Business Clinic: Changing holiday lets to residential lets

Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Holiday lets can be challenging to market and manage. Stephen Richards of Carter Jonas Leisure sets out the process for change of use to residential and offers some advice on the holiday market.

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Q. We have six holiday cottages in one barn, which we converted more than 17 years ago. They have slowly become more difficult to run, with fewer bookings and more enquiries for short-term lettings.

We have a 28-day clause on them and I really feel it is time to try to change to either longer-term lettings or residential, as the outgoings mean the cottages are not viable. Please advise the best way forward. We are in an English planning authority area.

A. It sounds as if, when planning permission was granted 17 years ago, a holiday letting restriction was applied. This means no individual can stay in the property for more than 28 consecutive days.

To allow the cottages to be rented out longer term – for example, on an assured shorthold tenancy (AST), you would have to apply for a change of use for C3 use – a dwelling house.

From the outset, it’s important to establish whether there is a Section 106 agreement in place, tying the cottages to the main residence.

If there is, regardless of any change of use, you won’t be allowed to sell the cottages independently from the farmhouse or the rest of the land – either individually or as a block, depending on the wording of the agreement.

Subject to this, if you’re successful in getting a change of use to C3, you’ll be able to let the properties on the open market, or to sell them. If you’re successful in getting that change of use, you’ll be able to let the properties on the open market.

If not, some planning authorities will grant an extension of the 28-day limit, allowing tenancies of up to six months, which could then be renewable.

When applying for change of use, it’s a standard requirement to prove that the existing use is no longer viable – so, in this case, you would need to establish that there is no longer a sufficient business need for the holiday letting cottages or demand within the area.

You have the option to start with a pre-application. There is a cost associated, but it allows you to test the water, spending less time than in making a full planning application. The local authority will give tell you the likelihood of any application succeeding.

It would be worth getting advice in the first instance on whether or not your cottages would be suitable for and compliant with the requirements for the private rented sector.

Regulations for residential let properties are becoming ever stricter – there may be costs and time implications you have not considered, both to get them up to scratch and to maintain them.

For example, each cottage would need to meet energy efficiency standards, have separate utilities meters and their own boiler, as well as up-to-date gas and electricity certificates. Parking arrangements and gardens must also be suitable for long-term lets.

You may want to consider changes to make your cottages more appealing to the holiday market. As a leisure specialist, I have seen how this market has changed dramatically in the past two decades.

I recently worked with a landowner to upgrade a holiday cottage complex to interconnect their cottages, increasing their flexibility and therefore appeal to a wider range of holidaymakers and to attract larger groups, for which there is a growing market.

There will likely be other, lower-cost changes that could increase the holiday letting business. Employing a company to deal with cleaning and changeover, as well the marketing and letting, is an option if time has become an issue.

If you can make a success of the business and keep it running, your income from holiday letting cottages could be higher than on a long-term residential tenancy.

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