What are free-use premises and how to choose them correctly?

Let's start with the fact that the legislation does not contain the term “Free Purpose Premises” (PSN). This is more of a real estate term, referring to commercial real estate. PSN means that at the construction stage the premises were not designated for any specific purpose (office, shopping pavilion, pharmacy, warehouse, entertainment center, etc.).

In this article we will examine in detail the features of free-use premises and the extent to which they can be used as hotels.

What does a free-use premises mean?

So, PSN are premises initially designed for various purposes, without any specialization. The purpose of this versatility is to expand the possibilities of subsequent use of the room. The fact is that if a specific intended purpose is indicated in the design documentation, then it will have to be built in accordance with the requirements for the declared type of premises, in compliance with the relevant fire, sanitary and other standards.

If you specify PSN as the purpose, then the requirements for the premises will be of a general nature, and when renting out such premises or selling them, the owner will not need to do redevelopment so that the premises correspond to the stated intended use. In other words, all the worries about redevelopment and finishing of the premises will not be on the developer, but on the tenant or the new owner if they occupy the premises for specific purposes.

Supporters of PSN believe that the main advantage of this type of real estate is its versatility. For this purpose, PSNs are made with open layouts - relatively speaking, for any future request.

However, let us ask ourselves the question: are PSN really so universal if each specific activity requires compliance with its own norms and rules? In other words, redevelopment and major re-equipment will most likely be inevitable, especially when it comes to transferring the premises to a hotel.

This will require design documentation and project approval from a number of authorities:

Architectural and planning management;
Rospotrebnadzor;
Fire supervision;
Moscow Heritage Committee, etc.

What is commercial real estate?

All real estate is divided into residential and commercial. If the name of residential premises speaks for itself, then the definition and characteristics of commercial real estate are worth considering in more detail. In this article we will tell you what commercial real estate is, what categories it is divided into, consider real estate as a source of income and give useful recommendations when purchasing such properties.

Commercial real estate - what does it mean?

Commercial real estate objects are premises, buildings, structures and plots that are intended to generate profit by renting out or conducting business activities directly by the owner. The owner of a commercial property can be either a legal entity or an individual. The profitability of commercial real estate is the main criterion for its evaluation.

Main features of commercial properties

Profitability.

Real estate generates direct income in the form of rent or indirect income - used for the development of an enterprise.

Payback.

With proper investment, investments pay off on average in 7-10 years. After this period, commercial real estate begins to generate net profit.

Interesting! For comparison, let’s look at residential properties that do not make a profit, do not pay for themselves and undergo depreciation during operation - if the market situation is stable, they may lose value.

What applies to commercial real estate

Most people consider only retail premises - shops, stalls - to be commercial objects. However, this group includes a large number of different objects that differ in characteristics and scope of use.

Types of commercial real estate

Commercial real estate is classified according to its intended purpose. In accordance with this characteristic, all objects are divided into groups:

Source: https://zen.yandex.ru/media/etagi/chto-takoe-kommercheskaia-nedvijimost-5be54984f9cb6200acec74cc

Legal aspect

Currently, the legislation lacks not only a definition of Free Purpose Premises, but also the concept of intended or functional purpose.

The Law “On State Registration of Real Estate” dated July 13, 2017 No. 218-FZ says quite briefly that information about the purpose of the premises refers to additional information that is entered into the real estate cadastre.

purpose of the building (non-residential, residential, apartment building, residential building), if the property is a building;
purpose of the premises (residential, non-residential), if the property is a premises;

And then the extract from the Unified State Register already reflects the types of permitted use of a particular premises.

Due to the lack of a legislative definition, real estate market participants independently (but not according to uniform standards) divide real estate according to its intended and functional purpose. Let's look at the classification in more detail.

