Article 4 directions, Class E and change of use: the London planning traps that stop a commercial mortgage

This is the post we most often end up writing out by email, so it may as well live somewhere permanent. The single most expensive assumption in London commercial property finance is that a change of use which is permitted development somewhere else is permitted development here.

What an Article 4 direction actually does

Permitted development rights let certain changes happen without a full planning application. An Article 4 direction, made by a local planning authority, removes a specified permitted development right within a defined area. The change is not prohibited. It simply now needs a full planning application, with everything that implies for time, cost and outcome risk.

Two families of Article 4 direction matter most to commercial borrowers in London.

HMO directions. Most London boroughs now operate a direction removing the permitted change between a small house in multiple occupation and a dwelling house, across all or part of their area. If your case depends on converting to or from small HMO use, check the borough position first.

Office to residential directions. Boroughs in and around the Central Activities Zone operate directions restricting the conversion of office floorspace to residential, precisely because the London Plan wants that floorspace retained. A borrower buying tired office stock on the assumption it can be converted is buying an assumption, not a right.

Class E and what it did not solve

The Class E use class, introduced in 2020, consolidated a range of commercial, business and service uses into one class, so movement between shop, office, restaurant, gym, clinic and light industrial within the class no longer needs planning permission. This genuinely simplified life for occupiers and for landlords re-letting a unit.

It did not simplify the two things that actually decide a commercial mortgage. Moving out of Class E, most obviously to residential, is a different question entirely and is where Article 4 bites. And a lender will still ask what the lawful use is now, not what the class permits in theory.

The lending consequence, stated plainly

A lender underwrites the use the property lawfully has on the day of valuation. Not the use you intend. Not the use you have applied for. Not the use the agent's particulars imply.

If your case depends on a change of use, the RICS valuation and the credit decision will both be made on the existing lawful use until consent is granted. A vacant unit valued on its existing use and a vacant unit valued on a hoped-for residential conversion can be two very different figures, and the gap will come out of your deposit.

The practical sequence is: establish the planning position, then agree the price, then apply for finance. Borrowers routinely do this in the opposite order.

What the borough registers tell us

We read borough planning registers where they are published in a form we can machine-read. On 26 July 2026 that gave us 729 commercial-relevant planning applications live across 15 of the 33 borough registers. The other 18 boroughs do not publish in a readable form, and we do not substitute a neighbouring borough's figures for them, because that would be inventing data.

Where we can read the register, the value is specific and limited. It tells us the direction of travel on a street or an estate, which is context for a valuation conversation rather than a number that decides a credit case. Bexley's register, read on the same date, carries 18 commercial-relevant applications including reference 26/00860/PRIOR at 315 Bexley Road, Erith, a prior approval notification for change of use from Class E commercial office to two self-contained residential units. That is the exact transaction type this post is about, and it is going through a formal application rather than happening automatically.

Enfield's register carried 78 applications, Ealing 83, Croydon 59 and Lambeth 52. Westminster's register carried 163, which is what you would expect from the borough with the second-largest office stock in the capital.

Three checks before you agree a price

1. Pull the borough's Article 4 register. Every London borough publishes its directions. Read the one covering your postcode, not a summary.
2. Confirm the lawful use. A certificate of lawfulness is cheap relative to a failed valuation.
3. Assume no consent. Model the deal on the existing use. If it works on that basis, any consent you later obtain is upside. If it only works with consent, you are taking planning risk with borrowed money.

Send us the address and the planning position and we will tell you on the first call whether the case is fundable as it stands or only fundable after a decision notice.