How to change the destination of a commercial premises?

In Summary

Converting a commercial space into a dwelling or other use requires following legal procedures and completing the necessary steps with the relevant authorities. Here are the steps to successfully carry out a change of use in compliance with regulations.

What is a change of use?

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

Examples of change of use

A typical change of use could include converting a commercial space (such as a shop or restaurant) into housing or office. For example, an old bakery can be converted into an apartment, or a space used for craftsmanship can become an office area. This type of transformation often responds to market evolution needs or reallocation strategies for 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 the development and land use rules applicable to each geographic zone of a municipality. It defines the possible uses for land and buildings based on local development goals, environmental considerations, and economic dynamics. The PLU classifies different parts of the community territory into zones with specific uses (residential, commercial, industrial, etc.).

For a change of use to be approved, it must comply with the PLU provisions. For example, if a commercial space is located in a zone where only businesses are allowed, converting it into a residence may be impossible. Moreover, some PLUs impose additional restrictions, especially in heritage protection zones or neighborhoods aimed at preserving small local businesses.

Difference between change of use and change of destination

It’s important not to confuse change of destination with change of use. Although these concepts are similar, they follow different rules. A change of destination concerns the assignment of a building from one functional category to another (e.g., from commercial to residential). A change of use aims to modify how a property is used without changing its functional category (e.g., from a standard dwelling to a seasonal rental).

Thus, a change of destination is definitive and linked to the building, while a change of use is often temporary and can be personalized according to the occupant’s needs.

Administrative procedures related to change of destination

To proceed with a change of destination, certain administrative steps must be followed. Depending on the scope of work, you will need to submit either a prior declaration or a building permit application. This step ensures that the project complies with urban planning rules and the specifics of the zone where the property is located. For example, simple interior modifications may only require a prior declaration, whereas work affecting the façade or structure will require a building permit.

Administrative steps

Check the Local Urban Plan (PLU)

Before starting a change of destination project, the first crucial step is to verify the Local Urban Plan (PLU) of your municipality. The PLU is an administrative document that sets the rules for land development and use within a city or urban area. It defines the possible purposes for buildings in various geographic zones, based on urban development goals, economic growth, and heritage preservation.

Why consult the PLU?

The PLU is essential to ensure that the contemplated change of use is legally authorized. Each zone in a municipality is assigned a specific use, whether residential, commercial, industrial, or public services. Consequently, in some zones, the PLU may prohibit transforming commercial spaces into residences to maintain local economic activity or preserve the commercial character of a neighborhood, particularly in city centers. Therefore, a change of use conflicting with PLU guidelines will be automatically refused by planning authorities.

Zones and their restrictions

The PLU generally divides the territory into several zones subject to specific rules. These zones may include:

• Urban zones (U): Mainly intended for construction and activities. Change of use may be more easily permitted here, provided it respects the zone’s rules.
• Agricultural zones (A): Favorable for agricultural use structures. Changing to residential or commercial use is usually restricted or prohibited, with some exceptions.
• Natural zones (N): Protected for environmental and landscape reasons. Changes of use are highly regulated and often very limited.
• Protection zones: Certain specific areas (like historic centers or heritage neighborhoods) may have additional rules to preserve architectural heritage. Even a simple change of use might require an in-depth review by local authorities.

Steps to consult the PLU

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

1. Contact the urban planning service of your municipal office. They are responsible for informing you about land use rules and providing you with a copy of the current PLU.
2. Consult the PLU online if a digital version is available. This allows you to quickly review applicable rules for your project without visiting the office.
3. Ask specific questions about possible restrictions. Clarify whether exceptions or derogations can be granted, especially if your project might hold particular interest for the municipality (e.g., revitalizing a neighborhood).

Particularly in large cities

In certain major cities, such as Paris, Lyon, or Marseille, urban planning rules can be even more restrictive. The PLU may be supplemented with specific plans aimed at maintaining a balance between housing, commerce, and green spaces. For example, there might be priority zones where commercial spaces are encouraged to be converted into housing to address housing shortages. Conversely, in some shopping districts, the PLU could prevent such transformations to preserve the economic attractiveness of the area.

