How to change the destination of a commercial premises?

Summary

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

What is a change of use?

A change of use of a space involves modifying its initial purpose for a different function. Each space, whether commercial, residential, or for another purpose, has a designated use established during its construction or last renovation. This purpose, often defined by the Urban Planning Code, corresponds to the intended function for which the property is designed and used.

Examples of changes of use

A typical change could include converting a commercial space (like a shop or restaurant) into housing or office. For example, an old bakery can be transformed into an <strong;apartment, or a space intended for craftwork can become an office area. This type of transformation often responds to evolving market needs or strategic reallocation of urban spaces.

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 urban planning rules applicable to each geographic zone within a municipality. It defines the permissible uses for land and buildings based on local development goals, environmental concerns, and preservation of heritage. The PLU classifies different parts of the municipality into zones with specific usages (residential, commercial, industrial, etc.).

For a change of use to be approved, it must adhere to the PLU’s provisions. For example, if a commercial space is located in a zone where only retail is permitted, converting it into a residence might be impossible. Additionally, some PLUs impose further restrictions, especially in heritage-protected areas 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 are similar, they follow different rules. A change of destination concerns assigning a building from one functional category to another (e.g., from a commercial space to a residence). A change of use refers to modifying how an property is utilized without changing its functional category (e.g., switching from a typical residence to a short-term rental).
Thus, a change of destination is generally permanent and attached to the building, while a change of use is often temporary and can be personalized according to the occupant’s needs.

Administrative procedures for changing the use

To proceed with a change of use, certain administrative steps must be followed. Depending on the scope of work, you may need to submit either a prior declaration or a building permit application. This formalities ensure compliance with urban planning rules and zone-specific requirements. For example, simple interior modifications might require a prior declaration, whereas structural or façade alterations necessitate 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 that sets rules for land development and use within a city or urban area. It defines permissible building uses in various zones based on urban development goals, economic growth, and heritage preservation.

Why consult the PLU?

The PLU is essential to ensure that the proposed change of use is legally authorized. Each zone in a municipality is assigned to a specific use, such as residential, commercial, industrial, or public services. Accordingly, in some zones, the PLU might prohibit converting commercial spaces into residences to maintain local economic activity or preserve the commercial character of a neighborhood, especially in city centers. Therefore, a change of use project contrary to PLU rules will be automatically rejected by urban planning services.

Zones and their restrictions

The PLU typically divides the territory into several zones each governed by specific rules. These zones can include:

• Urban zones (U): Mainly designated for construction and activity. A change of use is more easily authorized here, provided it respects zone-specific rules.
• Agricultural zones (A): Favor agricultural structures. Changing to residence or commerce is usually restricted or forbidden, with some exceptions.
• Natural zones (N): Protected for environmental and landscape reasons. Use changes are strictly regulated and often very limited.
• Protected zones: Specific areas (like historic centers or heritage districts) may have additional rules to preserve architectural heritage. Even a simple change of use may require detailed approval.

Steps to consult the PLU

To obtain these details and determine if a change of use is feasible in your space, you should:

1. Contact the urban planning department of your local town hall. This office can inform you about urban rules and provide a copy of the current PLU.
2. Check the PLU online, if the municipality offers a digital version. This allows quick access to an overview of rules applicable to your project without visiting in person.
3. Ask specific questions about potential restrictions. Clarify whether exceptions or derogations can apply, especially if the project may hold particular interest for the municipality (for example, revitalization projects).

Particular case of large cities

In some major cities such as Paris, Lyon, or Marseille, urban planning rules can be even more restrictive. The PLU might be supplemented by specific plans aiming to balance housing, commerce, and green spaces. For instance, some priority zones encourage conversions of commercial spaces into housing to meet housing shortages. Conversely, in commercial neighborhoods, the PLU might prevent such changes to maintain economic attractiveness.

Risks of non-compliance with the PLU

Ignoring the PLU or undertaking projects without ensuring compliance with planning regulations can lead to serious sanctions. Your change of use may be annulled, and you could be required to restore the property to its original state. Fines can also be imposed for unauthorized work.

