doors) should be fitted with double glazing for optimal insulation.
• Acoustic insulation: If the space is in a noisy area (near roads, busy districts), installing soundproofing materials is vital to reduce noise disturbances and ensure a peaceful environment for future residents.

6. Cost and management of works

The costs of works involved in transforming a commercial space into a residence vary depending on the initial condition and extent of renovations. Generally, it’s estimated around 1,500 to 2,000 € per square meter for a full transformation, including network connections, room planning, and compliance updates. Hiring an architect is advisable for large projects or spaces over 150 m². An architect can help ensure rules are followed and optimize layout.

Types of works to consider

Potential transformation costs

Inform the Land Registry Office

After successfully completing the change of use for your commercial space, it is mandatory to inform the Land Registry Office. This administrative step updates the fiscal classification of your property and ensures all modifications are legally recognized. Failing to inform the registry could lead to administrative issues and future tax complications.

Why inform the Land Registry Office?

When changing a commercial space into residential, the tax nature of the property changes. As a commercial space, your property was subject to the Territorial Economic Contribution (CET), a tax on commercial or professional activities. As a residence, it is subject to the residence tax and property tax. Therefore, informing the registry is crucial for recalculating local taxes based on the new use.

Tax implications of the change of use

Depending on the change of use, the following local taxes may vary:

• Residence tax: Once transformed into a residence, you will owe the residence tax, applicable to primary or secondary homes.
• Property tax: The property tax already applies to commercial spaces, but its amount can be reassessed after the change of use based on the new cadastral rental value.
• Elimination of CET: Converting a space into a residence removes the Territorial Economic Contribution (CET), which pertains to professional or commercial spaces.

The recalculation of taxes is critical to align your property’s tax situation with its new use, and this must be formally recognized with the registry.

How to inform the Land Registry Office?

1. Fill out a change of property use or configuration declaration: Complete the Cerfa form n°10517*02 (declaration IL n°6704), which is used to notify the tax authorities of the change in property use.
2. Submit the form to the Land Registry Office: Once filled, this form should be sent or delivered to the Land Registry Office responsible for your property, usually within three months after the works.
3. Required documents: Along with the form, it may be necessary to attach site plans, before/after photos, and other documents identifying the nature of the modifications.

Deadlines and consequences

The tax authorities use this information to adjust local taxes during the next declaration period. Therefore, it’s essential to verify that all details are accurate and the form is submitted within the specified deadlines. Failure to do so might lead to incorrect taxes and unforeseen adjustments later.

Furthermore, in future sales, failure to update this information with the registry can complicate the transaction. The change of use must be explicitly registered to ensure full transparency during resale.

Understand the fiscal implications

The change of use of a space from commercial to residential involves significant tax consequences that must be understood before finalizing the project. Changing the legal classification of a property also affects the applicable taxes. Here are the main points to consider:

1. Transition from territorial economic contribution (CET) to residence tax

When converting a commercial space into a residence, you are no longer liable for the Territorial Economic Contribution (CET), which applies to commercial or professional spaces. Instead, you will now owe the residence tax, an annual tax applicable to all housing. This tax depends on the cadastral rental value of the property and the municipality.

How does the residence tax work?

• The residence tax is calculated based on the habitable surface, location, and property characteristics.
• In some municipalities, especially in high-demand zones, the residence tax may be higher for secondary homes, which is important if you do not live there year-round.
• If the property is your primary residence, certain exemptions or reductions may apply, especially for low-income households or seniors.

2. Reassessment of property tax

Beyond the residence tax, the change of use often leads to a reassessment of the property tax. This tax is paid by all property owners, whether commercial or residential, but its amount can increase due to renovation works.

When is property tax reassessed?

• If significant expansion or renovation works are performed as part of converting a commercial space into a residence, the cadastral rental value will be adjusted, potentially increasing your annual tax bill.
• The calculation considers the property’s physical characteristics (size, number of rooms, equipment) and its location. A home in city center or in a premium district will generally have higher property taxes.

3. Expansion works and fiscal impact

If your project includes expansion works (adding rooms or enlarging the building), this can have significant tax consequences:

• Increase in floor area: Adding square meters affects the cadastral rental value, which forms the basis for property and residence taxes.
• New facilities: Adding features like a fitted kitchen, additional sanitary facilities, or a garage can also raise the property’s rental value, leading to higher local taxes.

It’s important to consider these tax implications when planning works to avoid surprises when taxes are levied.

4. Development tax

In some cases, transforming a commercial space into a residence, especially if it involves expansion or renovation, may incur payment of the development tax. This tax is levied when issuing a building permit or submitting a prior declaration and is based on the additional surface area created.

Calculation of the development tax:

• The development tax is calculated by multiplying the additional surface area (in square meters) by a fixed rate.
• It is also affected by a rate set by the municipality, region, and sometimes intercommunity authorities. This rate typically ranges from 1% to 5%, depending on the area.
• For example, if expansion works are undertaken or if you add windows, balconies, or terraces, this could trigger the payment of this tax.

5. Rental considerations

If you plan to rent out the property, the fiscal implications will vary based on the rental type:

• Unfurnished rental: If rented without furnishings, rental income is taxed under property income. A simplified regime (micro-foncier) may apply if income is below a certain threshold, or the actual regime allows deductions for expenses (renovations, agency fees, interest on loans).
• Furnished rental: Income from furnished rentals is taxed under the Industrial and Commercial Profits (BIC) category, with possible fiscal advantages like micro-BIC or actual regimes permitting amortization.

Tax implications

Conclusion

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