How to change the destination of a commercial premises?

In summary

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

What is a change of destination?

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

Examples of change of destination

A typical change of destination might include converting a commercial space (such as a shop or restaurant) into residential or office. For instance, an old bakery could be transformed into an apartment, or a space intended for craftsmanship could become a office area. This type of transformation often responds to market adaptation needs or strategies for reallocating spaces in urban areas.

The importance of the Local Urban Planning Scheme (PLU)

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

For a change of destination to be validated, it must conform to the provisions of the PLU. For example, if a commercial space is located in a zone where only businesses are permitted, converting it into a residence may be impossible. Additionally, some PLUs impose further restrictions, particularly in heritage protection zones or neighborhoods aimed at preserving local businesses.

Difference between change of destination and change of use

It is important not to confuse change of destination and change of use. Although these two concepts appear similar, they follow different rules. The change of destination concerns the assignment of a building from one functional category to another (for example, from a commercial space to a dwelling). The change of use, on the other hand, aims to modify how a property is utilized without changing its functional category (for example, changing from a standard dwelling to a short-term 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 the change of destination

To proceed with a change of destination, it is necessary to follow certain administrative steps. Depending on the scope of the 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 specific zone regulations. For example, interior modifications may only require a prior declaration, whereas work altering the facade or structure may require a building permit.

Administrative steps

Check the Local Urban Planning Scheme (PLU)

Before starting a change of destination project, the first crucial step is to verify the Local Urban Planning Scheme (PLU) of your municipality. The PLU is an administrative document that sets the rules for land development and utilization within a city or urban area. It specifies the possible destinations for buildings in various geographic zones based on urban planning, economic development, and heritage preservation objectives.

Why consult the PLU?

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

Zones and their restrictions

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

• Urban zones (U): Mainly designated for buildings and activities. A change of destination can be more easily permitted here, provided it respects the zone’s rules.
• Agricultural zones (A): Favor agricultural-related constructions. Changing to residential or commercial uses is usually restricted or forbidden, with exceptions.
• Nature zones (N): Protected for environmental and landscape reasons. Changes of destination in these zones are heavily regulated and often highly limited.
• Protected zones: Specific areas (such as historic centers or heritage districts) might have additional rules to preserve architectural heritage. Even simple changes of destination may be subject to detailed analysis by local authorities.

Procedures to consult the PLU

To obtain these details and determine whether the change of destination is possible in your space’s zone, you should:

1. Contact the urban planning department of your local city hall. This department is responsible for providing information on planning rules and providing a copy of the current PLU.
2. Check the PLU online if the municipality offers a digital version of the document. This can allow quick access to an overview of applicable rules for your project without needing to go in person.
3. Ask specific questions about possible restrictions. Clarify whether exceptions or derogations can be granted, especially if your project might benefit from particular local interest (e.g., revitalizing a neighborhood).

Particular case of large cities

In some large cities, such as Paris, Lyon, or Marseille, urban planning rules can be even stricter. The PLU might be supplemented with specific plans aiming to balance housing, commerce, and green spaces. For instance, there may be priority zones encouraging the conversion of commercial spaces into residences to address housing shortages. Conversely, in certain commercial districts, the PLU might prevent such transformations to maintain economic attractiveness.

Risks of non-compliance with the PLU

Ignoring the PLU or undertaking a project without ensuring compliance with planning rules can lead to severe penalties. Your change of destination could be canceled, and in some cases, you might be required to restore the property to its original state. Additionally, fines may be imposed for unauthorized works.

Submit a prior declaration or building permit application

When your change of destination project complies with the Local Urban Planning Scheme (PLU), the next step is to formalize the procedures with the authorities. Two processes are available: a prior declaration of works or a building permit application. The choice depends on the extent of the modifications planned for the space.

Prior declaration of works

The prior declaration of works is a simplified administrative process. It is required when the change of destination does not significantly modify the building’s exterior or load-bearing structure. This approach is usually enough if you want to convert a commercial space into a residence without undertaking major works such as facade modifications or adding new openings.