Classification of commercial real estate

By purpose:

shopping: shops, supermarkets, hypermarkets, shopping centers, pavilions, pharmacies, car dealerships, etc.;
warehouse: warehouses, warehouses, etc.;
“catering”: restaurants, cafes, bars, etc.;
service industries: consumer service points, beauty salons, exchange offices, hairdressers, fitness centers, Internet cafes, etc.;
hotel and recreational purposes: hotels, sanatoriums, holiday homes, boarding houses, etc.).

By functional purpose

(depending on the technical characteristics and design features that allow the room to be used as an independent object)

basic;
auxiliary;
serving;
communication;
technical.

So, if the premises are registered, for example, with the purpose of “children’s center”, then in order to convert it into premises for another purpose (for example, “shop”) it will be necessary to bring it into compliance with the standards for a new type of real estate, as well as making changes to the documentation .

In addition, technical difficulties may arise when changing the functional purpose of the room. For example, a kitchen (functional purpose) in a cafe (purpose) must comply with all legal requirements: be equipped with appropriate ventilation, finished with suitable tiles, etc.

PSN, according to the developers, is suitable for any type of real estate. True, it will be possible to use it effectively only after it has been converted by the tenant or the new owner for specific purposes.

Rent of premises for free use from the owner. Classification of premises

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A free-type room is a very multifunctional facility. At the design stage, the developer takes into account many factors due to which the premises receive characteristic features.

Free type premises - what is it?

Their main advantage is the layout, which will allow you to create a regular office space or retail space without much difficulty.

Thanks to this, the owner will be able to focus on the needs of tenants, which will be very beneficial for him in economic terms. Let's figure out what the key factors are in free-use premises.

At the beginning of the 21st century, the commercial sphere of activity began to develop, so there was an acute shortage of such free-type premises that could be turned into an office or store in the future.

The problem was solved in two ways: purchasing residential property on the ground floor with subsequent redevelopment or investing money in new buildings.

The first option seemed faster and more reliable, because when buying an apartment and converting it into a commercial space, the results are immediately available upon opening.
The second option of investing money in new buildings did not always please entrepreneurs, because this was work for the future.

Characteristics of free-type premises

Due to the layout features and characteristics, it is possible to distinguish a category of objects that are classified as free-use premises. Depending on their characteristics, they are conventionally divided into “Premium”, “Luxury”, “Standard” and “Economy”.

Higher class premises are located closer to the city center near administrative buildings. They are distinguished by high ceilings and large windows, the presence of modern security and fire safety systems, and underground parking. Most often, they house branches of commercial banks or jewelry stores. Such premises are available for rent and cost accordingly.
Luxury standard premises are most often located in historical areas of the city. Such objects are located in buildings that have a similar appearance to the general architecture of the area. They are in good repair and have security measures (video surveillance and fire alarm).
Objects in the “Standard” category are more in demand, because their prices are much lower, but they are also located in Soviet buildings. The disadvantages include low ceilings that do not exceed 3.5 m, cramped elevators and other features of buildings from the USSR period.
In most cases, vacant Economy class premises are located directly in a residential multi-storey building. The difference from a regular apartment is the presence of a separate entrance, which is located towards the street. This option will be an excellent solution for entrepreneurs who want to open a small store or workshop.

A feature of free-use properties is their transformation depending on the needs of tenants:

office space for a commercial organization;
small trading platforms for displaying and selling goods or services;
warehouse or storage facility;
workshop for providing production or repair services;
public establishments (cafes, bars).

Thanks to the unique layout of such premises, they can be divided into several functional areas (for example, a cafe-bakery or a warehouse-shop).

PSN and hotels

Despite the fact that the real estate market offers quite a lot of PSN, including for hotels, let's see how the acquisition of such premises will be justified without a radical redevelopment.

For example, let's look at hotel requirements. Let’s take such a “trifle” as the minimum width of the corridor. In particular, it should be sufficient so that, if necessary, a guest and a housekeeping trolley can comfortably separate in the corridor. But there are also such things as dividing the flow of different guests (guests and those who came to the event), guests and staff (separate entrance, elevators), arrangement “under one roof” of premises for various purposes: rooms, restaurant, fitness center, etc.

