A developer owned a commercial building in a central location.  Due to the demand for residential rental properties, they decided they would be able to make better use of the building for residential housing, and looked into how they would do this.

Council confirmation

It is a legal requirement to obtain written confirmation from your local Council before changing the use of a building.  If the Council determines that additional work will need to be done to the building in order to change the use to residential (which is likely), the owner must obtain a building consent before starting the work.  Often this will be around things like fire escapes, given people will be sleeping in the building.  Failure to do this may result in penalties.

Every building is designed for a specific purpose and has to meet the Building Act requirements which certifies that it’s safe for that particular use. While a building will meet the requirements to be used as a commercial property, it does not necessarily mean that it will meet the requirements for a residential building. 

Use of Building

The use of every building or part of a building is categorised by law, and is defined in Schedule 2 of the Building (Specified Systems, Change the Use, and Earthquake-Prone Buildings) Regulations 2005.

There are four broad activity groups:

1. Crowd activities;
2. Sleeping activities (residential);
3. Working, business of storage activities; and
4. Intermittent activities

Change of use

The new use of the building may differ from what the building was designed to do. This may increase the risk to safety or be in violation of laws and regulations. When converting a commercial property into a residential one the Council will take into consideration the ventilation, natural light, and space, as well as the location of the building.  There may also be zoning issues.

Some examples of issues which can arise are:

•           A building which was designed to be a restaurant or store may not be able to be used as a home because there                may not be enough windows;
•           A CBD office building may not be suitable to be used as apartments because the building does not currently have            enough bathrooms or plumbing; or
•           An office in an industrial area will not be able to be used as a home because it is in a strictly industrial area.

Council will carry out checks on the building to ensure that it is safe for its new use and compliant with the standards set out in the Building Code.  The Council will either accept or deny the proposed change, or will require additional work to the building before approving the change.

Building consent and change of use

You do not need building consent just because you are changing the use of the building, however if you are doing any building work in the process then you will need to.  This includes if you are making changes to the fire or safety systems. 

If the council is satisfied that no work will need to be completed then you will not need a building consent.  If the building work you are undertaking is exempt under schedule 1 to the Building Act then a building consent will not be required.

Title issues

If the building is on a fee simple title, and you want to be able to sell units in the building, you will need to look at converting the building to a unit title.  This will involve a surveyor creating a unit plan, and creating ownership interests for each unit.

Equally, if the building is currently a unit title, but is unit-titled by floor, you may wish to undertake a further development to convert them to individual units on those floors.  This will also involve a surveyor.

Your lawyer will need to be involved in this as there will be documents to register the unit plan, and then documents to sign to set up a Body Corporate.

If the building is mortgaged, your bank will also need to consent to this process.

It is vital to take legal advice if you are considering converting a commercial building to a residential building as there are many traps for those who are not aware of the various steps in the process.