Risks of non-compliance with the PLU

Ignoring the PLU or undertaking a project without ensuring conformity with urban planning rules can lead to severe penalties. Your change of use project might be annulled, and in some cases, you could be required to restore the premises to their original state. Additional penalties may be imposed if unauthorized work is carried out.

Submit a prior declaration or a 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 the relevant authorities. Two procedures exist: a prior declaration of works or a building permit request. The choice depends on the scope of modifications planned on the space.

The prior declaration of works

The prior declaration of works is a simplified administrative formalism. It is required when the change of use does not significantly alter the external appearance of the building or its load-bearing structure. This approach is typically sufficient if transforming a commercial space into housing without undertaking major modifications such as façade changes or adding new openings.

When to use a prior declaration?

The prior declaration is mandatory when the project involves:

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

The building permit

A building permit is required whenever work impacts the structure of the building or its exterior appearance. This procedure is more complex than the prior declaration and requires a thorough review by planning authorities. It is necessary especially for work that modifies façades or affects the floor area of the building.

When to request a building permit?

The building permit is necessary in cases such as:

• When work modifies the façade of the building, for example, adding windows, balconies, or redesigning the storefront.
• If the project impacts load-bearing walls, such as during demolition or structural relocation.
• In cases of expanding habitable area by more than 20 m², or if the project exceeds the limits set by the PLU.

Procedures for each process

Submitting the prior declaration

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

• An site plan to locate the building within the municipality.
• Photos of the existing state to show the current condition of the space.
• A detailed description of planned work.

The municipal authorities have a one-month processing period to review your application. If no response is received after this period, the request is considered accepted by default.

Applying for a building permit

For a building permit, you need to complete form Cerfa n°13409 and provide more detailed documents, including architectural plans if structural modifications are planned. Required documents may include:

• A site plan indicating structural modifications.
• Façade plans before and after work to illustrate proposed changes.
• A materials description, especially for openings and finishes.

The review process usually takes two to three months, during which authorities may request additional information or reconsider certain project aspects. Silence after this period may lead to tacit approval.

Costs and implications

Submitting either a prior declaration or a building permit generally does not entail direct administrative fees, but some municipalities may apply development taxes depending on the scope of work. It is also important to note that any refusal of a declaration or permit can be contested within two months, through the municipal or planning authorities.

Consequences of non-compliance

Filing a request for prior declaration or building permit is mandatory to ensure legality. Unauthorized modifications may lead to penalties. This may include an obligation to restore the space to its original condition or significant financial penalties. Additionally, illegal work can complicate future sales and result in administrative delays.

Obtain approval from the co-ownership (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 regulations before starting any process. This document establishes the rules of operation within 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 (e.g., converting a commercial space into residential) is permitted by the co-ownership regulations.

Why consult the co-ownership regulations?

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

Need for the general assembly’s approval

Even if the regulations do not explicitly oppose the change, it is necessary to obtain approval from the general assembly of co-owners to undertake work that could affect the building. The assembly votes on important decisions concerning the property, such as renovations or changes in the use of spaces.

Which situations require co-ownership approval?

• Transformation of shared spaces: If work or the change of use involves common areas (hallways, entrances, elevators), approval from co-owners is mandatory.
• Impact on other co-owners: If transforming a commercial space into a residence affects other occupants, for example, by increasing the number of residents or changing shared costs, approval from the general assembly must be obtained.
• Potential nuisances: Some changes in use could generate Nuisances (noise, increased traffic), requiring approval to prevent future conflicts.