We wrote in detail about the features of hotel design, as well as the current norms and regulations in the “hotel” industry in the articles “Hotel plans: layout, drawings of standard projects” and “Nuances of hotel construction: approval of design documentation.”

Speaking about real estate for hotels, we can draw an analogy with banks: institutions conducting transactions with valuables must meet many criteria: the location of the premises relative to each other and their purpose, the material for making windows and doors, etc.

As a rule, PSN do not meet such requirements, and banks prefer to purchase premises specially built for these purposes.

PSN for mini-hotels and hostels

Until recently, mini-hotels and hostels still had a legislative “loophole” for accommodation in an apartment building. In particular, part 2. Art. 23 of the Law of March 30, 1999 No. 52-FZ “On the sanitary and epidemiological welfare of the population” states that “...providing non-residential premises to citizens for permanent or temporary residence is not allowed.” Consequently, the hoteliers concluded that at least a small accommodation facility could be placed in a residential area. However, on October 1, 2021, the law “On Amendments to Article 17 of the Housing Code of the Russian Federation” comes into force, prohibiting the organization of hotels and the provision of hotel services in an apartment building.

Legal consequences of the new law (“either-or”):

Closure of a hotel or hostel located in a residential area;
Continuation of activity if the premises acquire non-residential status. This is possible if the apartment is located on the ground floor of an apartment building or above the first floor, but the premises located directly below the apartment being converted into non-residential premises are not residential.

It seems that against the backdrop of these legislative changes, attention to premises that initially have the status of non-residential (and these include premises for free use) will increase. It is possible that PSNs on the ground floor of apartment buildings or business centers will be in demand for hotels. Let's look, for example, at what the real estate market (including) now offers for hotels.

“Free appointment, Moscow, Southern Administrative District, Nagatino-Sadovniki district, Sky Fort residential complex; from 150 to 542 m², from 300,000 to 1,084,000 ₽/month. The premises are located on the first and second floors with a separate entrance from the entrance street. There are fire safety installations, high-power hoods, a hall layout, and panoramic glazing. Ideal for a cafe/restaurant, hookah bar, fitness, bank, also possible for a store, beauty salon, pastry shop, medical center, pharmacy, flowers, etc.”

As you can see, in the detailed description there is no mention of a hotel, despite the fact that in the brief description of the property, hotels are present “on an equal basis” among other types of real estate.

“Vacant appointment (B+), 377 m² in business, Moscow, Central Administrative District, Basmanny district, st. Solyanka, 1/2С1, 377 m², 1,439,009 ₽/month. The room is corner, located on the courtyard side of the house and is clearly visible from 2 streets, Zabelina and Solyanka. The area is 377 m2 on three levels. The area of the first floor is 141 m2, the mezzanine of the first floor is 84 m2 and the basement is 152 m2. The ceiling height in the basement is 5 meters. Up to 200 kW of electrical power is allocated to the room; there is space for installing ventilation with output to the roof of the building. The close proximity of the Kitay-Gorod metro station and Zaryadye Park ensures high, intense pedestrian traffic and future restaurant customers...”

The detailed description in this advertisement is also not intended for the hotel.

By the way, an analysis of advertisements offering PSN on the ground floor showed that premises are much more often offered for hostels than for hotels. Moreover, even in those advertisements that indicate hotels as one of the possible options, the detailed description indicates “non-hotel” purposes for using the premises as the highest priority (restaurant, office, etc.).

Rent and sale: some nuances

Rental and sales rates for PSN will depend on many factors:

Purpose of the premises: if the premises can be used as a retail space, then it will cost more.
Location. For example, in Moscow, the cost of premises is highest in the center and western regions.
Room area
Its isolation (stand-alone building or not). For example, in Moscow there are many detached buildings with PSN status in relatively new areas (Mitino, Zhulebino, Solntsevo)

Let's see, for example, what free-use premises are now offered in Moscow for hotels or hostels. Now, as an example, let’s take free-standing buildings.