When to use a prior declaration?

A prior declaration is mandatory when the project involves:

• Interior arrangements that do not affect load-bearing walls or the facade.
• A reconfiguration of internal spaces, like adding partitions or upgrading electrical and sanitary systems.
• Changing use without external visible impact, for example, turning a office into an apartment.

Applying for a building permit

A building permit is required when the planned works affect the structure or the building’s exterior appearance. This process is more involved than the prior declaration and requires a detailed review by planning authorities. A permit is necessary especially for works modifying facades or impacting the floor area of the building.

When to request a building permit?

The building permit is necessary in the following cases:

• When works modify the façade, such as adding windows, balconies, or redoing the storefront.
• If the project impacts load-bearing walls, such as during demolition or structural relocation.
• In case of extension increasing living space by more than 20 m² or exceeding the limits set by the PLU.

Procedures for each process

Filing 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:

• A location plan to identify the building within the municipality.
• Photos of the existing condition showing the current state of the property.
• A detailed description of the planned work.

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

Applying for a building permit

For a building permit, you must complete form Cerfa n°13409 and provide more detailed documents, including architect plans if structural alterations are planned. Necessary documents may include:

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

The review period is generally two to three months, during which authorities may request further information or reword parts of the project. If no response after this period, your permit can be tacitly approved.

Costs and implications

The submission of a prior declaration or building permit generally does not incur direct administrative fees, but some municipalities may apply development taxes based on the scope of work. It is also important to note that any rejection of a prior declaration or building permit can be challenged within two months, with the local town hall or authorities.

Consequences of non-compliance

Submitting a prior declaration or building permit application is mandatory to ensure the legality of the work. If you carry out modifications without this process, you risk penalties. These could include a requirement to restore the property to its original condition or significant financial penalties. Additionally, illegal works can complicate future sales of the property and lead to administrative blockages.

Obtain co-ownership approval (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 initiating any procedure. This document establishes the rules for managing the co-ownership and may include specific clauses about the use of spaces within the building. In other words, you must ensure that the proposed change of destination (e.g., converting a commercial space into residential) is authorized by the co-ownership regulations.

Why consult the co-ownership rules?

The co-ownership regulation determines each co-owner’s rights and obligations and specifies permitted uses for different property types within the building. If the regulation states that certain spaces must remain for commercial use, converting a space into a residence might be forbidden. Such restrictions often aim to protect the balance between commercial and residential activities within the building and to maintain harmony between private and professional areas.

Need for the approval of the general assembly

Even if the co-ownership regulation does not explicitly oppose the transformation, you must obtain approval from the general assembly of co-owners before undertaking works that could impact the building. This assembly votes on important decisions concerning the condominium, such as renovation works or changes in the use of spaces.

Which situations require co-ownership approval?

• Transformation of common areas: If the works or change of destination involve using or modifying shared parts (corridors, entrances, elevators), the approval of co-owners is mandatory.
• Impact on other co-owners: If transforming a commercial space into a residence directly affects other occupants, for instance by increasing the number of residents or altering common charges, the general assembly must decide.
• Potential nuisances: Some changes of destination could cause disturbances (noise, additional traffic), which requires the approval of co-owners to prevent future conflicts.

Procedures to obtain approval

1. Consult the co-ownership syndic: Before any process, it is recommended to discuss the project with the co-ownership syndic, who can guide you on steps to follow and inform you of any restrictions in the regulation. The syndic can also advise on how to present your project at the assembly.
2. Submit the project to the general assembly: You need to present your project at the upcoming co-ownership general assembly, providing all necessary information on planned works, impact on the building, and other co-owners. This meeting usually occurs annually, but you can request an extraordinary assembly to specifically discuss your project.
3. Prepare a complete file: Ensure you prepare a detailed dossier including work plans, estimated impact on the building, and any other information needed to convince co-owners to approve. Remember some co-owners might oppose if the project could cause nuisances or additional costs.
4. Obtain the required majority: Depending on the planned works, you will need to secure a simple or qualified majority during voting. Generally, an absolute majority is required for works affecting common parts or changing the use of spaces. If you get a favorable agreement during voting, you can proceed with the works.