Steps to obtain approval

1. Consult the condo manager: Before starting, it is recommended to discuss your project with the condo manager, who can guide you on the steps to follow and inform you about any restrictions in the regulations. The manager may also advise you on how to present your project to the assembly.
2. Present the project at the general assembly: You will need to present your project at the next co-ownership meeting, providing all necessary information about planned work, impact on the building, and other co-owners. This meeting usually takes place annually, but you can request an extraordinary assembly to specifically address your project.
3. Prepare a complete file: Ensure you prepare detailed plans, the projected impact on the building, and any other supporting documents to convince co-owners to vote favorably. Remember that some co-owners may oppose if the project could cause nuisances 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 projects affecting common areas or changing the use of spaces. If approval is obtained, you can proceed with the work.

Plan the necessary work

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

1. Connection to essential networks

The first critical aspect of transforming a commercial space into a dwelling is connecting to water, electricity, and gas networks. A commercial space is generally not equipped for residential needs in terms of consumption and domestic facilities. Therefore, it is necessary to:

• Update electrical installations to meet safety standards for a dwelling, including installing separate circuits for the kitchen, bathrooms, and appliances.
• Verify water connection to ensure potable water supply complies with quality standards for residences. Additionally, an wastewater drainage system must be installed or upgraded to meet domestic needs.
• Install or modernize the gas system if heating or cooking relies on gas. If the space isn’t already connected, plans for urban network connection are necessary.

2. Layout of essential rooms

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

• Create a bathroom: It’s essential to install comprehensive sanitary facilities: shower or bathtub, sink, toilet, and proper ventilation. This room must meet ventilation and insulation standards to ensure comfort.
• Design a kitchen: The kitchen needs dedicated space for electrical connections and water supply. Appliances such as a sink, stove, and refrigerator should be included. Custom furniture suitable for residential use should also be planned.

3. Compliance with habitable standards

Any dwelling must meet legal minimum comfort criteria defined by the Decree No. 2002-120 of January 30, 2002, to guarantee a basic level of comfort and safety. These standards include:

• Minimum living area: The residence must offer at least 9 m² of living space with a ceiling height of 2.20 meters.
• Adequate ventilation: Each room must have natural or mechanical ventilation to ensure air circulation and avoid humidity issues.
• Sufficient natural lighting: Living rooms must have windows or openings to the outside providing natural light. If the commercial space does not have such, windows or skylights must be added, which may require a building permit.

4. Safety and accessibility

Beyond comfort criteria, transforming a commercial space into a residence must comply with current safety standards:

• Fire safety systems: A dwelling must be equipped with smoke detectors compliant with standards. Depending on the configuration, installing fire doors or updating the electrical system may be necessary to reduce fire risks.
• Accessibility standards: If the residence is to be rented out, or located in a new or recently renovated building, it must comply with accessibility for people with reduced mobility (PRM) standards. This may include ramps, wider doors, or adapted bathrooms.

5. Thermal and acoustic insulation works

Regulations also require that the dwelling meets insulation standards to ensure good energy efficiency:

• Thermal insulation: Walls, ceilings, and floors must be well-insulated to reduce heat loss and maintain thermal comfort year-round. Openings (windows, doors) should be equipped with double glazing for better insulation.
• Acoustic insulation: If the space is in a noisy area (near a road, commercial district), installing soundproofing is essential to reduce noise pollution, ensuring a peaceful environment for future residents.

6. Cost and management of work

The costs of transforming a commercial space into a residence vary based on the initial state and scope of work. Generally, about €1,500 to €2,000 per square meter should be budgeted for a full transformation, including utility connections, room layout, and compliance updates. Hiring an architect is recommended for large projects or spaces over 150 m². They can help ensure regulatory compliance and optimal layout.

Types of work to consider

Potential transformation costs

Notify the land registry office

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

Why notify the land registry?

When you change the use of a commercial space to residential, the tax nature of your property is altered. As a commercial space, your property was subject to the territorial economic contribution (CET), a tax applied to commercial or professional activities. As a residence, it will be subject to the housing tax and property tax. Therefore, notifying the land registry is vital for a recalculation of local taxes based on the new use of the property.

