by Rachael Unsworth and Tony Sweeney
After a protracted appeal process, it has been determined that Brook House, 113 Park Lane, cannot continue in office use after 1990. This is in accordance with Westminster City Council’s policy of requiring the return to residential use of offices which were given temporary permission after the second world war. The Secretary of State has accepted the recommendations of his inspector and dismissed the appeal by the current leaseholders, MEPC.
The Brook House appeal has been widely seen as a test case for properties in Mayfair which are also potentially affected by Westminster’s policy. This article discusses the implications of the decision and draws attention to some problematic issues in the continuing debate.
Reasons for dismissal of the appeal
Westminster City Council is abiding by the temporary office permissions policy in order to protect the residential element in the character of Mayfair. The three main reasons given are:
(1) The general need for housing in London.
(2) The special housing requirements in an international city of such status.
(3) The particular character and function of Mayfair.
The inspector found that the policy is “still generally very appropriate” (para 128 of the inspector’s report) and is especially applicable to the upper floors of Brook House, which are physically capable of reversion. The circumstances of this case are not sufficiently special to warrant a variation from the policy.
Why the decision is correct
In this instance, the points raised in support of MEPC’s continuing use of the property as offices were not sufficiently strong to outweigh the key elements of the policy.
Brook House was originally a residential property and it is viable to return it to residential use. Mayfair is an extraordinary residential area, but it is a proper planning objective to support the provision of housing of all types (Westminster Local Plan, para 10.51). Demand for houses and flats in this part of central London picked up in 1983 and continues to be strong.
The tenants have always known that permission for the use of Brook House as an office was temporary. The circumstances here are very different from cases where an individual building’s use may have been changed at some time in the past, the use has become established and then, after many years, a strong argument can be made for the use to continue.
As a property development company, MEPC are fortunate in having other central London premises which could be used as headquarters offices, including St James’s Square, Chiltern Street and Eccleston Square. Even if none of these were suitable, the company is in a healthy state and would be in a position to compete successfully for alternative accommodation. The shares of the company outperformed the FT All-share index by over 20% during 1987, partly owing to the acquisition, at a discount, of Oldham Estates. Central London offices constituted a significant proportion of the portfolio taken over(1).
The 1974 policy permitting the extension of use as offices from 1990 for the remainder of the life of the building can be seen to be outmoded now that refurbishment has taken over from the previously more widespread practice of wholesale redevelopment. The life of the “original” building could now be extended more or less indefinitely to accord with the resurgence in demand for “period” office buildings thought to give a prestigious image to occupiers. It is therefore correct that this aspect of the policy has been reviewed.
Although there is no subdivision of Mayfair for planning purposes, it is tenable to argue that the character of the north-west portion is definitely primarily residential. Our office surveys of Mayfair over the last two years have shown a pattern of office activity concentrated in the more easterly and southerly sectors of Mayfair. We listed all offices available, under construction or proposed. Of the 38 properties in these categories, only five were in the north-west quarter of Mayfair.
It is not simple to define the mix of residential, office and other uses which should exist in order to maintain a balance, but to ensure the continued coexistence of the various uses there must be active management of the area. The policy which requires reversions in 1990 is seen as a key instrument in helping to hold at bay the seemingly limitless demand from non-residential users to establish a foothold in this coveted area. Commercial users would usually be in a position to outbid residents if the use were to be decided by the open market. It is at a time of severe pressure for other uses that the policy of protecting the residential element becomes crucial (para 126 of the inspector’s report).
Altogether, 107 buildings are affected by this policy, 105 of which are marked on the map. This amounts to 7% of the office floorspace in Mayfair. Since many buildings are multiple-occupied, far more than 107 businesses will be affected. But it is unlikely that every single one of these properties will revert to residential use.
It is already known that Ropemaker Properties (BP Pension Scheme) will not revert entirely. A deal has been struck with Westminster council on the 14 properties of the Mayfair estate: 50% of the floorspace will revert to residential use and office use will be permitted on the remaining 50%. Any later decisions on the use of these buildings must guarantee that the overall balance of use is maintained.
Some of the tenants who will have to move from their offices by 1990 might well wish to find alternative accommodation elsewhere within the boundaries of Mayfair, but there may be some who could equally well take the decision to move to another area. The additional pressure on the office market in Mayfair will not be inordinate. However, for those who do have to move, there is only a short time in which to make decisions.
There are flaws in the argument
“The appellant has always known that the land-use planning strategy is to secure a reversion to residential use as soon as practicable.” Why was it not practicable to return Brook House to residential use earlier?