1. RENT: “Vacant purpose, 632 m², Moscow, Central Administrative District, Basmanny district, Arkhangelsky lane, 11/16С3, 948,000 ₽/month. Purpose: office, hostel, medical center, representative office, gallery, free appointment. We present to your attention a detached building in the very center of Moscow, a 5-minute walk from the Chistye Prudy metro station. 3 floors (first, second and attic floor). Office-corridor layout. Working condition. A major renovation was carried out in 2015. All central communications are connected to the building. Bathrooms and showers on all floors. Parking for 3-4 cars. Previously used as a hostel. Free passage and entry into the territory of the building, any operating mode. Advertising opportunities. There is always good traffic of clients, tourists, foreigners, wealthy residents of the area, and many others.”
2. SALE: “Vacant premises 553 m2, Moscow, Turgenevskaya metro station, Myasnitskaya street, 15. Rate: 433,996 ₽/m2, Cost 240,000,000 ₽. Floor 3 of 6. Office space, apartments, mini-hotel, hostel with a total area of 553 sq.m. is offered. The former apartment building of the merchant I. Kuznetsov, known as the “House with the Lion”, the historical facade is made in the neoclassical style, stylized as antiquity. Year of construction 1908-1910, a major overhaul was carried out with the replacement of communications and ceilings. A living room, an office layout, three bathrooms, a sauna, a spacious kitchen-dining room. Ceiling height 4.3m. Windows on 3 sides. Split air conditioning system. High-quality repairs have been completed. Windows, doors, floors are oak. There are two entrances - through the front entrance and from the yard, there is an intercom. Secure parking for 4 cars in the courtyard."

An analysis of many advertisements for the rental or sale of PSN allows us to conclude that, due to the specifics of hotels, such premises are most often positioned as suitable for hotels (or hostels) only if they have previously been used for these purposes.

Vulnerable position

The declared versatility of PSNs is the source of not only their advantages, but also their Achilles heel. In any article devoted to starting a hotel business, you can find a preamble about the importance of positioning, while at the design stage such issues as target audience, star rating, focus of the hotel, etc. must be resolved. This will form the basis not only of the location of the hotel, but will be reflected in features of its internal and external layout. Read, for example, the article “Hotel and Inn Design: Styles, Design and Photos of Modern Hotel Interiors.”

However, the law does not prohibit the organization of hotels in open-use premises. It seems that the least expensive projects will be those that have previously been used for hotels and, accordingly, meet many specific industry requirements.

It should also be borne in mind that in accordance with the Decree of the Government of the Russian Federation of February 16, 2021 N 158 “On approval of the Regulations on the classification of hotels,” the classification of hotels is now mandatory. This means that it must also meet all the stated requirements for “stardom,” including the layout and technical equipment of the premises. For PSNs rented out as hotels, this is especially true.

There is good news: mandatory classification, and, consequently, fines for its absence, is not introduced immediately, but gradually. In accordance with the law of February 5, 2021 No. 16-FZ “On Amendments to the Federal Law “On the Fundamentals of Tourism Activities in the Russian Federation” and the Code of the Russian Federation on Administrative Offences...” the fine for lack of a certificate is provided for:

from July 1, 2021 for hotels with more than 50 rooms;
from January 1, 2021 for hotels with more than 15 rooms;
from January 1, 2021 – for all other hotels.

Premises for free use - What is it? Description and functions

articles

In this article we will examine in detail the features of free-use premises and the extent to which they can be used as hotels.

What does a free-use premises mean?

So, PSN are premises initially designed for various purposes, without any specialization. The purpose of this versatility is to expand the possibilities of subsequent use of the room.

The fact is that if a specific intended purpose is indicated in the design documentation, then it will have to be built in accordance with the requirements for the declared type of premises, in compliance with the relevant fire, sanitary and other standards.

