What is the difference between residential and non-residential premises?

Main differences

There are three main differences that determine whether the property is residential or commercial.

1. Tariffs. Commercial and residential properties are serviced at different rates. In apartments, utilities are much lower than those for entrepreneurs. Many businessmen, in order to save money, immediately refuse hot water and gas, because they charge cosmic amounts to pay for them. The increase in tariffs for commercial facilities is due to the fact that such facilities are used to earn money.
2. Purpose. Residential property is used as housing, that is, a person can live in this room, but does not have the right to run a business in it. Commercial property is used for income generation.
3. Price. A square meter of non-residential property costs much more than a square meter of even the best apartment. The difference in price between two equivalent objects for different purposes is about 25-30%.

Housing-stock property

Housing is buildings and premises intended for permanent or temporary residence of people. Housing-stock property include:

• residential building – manor or apartment type;
• cottage;
• addition to a residential building;
• apartment;
• rooms in shared (multi-family) apartments;
• country and garden houses.

To transfer residential property into non-residential is not an easy task. Therefore, before buying a residential property for running legal business, it is necessary to carefully explore this issue and make sure that it is possible to change the functional purpose of the premises (as far as the capital city is concerned, in 2015, the Kyiv City Council decided that it is not required to determine the functional purpose of real estate premises for permission to change their status).

Non-housing stock

Non-housing stock include objects not intended for living. Most of them are used for commercial activities. These objects include:

• hotel buildings – hotels, motels, campsites, recreation facilities, restaurants and bars; tourist camps;
• office buildings – financial service buildings, administration and amenity buildings, buildings for office and administrative purposes, etc.;
• commercial buildings – shopping centres, department stores, shops, covered markets, etc.;
• garages – both ground and underground, as well as covered car parks;
• industrial buildings and warehouses;
• buildings for public performances (casinos, gambling houses);
• outbuildings (adjoining a farm) – auxiliary non-residential premises, which include garages, cookhouses, workshops, cellars, sheds, heating rooms, boiler rooms, transformer substations, etc.;
• other buildings.

For non-residential premises, in particular offices, there is also a separate classification, depending on several factors:

• location, in particular distance from the city centre;
• type of building, design features;
• adjacent structures;
• life support and security systems;
• layout concepts and finishing.

According to this classification, all office property is divided into five classes: A, B, C, D, E. The first two classes provide for a favourable location of the object in downtown, office buildings or in a transit place. Other characteristic features of this property are the proximity to public transport stops, like the metro, the presence of own or nearby parking lots, location in new or renovated buildings.

Objects of class C and D are reconstructed (C) or unreconstructed (D) research institutes or other administrative buildings of the Soviet development.

And finally, class E are offices in residential buildings, including apartments transferred into non-housing stock, or in basements. This class premises are among the cheapest commercial property.

What premises can be transferred from residential into non-residential?

You can transfer premises on the basement and ground floors into non-residential. No one should be registered in such room. It is also not possible to convert apartments above the third floor to be used as workshops and studios.

The transfer of residential into non-residential premises can be carried out provided that the owner and his family are provided with living area in accordance with the norms established by the legislation.

A residential building should not be recognized as unfit, an architectural monument, and the premises should not be encumbered with any persons’ rights (not be pledged or be under arrest).

The process of transferring residential premises into non-residential

Many businessmen are thinking about buying a residential property at an affordable price and starting the process of obtaining commercial status for it. Why? Firstly, commercial property availability gives the businessman credibility, which, in turn, increases customer trust. Secondly, the cost of commercial property is much higher, so such an object can be sold later more profitably.

To change the category of housing the following documents are required:

• notarized copies of documents on the ownership of the premises transferred into non-residential;
• a copy of the registration of technical data sheet of housing stock apartment;
• written consent of residents to use this premises as non-residential;
• certificates of registration of the owner (in case of an individual) in another place, as well as that no one is registered in the specified room;
• notarized constituent documents – if the owner is a legal entity;
• design proposals for the reconstruction of a residential building, premises (apartments) made by a certified architect.

The algorithm for transferring residential into non-residential premises contains a number of mandatory requirements:

• availability of a technical opinion on the possibility and expediency of transferring the object into non-residential premises;
• obtaining pre-project proposals for the improvement of the territory from the department of architecture of the local government;
• the availability of technical feasibility of arranging a separate entrance.

The procedure for transferring a residential object into non-residential can be divided into several stages:

• preparation of all necessary documents;
• submitting them to the Centre for Provision of Administrative Services to obtain a decision on the transfer;
• obtaining initial data and technical conditions for the reconstruction of the property;
• preparation of a project for the reconstruction of a real estate object into a non-residential one by a certified specialist;
• sending a message on the start of construction work to the State Architectural and Construction Inspectorate;
• reconstruction of the property with the arrangement of a separate entrance and improving the surrounding area. Designer and technical supervision are obligatory;
• registration of a new technical data sheet of housing stock apartment;
• payment of a equity contribution or exemption from it;
• registration of a declaration of facility readiness for operation;
• registration of title to already non-residential premises.

 Restriction on the use of non-residential premises

Non-residential premises in a new building or a separate commercial object can be used for different purposes. If we talk about non-residential premises on the ground floors of residential complexes, they are mostly for shops, pharmacies, beauty salons, hairdressers and other commercial facilities that are opened there.

You cannot register a room as a commercial in a multi-storey residential building for the following objects:

• objects of an industrial nature;
• public toilets;
• funeral homes other than funeral homes offices;
• glass bottle buy-back centres;
• specialized institutions and enterprises that contaminate the territory and air of residential neighbourhoods are characterized by excessive levels of noise, vibration, and radiation;
• consumer services enterprises that use flammable and explosive substances.