Student Residential Landlords Commercial

Article 4 Direction

The Article 4 Direction in Canterbury means that Landlords and Investors have to be especially carefully when purchasing or letting a property in Canterbury. It could have a huge impact on your investment and income.

About Varsity Canterbury

An Overview

February 2016 saw Canterbury Council implement the Article 4 Direction. The purpose of the directive was to limit the number of residential properties being converted into student accommodation by Investors and student Landlords. The move was a positive step towards making certain that housing remained available for families to buy & rent and essentially put a limit on the number of new private student properties coming onto the rental market.

The Article 4 direction means that residential property within the boundaries of the directive (in our case, the whole of Canterbury) is given a usage class. The only ones we need to be concerned with when considering student property investment is C3 and C4 uses.

C3/C4 Explained

Fundamentally, the usages classes are described below.

  • A property which is classed as C3 is a single residential dwelling for the purpose of 1 family using the property
  • A property which is classed as C4 is occupied by three or more households (most student properties)
  • It is important to note that the usage class refers to the property itself and not the tenancy. Please note however, it is not simply the number of occupiers residing in a property which determines it's usage class.

If you're considering renting your property to students or - most importantly - if you're considering purchasing a property with the intention of renting to students, you must ensure that the property has C4 use.

What makes it a C4 property?

Considering the information above, you'd be forgiven for believing that a property has C4 use if it was previously let to three or more students, but it's not as easy as that. To be classed as C4, a property must meet the following requirements;

It must have been let to three or more tenants - without exception - since February 2016. As most student tenancies run from July - June, this means that three or more students must have occupied the property since July 2015. You must be able to categorically prove that the above is correct. Usually, this would mean having sequential ASTs dating back to July 2015.

The property must not, at any point since July 2015, have been let to fewer than three tenants. If this is the case, the property automatically reverts to C3 use.

Can I apply for C4 use?

The simple answer is yes, you can apply for planning permission to convert a property from C3 to C4 use, however a successful application would be very unlikely.

For a C4 conversion application to be considered, the council will look at the area immediately surrounding the property in question. If more than 10% of the local area is already occupied by students, the planning will be rejected.

Most areas in Canterbury are likely already occupied by at least a 10% student population and so any successful applications are very unlikely. It is important to bear in mind that Article 4 was implemented to reduce the number of properties being converted into student accommodation and therefore you are likely to be unsuccessful with any plan that contradicts this.

What if you believe a property has C4 use, but you can't prove it OR you're having issues proving that your C4 use property is legitimate.

If you have bought or already own a property which you believe has C4 use (or have been told does by the Estate Agent or Vendor) there is another way to prove it's class.

During the conveyancing stage of the purchase, one could request that the Vendor sign a Statutory Declaration to confirm the properties' previous usage. The declaration must essentially be an overview of the letting activities since July 2015 and should include as much detail as possible, including the number of tenants in situ and perhaps which Letting Agents were involved.

Armed with the signed & sworn declaration and accompanied by any supporting documentation (such as any ASTs which are available) one could then apply for a Lawful Development Certificate using the planning website. The certificate costs ITRO £500 but providing it's successful (which it is likely to be if you have sufficient evidence), it will retrospectively apply C4 use to the property and it could therefore be let to students moving forward.

In addition to or instead of a Statutory Declaration, we have seen Lawful Development applications be approved when accompanied by a confirmation by the Managing Agent which confirms the letting detail since before Article 4 was introduced. This is likely to only be a viable option if the property has been managed by the same agent for past six years.

It appears to have become more common for mortgage lenders to also request for a Lawful Development Certificate to confirm C4 use, irrespective of whether you have the ASTs to confirm it's use. This is becoming increasingly requested with applications for further finance or mortgage drawdowns (as opposed to the initial purchase for some reason) but provided the ASTs are available, a Statutory Declaration wouldn't be required for the application.

In summary

Taking Article 4 into account when considering investing in student accommodation is of the utmost importance and can be a very costly mistake if it's not done correctly. It's vital that the property you purchase has C4 use or you're certain that it is attainable. If you're unsure about a property you're interested in want to discuss it further, please contact us today so that we can talk through your options.

C3/C4 Use – FAQ

Probably. If it’s always been let to three or more students, is documented via appropriate ASTs and dates back to at least February 2016, it is C4 use.

The property has reverted to C3 use.

C3/C4 use is not affected by the type of AST used.

You’ll be breaking the law and could be fined.

The property will retain C4 use and so has no affect. You will, however, likely need building control and as a five bedroom property will require a HMO Licence.

Case Studies

Case Study 1

Landlord: Mrs X
Property: 2 Bedroom Terrace House

Mrs X let her property successfully for a number of years to a family for £1000 per month.

Considering student properties tend to achieve a higher yield than standard accommodation, Mrs X decided to serve notice on the current tenants in March 2019 so that she could turn the living room into another bedroom in order to rent to three students for £1250 per month. Mrs X found student tenants who moved in and were happy with the accommodation and she was happy to receive £250 more per calendar month.

What Mrs X didn’t realise was that in adding an extra bedroom to the property and letting to three people instead of a family, she has changed from C3 to C4 but did not have permission to do so. The council found out and ordered her to revert back to letting to a family (or two students, which would still count as C3 use). She had to undo all of the renovation work recently completed on the property and ended up in a worse financial position than we she started.

Case Study 2

Landlord: Mr A
Property: 4 Bedroom Student Accommodation

Mr A is a Property Investor and was in the process of purchasing a new property to add to his portfolio. The property was advertised for sale as student accommodation and had been let to students previously. The sale went through successfully and Mr A was happy to have another investment generating a good rental yield.

Mr A decided to add another bedroom to the property via an extension. He knew that this would mean he had to apply for a HMO Licence and inform his lender. During the conversation with his lender, they asked him for confirmation that the property had C4 use. He provided them with the last few ASTs dating back to 2019. In order to be a classed as C4, it must be proven that a property has been occupied by three or more students since February 2016. Mr A did not have proof of this, so went back to his solicitor, the Estate Agent and the Vendor who sold the property and it transpired that it had actually been let to a family in 2017 and was therefore C3 use.

This oversight ending up costing Mr A tens of thousands of pounds. Not only could he now not let his property to students, if he decided to sell, any investor (perhaps one who’s clued up with this information!) will know that it cannot achieve the desired yield and so is not a worthwhile investment. He ended up selling the property a few months later to a family – at a huge loss.