Supporters of PSN believe that the main advantage of this type of real estate is its versatility. For this purpose, PSNs are made with open layouts - relatively speaking, for any future request.

However, let us ask ourselves the question: are PSN really so universal if each specific activity requires compliance with its own norms and rules? In other words, redevelopment and major re-equipment will most likely be inevitable, especially when it comes to transferring the premises to a hotel.

This will require design documentation and project approval from a number of authorities:

Architectural and planning management;
Rospotrebnadzor;
Fire supervision;
Moscow Heritage Committee, etc.

Legal aspect

Currently, the legislation lacks not only a definition of Free Purpose Premises, but also the concept of intended or functional purpose.

purpose of the building (non-residential, residential, apartment building, residential building), if the property is a building;
purpose of the premises (residential, non-residential), if the property is a premises;

And then the extract from the Unified State Register already reflects the types of permitted use of a particular premises.

By purpose:

shopping: shops, supermarkets, hypermarkets, shopping centers, pavilions, pharmacies, car dealerships, etc.;
warehouse: warehouses, warehouses, etc.;
“catering”: restaurants, cafes, bars, etc.
;
service industries: consumer service points, beauty salons, exchange offices, hairdressers, fitness centers, Internet cafes, etc.
;
hotel and recreational purposes: hotels, sanatoriums, holiday homes, boarding houses, etc.).

By functional purpose

(depending on the technical characteristics and design features that allow the room to be used as an independent object)

basic;
auxiliary;
serving;
communication;
technical.

Psn and hotels

Despite the fact that the real estate market offers quite a lot of PSN, including for hotels, let's see how the acquisition of such premises will be justified without a radical redevelopment.

But there are also such things as dividing the flow of different guests (guests and those who came to the event), guests and staff (separate entrance, elevators), arrangement “under one roof” of premises for various purposes: rooms, restaurant, fitness center, etc.

We wrote in detail about the features of hotel design, as well as the current norms and regulations in the “hotel” industry in the articles “Hotel plans: layout, drawings of standard projects” and “Nuances of hotel construction: approval of design documentation”

As a rule, PSN do not meet such requirements, and banks prefer to purchase premises specially built for these purposes.

PSN for mini-hotels and hostels

Until recently, mini-hotels and hostels still had a legislative “loophole” for accommodation in an apartment building. In particular, part 2. Art. 23 of the Law of March 30, 1999

No. 52-FZ “On the sanitary and epidemiological welfare of the population” states that “...providing non-residential premises to citizens for permanent or temporary residence is not allowed.” Consequently, the hoteliers concluded that at least a small accommodation facility could be placed in a residential area.

However, on October 1, 2021, the law “On Amendments to Article 17 of the Housing Code of the Russian Federation” comes into force, prohibiting the organization of hotels and the provision of hotel services in an apartment building.

Legal consequences of the new law (“either-or”):

Closure of a hotel or hostel located in a residential area;
Continuation of activity if the premises acquire non-residential status. This is possible if the apartment is located on the ground floor of an apartment building or above the first floor, but the premises located directly below the apartment being converted into non-residential premises are not residential.

It seems that against the backdrop of these legislative changes, attention to premises that initially have the status of non-residential (and these include premises for free use) will increase.

It is possible that PSNs on the ground floor of apartment buildings or business centers will be in demand for hotels.

Let's look, for example, at what the real estate market (including) now offers for hotels.

“Free appointment, Moscow, Southern Administrative District, Nagatino-Sadovniki district, Sky Fort residential complex; from 150 to 542 m², from 300,000 to 1,084,000 ₽/month. The premises are located on the first and second floors with a separate entrance from the entrance street. There are fire safety installations, high-power hoods, a hall layout, and panoramic glazing. Ideal for a cafe/restaurant, hookah bar, fitness, bank, also possible for a store, beauty salon, pastry shop, medical center, pharmacy, flowers, etc.”