Submit a prior declaration or building permit application

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

The prior declaration of works

The prior declaration of works is a simplified administrative process. It is needed when the change of use does not significantly alter the building’s appearance or load-bearing structure. This procedure is usually sufficient if transforming a commercial space into residence without major façade or structural modifications.

When to use a prior declaration?

It is mandatory when the project involves:

• Interior arrangements that do not affect load-bearing walls or façade.
• Reconfiguration of internal spaces, such as adding partitions or adapting electrical and plumbing systems.
• Changing the use without visible external impact, for instance, converting a office into an apartment.

The building permit application

A building permit is required when the work impacts the structure of the building or its exterior appearance. It is a more involved process than a prior declaration and requires detailed project review by urban planning authorities. This permit is necessary especially for façade modifications or increasing the floor area.

When to request a building permit?

It is necessary in cases such as:

• Modifying the façade, e.g., adding windows, balconies, or updating the storefront.
• Impacting load-bearing walls, like demolishing or moving parts of the existing structure.
• Expanding the living space by more than 20 m² or exceeding the limits set in the PLU.

Procedures for each process

Filing the prior declaration

For a prior declaration, complete form Cerfa n°13404. This must be accompanied by documents including:

• A location plan to identify the building within the municipality.
• Photos of the existing condition.
• A detailed description of proposed works.

The town hall has one month to review the application. If no response is received within this period, the request is deemed accepted by default.

Filing for a building permit

For a building permit, fill out form Cerfa n°13409 and provide more detailed documents, including architectural plans if structural changes are planned. Necessary documents might include:

• A site plan showing structural modifications.
• Facade plans before and after modifications.
• A materials description, especially for openings and finishes.

The review typically takes two to three months, during which authorities may request additional information or revise project details. Silence after this period generally constitutes tacit approval.

Costs and implications

Submitting a prior declaration or application for a building permit usually does not incur direct administrative fees, but some municipalities may apply development taxes based on work scope. Refusals can be contested within two months at the town hall or relevant agencies.

Consequences of non-compliance

Filing a declaration or permit application is mandatory to ensure legality. Performing work without this can result in penalties. These can include being ordered to restore the property to its original condition or facing significant fines. Illegal work can also complicate future sales and cause administrative blockage.

Obtain the co-ownership agreement (if applicable)

If the commercial space you wish to transform is located in a co-owned building, it is essential to consult the co-ownership rules before proceeding. This document establishes the rules governing the co-ownership and may contain specific clauses regarding the use of spaces within the building. In other words, you must ensure that the intended change of use (for example, converting a retail unit into residential) is permitted by the co-ownership regulations.

Why consult the co-ownership rules?

The co-ownership agreement defines the rights and obligations of each co-owner, specifying permitted uses for various property types within the building. If the regulations state certain units must be used for commercial purposes, converting a space into residential might be prohibited. Such restrictions are often intended to protect the balance between commercial and residential activities and to maintain cohesion between private and professional areas.

Need for approval from the general assembly

Even if the regulations do not explicitly prohibit the change, you must obtain approval from the co-owners’ assembly for work that could impact the building. This assembly votes on major decisions concerning the co-ownership, such as renovation or change of use.

Which situations require co-ownership approval?

• Transformation of shared spaces: If work or the change of use involves modifying or using common areas (hallways, entrances, elevators), approval from co-owners is mandatory.
• Impact on other co-owners: If converting a commercial unit into residence affects other occupants—e.g., increasing the number of residents or altering shared charges—the assembly must authorize.
• Potential nuisances: Some use changes could cause nuisances (noise, additional traffic), requiring approval to prevent conflicts.

Procedures to obtain approval

1. Consult the co-ownership syndic: Before proceeding, discuss the project with the syndic, who can advise on procedures and restrictions set out in the rules. The syndic can also assist in presenting the project at the assembly.
2. Submit the project to the general assembly: Present your project at the next co-ownership assembly, providing necessary information on planned work, impact on the building, and other co-owners. This meeting usually takes place annually, but an extraordinary assembly can be requested to discuss the project specifically.
3. Prepare a complete file: Ensure you have a detailed file including construction plans, estimated impact on the building, and other relevant information to garner favorable votes. Some co-owners may oppose if the project could cause nuisance or additional costs.
4. Obtain the required majority: Depending on the work, a simple or qualified majority vote is needed. Generally, an absolute majority is required for works affecting common areas or changing the use. If approved, you can proceed with the work.