Plan the necessary works

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

1. Connection to essential networks

The first crucial aspect of transforming a commercial space into a residence is the connection to water, electricity, and gas networks. A commercial space is typically not equipped to meet residential needs in terms of consumption and domestic equipment. Therefore, it is necessary to:

• Update electrical installations to meet safety standards for a dwelling, notably by installing separate circuits for the kitchen, bathrooms, and other appliances.
• Check the water connection to ensure potable water supply complies with quality standards for a residence. Additionally, a wastewater drainage system must be installed or updated to suit domestic needs.
• Install or upgrade the gas system, if the heating or cooking uses gas. If the space already lacks a gas connection, work to connect to the urban network will be needed.

2. Layout of essential rooms

To convert a commercial space into a functional dwelling, some rooms must be created or prepared according to standards for housing:

• Creating a bathroom: It is essential to install complete sanitary facilities: shower or bathtub, sink, toilet, and proper ventilation. This room must meet ventilation and insulation standards to ensure optimal comfort.
• Fitting a kitchen: The kitchen requires dedicated space for electrical installations and water supply. Appliances such as a sink, stove, and refrigerator should be integrated. Planning for kitchen furniture suitable for residential use is also necessary.

3. Compliance with habitability standards

Every dwelling must meet legal minimum decency criteria as outlined by Decree No. 2002-120 of January 30, 2002, to guarantee a minimum level of comfort and safety. These standards include:

• Minimum living space: The dwelling must provide a decent living area (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 lighting: Living spaces should have windows or openings to the outside for natural light. If the commercial space lacks windows, new ones or skylights may need to be created, which could require a permit.

4. Safety and accessibility

In addition to comfort standards, transforming a commercial space into a residence must comply with current safety regulations:

• Installing fire safety systems: A dwelling must be equipped with smoke detectors conforming to standards. Depending on the layout, fire doors or electrical updates may be necessary to limit risks.
• Accessibility standards: If the dwelling is intended for rental or located in a new or recently renovated building, it must meet accessibility standards for people with reduced mobility (PRM). This can include ramps, wider doors, or adapted bathrooms.

5. Thermal and acoustic insulation works

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

• Thermal insulation: Walls, ceilings, and floors should be well insulated to minimize heat loss and ensure thermal comfort year-round. Openings (windows, doors) should be equipped with double glazing for better insulation.
• Acoustic insulation: If the space is located in a noisy area (near a road or busy commercial district), installing soundproofing materials is essential to reduce noise nuisances, creating a peaceful environment for future occupants.

6. Cost and management of works

The costs of converting 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 a complete transformation, including network connections, room layouts, and compliance upgrades. Engaging an architect is recommended for large projects or properties exceeding 150 m². An architect can help ensure compliance and design an optimized layout.

Types of works to consider

Potential transformation costs

Inform the cadastre office

After successfully completing the change of destination for your commercial space, it is mandatory to inform the cadastre office. This administrative step updates the fiscal assignment of your property and ensures all modifications are legally recognized. Failing to inform the cadastre could lead to administrative issues and future fiscal complications.

Why inform the cadastre?

When converting a commercial space into a residence, the property’s fiscal nature changes. As a commercial property, it was subject to the territorial economic contribution (CET), a tax applicable to commercial or professional activities. Conversely, a residence is subject to the residence tax and the property tax. Therefore, informing the cadastre is crucial to enable a recalculation of local taxes based on the property’s new use.

Tax implications of changing destination

Depending on the change, local taxes payable may vary:

• Residence tax: Once converted into a residence, you will be liable for the residence tax, applicable to primary or secondary homes.
• Property tax: The property tax was already applicable to commercial spaces but may be reassessed after the change, based on the new cadastral rental value.
• Elimination of CET: Converting the space into a residence means the territorial economic contribution (CET), which pertains to professional or commercial properties, will no longer apply.