The delay in finally getting tough in implementing this policy has led to the raising of false hopes on the part of tenants that 1990 would prove to be an extendable deadline, as other deadlines have in the past been extended. Many of the 107 buildings at issue had extensions of office use granted at one or more points during the last 40 years: for example, 3 Audley Square has had five extensions of permission; 2 Balfour Place has received permissions interspersed with refusals affecting different floors of the building. There has been considerable variety in the application of the policy and Brook House exemplifies this: in 1972 Westminster turned down an application to continue to use the premises as offices, but in 1975 they changed their minds and granted a fresh permission until 1990, as originally requested in 1971. This decision in itself did not accord with an already formulated policy (passed in 1974) to extend office uses from 1990 for the life of the building: 20 and 39 Park Street have been treated in a similar manner. The inspector does make the point that “the markets must be given clear signals that the authorities are to stand firm on the restoration of housing where practicable, so that confidence may be retained in the future of residential uses, as a vital component of the area’s quality” (para 126 of the inspector’s report).
The matter of viability of conversion is a vexed one, especially as the valuation is meant to relate to “a freeholder in possession” (Westminster Local Plan, para 10.53). This phrase was specifically added to the plan policy following public consultation, yet it seems to have been overridden here. Even though the development would be by a freeholder in possession, the inspector has allowed for a developer’s profit of 25% on costs and a further 10% valuer’s contingency. In our experience as agents for residential developments, this level of margin is unheard of. It is therefore difficult to accept the inspector’s reasoning. If the same margin is always to be applied, schemes which would be viable in normal circumstances will by this calculation appear not to be.
There has been a growth in both residential floorspace and office floorspace in Mayfair as redevelopment has taken place and the subdivision of houses to flats has resulted in an increase in the numbers of residents who can be accommodated. From 1969 to 1987 residential floorspace increased by 8.6%, whereas office floorspace increased by only 2.5% over the same period(2). It is noteworthy that the Mayfair Residents’ Association, arguably the strongest advocates of adherence to the residential reversion policy, stressed the decline in residential population of the borough as a whole rather than of Mayfair in particular when giving their views last year(3).
It is accepted that there are good reasons for this policy not being founded on housing need in the ordinary sense. Its implementation serves only to increase choice at the top of the market. It is argued on Westminster’s side that the addition to the overall stock of housing which results from the Mayfair reversions will have “ripple” effects down through the market. The inspector is not convinced by this argument and recognises Mayfair as a special submarket. Although the inspector has accepted the policy, he admits that “it is a moot point” whether offices or residential premises contribute more to the vitality of the area in the short term (para 127 of the inspector’s report).
Implications
There are 106 more buildings which are also affected by this policy (see map based on October 1987 figures). At that time, applications had already been turned down on 13 properties and six appeals had also been rejected. Of the remaining 94, there were 22 on which applications were being considered and five on which appeals against a refusal were being considered. Thirteen properties had been granted extensions of office use but only two of these are full permission for a whole building. This leaves 55 properties which have permission to 1990 only and on which there has been no decision.
On May 31, the Grosvenor Estate submitted a package of applications relating to 36 of their properties (many of the blue dots on the map). It will be interesting to see whether the estate and Westminster will find a formula similar to the one agreed for Ropemaker Properties.
Although each case technically has to be argued on its merits, it is impossible to avoid an element of precedent-creation. Westminster used certain arguments to justify the decision not to renew permission. The Secretary of State was convinced that they outweigh the points made on behalf of MEPC. These arguments will now be tried again, having once been tested. Unless substantially more convincing cases can be made by appellants in other appeal cases, the same decision will be arrived at by an inspector who considers the objective facts of any case. However, each case will require a consideration of whether the building can viably be converted to residential use. This matter cannot be decided according to generally applicable tests.
In some instances, exceptions are allowed for in the plan (para 10.59), “where it can be shown to the satisfaction of the City Council that any house, or part of a house, either alone or in combination with others, cannot be used or adapted for use for one kind of residential occupation or another”. Only very special circumstances will be considered in addition to this exception.
It has hereby been accepted that the principle of the policy is correct. The only change for subsequent appellants is to prove that their case is an exception. This hinges mainly on the question of financial viability and takes the debate into the thorny undergrowth of feasibility calculations where other objectives of the overarching planning policy are obscured from view. There is the possibility that other occupiers whose cases have yet to be decided will deliberately take action to change their premises so substantially that conversion back to residential use can be calculated to be unviable. The arguments used to prove the case are very technical and this leaves us wondering whether an inspector with a predominantly legal and planning background is in a position to decide matters of detailed quantitative appraisal. An issue which does not usually play a major role in planning decisions has been dragged into the centre stage spotlight.
(1) Phillips & Drew 1987
(2) Stanley Coggan, surveyor to the Grosvenor Estate, in a letter dated October 31 1987 to Estate Gazette
(3) Fuller Peiser report, August 1987, p 10