Plan the necessary works

Transforming a commercial space into a residence often involves extensive works to meet habitation standards and legal requirements. These works are crucial to ensure the new dwelling is comfortable and compliant with current regulations. Here are the main steps to consider in planning the works.

1. Connection to essential networks

The primary concern in converting a commercial space into a residence is the connection to water, electricity, and gas networks. Commercial premises are typically not equipped to satisfy residential needs in terms of consumption and facilities. It is necessary to:

• Update electrical installations to meet safety standards for housing, including separate circuits for the kitchen, bathrooms, and appliances.
• Check water connection: ensure potable water supply conforms to quality standards for living spaces. An wastewater evacuation system must also be installed or upgraded for domestic use.
• Install or upgrade gas systems, if the heating or cooking uses gas. If the property is not already connected to the urban gas network, connection work is required.

2. Room layout and fittings

To turn a commercial space into a functional dwelling, certain rooms must be created or adapted according to residential standards:

• Create a bathroom: including complete facilities: shower or bathtub, sink, toilet, and proper ventilation. The room must comply with ventilation and insulation standards.
• Design a kitchen: with dedicated electrical points and water supply. Appliances such as a sink, stove, and refrigerator should be set up. Kitchen furniture suitable for residence should be installed.

3. Compliance with livability standards

Any housing must meet minimum decent living standards defined by Decree No. 2002-120 of January 30, 2002, ensuring basic comfort and security. These include:

• Minimum habitable surface area: Living spaces must be at least 9 m² with a ceiling height of 2.20 m.
• Adequate ventilation: Each room needs natural or mechanical ventilation to ensure air circulation and prevent humidity issues.
• Sufficient natural light: Living rooms should have windows or openings to the outside for natural light. If not existing in the space, windows or roof windows should be created, possibly requiring a building permit.

4. Safety and accessibility standards

Beyond comfort criteria, the transformation must comply with current safety standards:

• Fire safety installations: the dwelling must be equipped with smoke detectors meeting standards. Depending on the configuration, fire doors or electric system updates might be necessary to reduce fire risk.
• Accessibility standards: if the dwelling is to be rented or is in a new or recently renovated building, it must meet accessibility requirements for persons with mobility impairments (PMR), such as ramps, wider doorways, or accessible bathroom facilities.

5. Thermal and acoustic insulation works

Regulations also require the dwelling to comply with insulation standards to ensure energy efficiency:

• Thermal insulation: walls, ceilings, and floors should be well insulated to limit heat loss. Openings (windows, doors) must be double-glazed to optimize insulation.
• Acoustic insulation: if located in a noisy area (near a road or in a commercial district), soundproofing materials should be installed to reduce noise nuisances, ensuring a peaceful environment for future residents.

6. Cost and management of works

The costs of transforming a commercial space into a residence vary depending on the initial condition and scope of work. Generally, about €1,500 to €2,000 per square meter should be budgeted for complete transformation, including network connections, room fittings, and compliance upgrades. Hiring an architect is recommended for significant projects or spaces over 150 m². The architect can help ensure adherence to regulations and optimal design.

Types of works to consider

Potential costs of the transformation

Inform the cadastre office

After successfully completing the change of use of your commercial space, it is imperative to notify the cadastre office. This administrative step updates the fiscal assignment of your property and ensures that all modifications are legally recognized. Failure to inform the cadastre could lead to administrative issues and future tax complications.

Why inform the cadastre office?

When you change a commercial space into residential, the property’s fiscal status changes. As a commercial property, it was subject to the Territorial Economic Contribution (CET), a tax applied to commercial or professional activities. As a residence, it becomes liable for residence tax and property tax. Therefore, informing the cadastre is necessary to allow a recalculation of local taxes based on the new use of the property.