The tax recalculation is essential to align the fiscal situation of your property with its new use, and must be officially registered with the cadastre.

How to inform the cadastre?

1. Fill out a declaration of change in physical characteristics or allocation: You must complete form Cerfa n°10517*02 (declaration IL n°6704), which is the declaration for change in physical characteristics or allocation for built properties. This form informs the tax authorities of the change of destination.
2. Submit the form to the cadastre office: Once completed, this form must be sent or deposited at the cadastre office responsible for your property. This process should typically be done within three months after the work is completed.
3. Required documents: Along with the form, it might be necessary to include site plans, photos before and after work, and other documents clearly identifying the modifications made.

Deadlines and consequences

Tax authorities will consider this information for adjusting local taxes during the next declaration period. It is essential to ensure all data is correct and the form is submitted within the specified deadlines. Failing to do so may result in incorrect taxes and unexpected adjustments later.

Additionally, in case of future sale, failure to update the information with the cadastre can complicate the transaction. The change of destination must be clearly registered to ensure full transparency during resale.

Understand the tax implications

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

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

When transforming a commercial space into a residence, you are no longer liable for the territorial economic contribution (CET), which applies to spaces used for commercial or professional purposes. Instead, you will pay the residence tax, an annual tax applicable to all dwellings. This tax depends on the cadastral rental value of the property and the municipality where it is located.

How does the residence tax work?

• The residence tax is calculated based on the habitable surface area, the location, and property features.
• In certain municipalities, especially in tight zones, the residence tax may be higher for secondary residences, which is important if you do not occupy the property year-round.
• If you occupy the property as a primary residence, some exemptions or reductions may apply, especially for households with modest income or seniors.

2. Reassessment of property tax

In addition to the residence tax, the change of destination often leads to a reassessment of the property tax. This tax is paid by all property owners, whether commercial or residential, but the amount may increase following the planned works.

When is property tax reassessed?

• If you undertake significant extension or renovation works during the transformation, the cadastral rental value will be adjusted. This means the basis for calculating property tax will be re-evaluated upwards, increasing the annual amount payable.
• The calculation of property tax considers the physical characteristics of the dwelling (size, number of rooms, equipment), and its location. For example, a property in the city center or a sought-after area will be subject to higher property taxes than in peripheral zones.

3. Extension works and fiscal impact

If your project includes extension works (adding rooms or enlarging the building), this can have important fiscal consequences:

• Increase in floor area: Adding square meters directly impacts the cadastral rental value, which is used as a basis for property and residence taxes.
• Creating new facilities: Adding features such as an equipped kitchen, extra sanitary facilities, or a garage can also increase the property’s rental value, resulting in higher local taxes.

It is therefore crucial to consider these tax implications before planning works to avoid surprises when receiving your local taxes.

4. The development tax

In some cases, transforming a commercial space into a residence, especially if it involves extension or renovation works, may trigger the payment of the development tax. This tax is levied upon issuing a building permit or submitting a prior declaration of work and is calculated based on additional area created.

Calculation of the development tax:

• The development tax is determined by the additional surface area (in square meters) created by the work, multiplied by a fixed value.
• It is also influenced by a rate set by the municipality, the region, and sometimes intercommunalities. This rate typically ranges from 1% to 5% depending on geographic zones.
• For example, works involving extension, new windows, balconies, or terraces can trigger this tax.

5. Effects in case of rental

If you plan to rent out the property, the fiscal effects will differ according to the type of rental:

• Unfurnished rental: If renting without furniture, your income will be taxed under rental income. You can benefit from a simplified regime if income is below a certain threshold, or choose 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), which offers additional fiscal advantages, especially under the micro-BIC regime or the actual regime allowing for depreciation deductions.

Tax implications

Conclusion

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