Tax implications of changing use

Depending on the change, the local taxes you will owe may vary:

• Housing tax: Once converted into a residence, you will be liable for the housing tax, applicable to primary or secondary residences.
• Property tax: The property tax already applies to commercial spaces, but its amount might be reassessed after the change, based on the new cadastral rental value.
• Elimination of the CET: Converting the space into a residence means the territorial economic contribution (CET), which concerns commercial or professional spaces, no longer applies.

The tax recalculation is essential to align your property’s fiscal situation with its new use, and this must be officially declared with the land registry.

How to inform the land registry?

1. Fill out a declaration of change in property type or use: You need to complete form Cerfa n°10517*02 (IL declaration No. 6704), which notifies the tax authorities that the property has changed its purpose.
2. Submit the form to the land registry office: Once completed, this form must be sent or delivered to the land registry office responsible for your property. This step should generally be done within three months after work completion.
3. Supporting documents: Alongside the form, you may need to attach site plans, before/after photos, and other documents clearly illustrating the modifications made.

Processing times and consequences

Tax authorities consider this information to adjust local taxes during the next declaration period. Therefore, it is vital to ensure accuracy and submit the form within the specified deadlines. Failure to do so could result in incorrect taxes and unforeseen adjustments later.
Moreover, in case of future sale, failure to update the information with the land registry could complicate the transaction. The change of use must be clearly recorded to ensure full transparency during resale.

Understand the tax implications

The change of use of a commercial space into a residence carries significant tax consequences that must be understood before finalizing the project. Changing the purpose of a property also alters the taxes applicable. Here are the main points to consider.

1. Transition from territorial economic contribution (CET) to housing 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 must pay the housing tax, an annual tax applicable to all residences. This tax depends on the cadastral rental value of the property and the municipality where it is located.

How does the housing tax work?

• The housing tax is calculated based on the living area, the location, and property characteristics.
• In some municipalities, especially in saturated zones, the housing tax can be higher for secondary residences, which is important to consider if the property is not occupied year-round.
• If the property is used as a primary residence, certain exemptions or reductions may apply, particularly for low-income households or seniors.

2. Reassessment of the property tax

In addition to the housing tax, the change of use often triggers a revaluation of the property tax. The property tax is paid by all owners regardless of use, but its amount can increase based on work carried out.

When is property tax reassessed?

• If you undertake significant expansion or renovation works during the transformation, the cadastral rental value will be adjusted. This results in a higher basis for property tax calculation, increasing the annual amount owed.
• The property tax calculation considers physical characteristics (size, number of rooms, amenities) and location. For example, a dwelling in the city center or a prime area will have a higher property tax.

3. Expansion works and fiscal impact

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

• Increase in floor area: Adding square meters directly modifies the cadastral rental value, which is used for property tax and housing tax calculations.
• Adding new amenities: Installing features such as a fitted kitchen, extra sanitary facilities, or a garage may also increase the property’s rental value, resulting in higher local taxes.

It’s crucial to account for these tax implications when planning work to avoid surprises when receiving local tax bills.

4. Development tax

In some cases, transforming a commercial space into a residence—especially if it involves enlargement or renovation—may result in paying the development tax. This tax is levied during the issuance of a building permit or 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.
• The rate is also influenced by the municipal, regional, and intercommunal rates. These rates typically range from 1% to 5% depending on the geographic zone.
• For example, enlarging a space or adding windows, a balcony, or a terrace may trigger this tax.

5. Rental implications

If you plan to rent out the property, the fiscal implications change depending on the type of rental:

• Unfurnished rental: Rental income from an unfurnished property is taxed under property income. You might benefit from a simplified scheme if your rental income is below a certain threshold, or opt for the actual regime allowing you to deduct certain charges (works, agency fees, interest on loans).
• Furnished rental: Income from furnished rentals is taxed under Industrial and Commercial Profits (BIC). This regime can offer additional tax advantages, such as micro-BIC or actual regimes allowing you to deduct depreciation.

Tax implications

Conclusion

For Further Information