Tax implications of a change of use

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

• Residence tax: After converting to residence, you will be liable for the residence tax, applicable to primary or secondary homes.
• Property tax: The property tax already applies to commercial spaces, but the amount may increase based on the new cadastral rental value of the property.
• Deletion of CET: Converting the property into a residence means the Territorial Economic Contribution (CET), applicable to commercial or professional spaces, no longer applies.

The recalculation of taxes is essential to align the fiscal situation with the new use, and this must be formalized with the cadastre.

How to notify the cadastre office?

1. Fill out a declaration of change of composition or allocation: Complete form Cerfa n°10517*02 (IL declaration n°6704), used to notify the tax authorities about the change of purpose of built properties. This form informs the fiscal administration that the property changes use.
2. Submit the form to the cadastre office: Once completed, send or deposit the form at the cadastre office governing your property. This should generally be done within three months of completing the work.
3. Documents to provide: Alongside the form, additional documents such as site plans, before/after photos of work, and other identification materials may be required.

Timelines and consequences

Tax authorities use this information to adjust local taxes during the upcoming declaration period. It is vital to ensure all information is correct and the form is submitted within specified deadlines. Failing to do so may lead to incorrect taxes and unforeseen adjustments later.
Furthermore, if the property is sold later, failure to update the records with the cadastre can complicate the transaction. The change of use must be clearly registered to ensure full transparency during resale.

Understanding the tax implications

The change of use of a commercial property into a residence has significant tax consequences that must be understood before finalizing the project. Changing the property’s use also affects applicable taxes. Here are key points to consider.

1. Transition from the Territorial Economic Contribution (CET) to residence tax

When converting a commercial property 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 pay the residence tax, an annual tax applicable to all homes. This tax depends on the cadastral rental value and the municipality.

How does the residence tax work?

• The residence tax is calculated based on the habitable surface area, location, and characteristics of the dwelling.
• In some towns, especially in high-demand areas, the residence tax can be higher for secondary homes, an important factor if you do not reside there year-round.
• Owners occupying the property as their primary residence may benefit from exemptions or reductions, especially for low-income households or seniors.

2. Reassessment of property tax

In addition to residence tax, changing the use often leads to a reassessment of property tax. This tax is paid by all property owners, whether commercial or residential, but its amount can increase based on work done.

When is property tax reassessed?

• If significant expansion or renovation work is done, the cadastral rental value is adjusted. This leads to an increased basis for property tax calculations, raising the amount payable annually.
• The property tax calculation considers physical characteristics (size, number of rooms, amenities) and location. For example, a dwelling in the city center or in a sought-after district may face higher property taxes.

3. Impact of extension works on tax

If your project involves an extension (adding rooms or enlarging the building), the tax implications can be significant:

• Increase in floor area: Adding square meters alters the cadastral rental value, affecting property and residence taxes.
• Creation of new amenities: Adding features like a fitted kitchen, additional sanitary facilities, or garage can also increase the property’s rental value, leading to higher taxes.

It is important to consider these tax consequences when planning work to avoid surprises during tax assessments.

4. Development tax

In some cases, transforming a commercial property into a residence may invoke the development tax. This fee is levied upon issuing a building permit or prior declaration for works, based on the additional surface area created.

Calculation:

• The development tax is calculated by multiplying the additional surface area (in square meters) by a fixed rate.
• This rate is set by local authorities including the municipality, region, or inter-communal entity, typically ranging from 1% to 5%.
• For example, adding a balcony, window, or extension can trigger this tax.

5. Taxation during rental

If you plan to rent the property, the tax consequences will vary depending on the rental type:

• Unfurnished rental: Rental income is taxed under rental income. You can opt for a simplified regime if income is below a certain threshold, or a real regime allowing deductions of expenses such as work, agency fees, and loan interest.
• Furnished rental: Income is taxed under the Industrial and Commercial Profits (BIC) category, which may offer additional tax benefits via the micro-BIC or actual regime, including depreciation of property and equipment.

Tax implications

Conclusion

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