“Vacant appointment (B+), 377 m² in business, Moscow, Central Administrative District, Basmanny district, st. Solyanka, 1/2С1, 377 m², 1,439,009 ₽/month. The room is corner, located on the courtyard side of the house and is clearly visible from 2 streets, Zabelina and Solyanka. The area is 377 m2 on three levels. The area of the first floor is 141 m2, the mezzanine of the first floor is 84 m2 and the basement is 152 m2. The ceiling height in the basement is 5 meters. Up to 200 kW of electrical power is allocated to the room; there is space for installing ventilation with output to the roof of the building. The close proximity of the Kitay-Gorod metro station and Zaryadye Park ensures high, intense pedestrian traffic and future restaurant customers...”

The detailed description in this advertisement is also not intended for the hotel.

Rent and sale: some nuances

Rental and sales rates for PSN will depend on many factors:

Purpose of the premises: if the premises can be used as a retail space, then it will cost more.
Location. For example, in Moscow, the cost of premises is highest in the center and western regions.
Room area
Its isolation (stand-alone building or not). For example, in Moscow there are many detached buildings with PSN status in relatively new areas (Mitino, Zhulebino, Solntsevo)

Let's see, for example, what free-use premises are now offered in Moscow for hotels or hostels. Now, as an example, let’s take free-standing buildings.

1. RENT: “Vacant purpose, 632 m², Moscow, Central Administrative District, Basmanny district, Arkhangelsky lane, 11/16С3, 948,000 ₽/month. Purpose: office, hostel, medical center, representative office, gallery, free appointment. We present to your attention a detached building in the very center of Moscow, a 5-minute walk from the Chistye Prudy metro station. 3 floors (first, second and attic floor). Office-corridor layout. Working condition. A major renovation was carried out in 2015. All central communications are connected to the building. Bathrooms and showers on all floors. Parking for 3-4 cars. Previously used as a hostel. Free passage and entry into the territory of the building, any operating mode. Advertising opportunities. There is always good traffic of clients, tourists, foreigners, wealthy residents of the area, and many others.”
2. SALE: “Vacant premises 553 m2, Moscow, Turgenevskaya metro station, Myasnitskaya street, 15. Rate: 433,996 ₽/m2, Cost 240,000,000 ₽. Floor 3 of 6. Office space, apartments, mini-hotel, hostel with a total area of 553 sq.m. is offered. The former apartment building of the merchant I. Kuznetsov, known as the “House with the Lion”, the historical facade is made in the neoclassical style, stylized as antiquity. Year of construction 1908-1910, a major overhaul was carried out with the replacement of communications and ceilings. A living room, an office layout, three bathrooms, a sauna, a spacious kitchen-dining room. Ceiling height 4.3m. Windows on 3 sides. Split air conditioning system. High-quality repairs have been completed. Windows, doors, floors are oak. There are two entrances - through the front entrance and from the yard, there is an intercom. Secure parking for 4 cars in the courtyard."

Vulnerable position

The declared versatility of PSNs is the source of not only their advantages, but also their Achilles heel.

In any article devoted to starting a hotel business, you can find a preamble about the importance of positioning, while at the design stage such issues as target audience, star rating, focus of the hotel, etc. must be resolved.

This will form the basis not only of the location of the hotel, but will be reflected in the features of its internal and external layout. Read, for example, the article “Hotel and Inn Design: Styles, Design and Photos of Modern Hotel Interiors.”

This means that it must also meet all the stated requirements for “stardom,” including the layout and technical equipment of the premises. For PSNs rented out as hotels, this is especially true.

There is good news: mandatory classification, and, consequently, fines for its absence, is not introduced immediately, but gradually.

In accordance with the law of February 5, 2021 No. 16-FZ “On Amendments to the Federal Law “On the Fundamentals of Tourism Activities in the Russian Federation” and the Code of the Russian Federation on Administrative Offences...” the fine for lack of a certificate is provided for:

from July 1, 2021 for hotels with more than 50 rooms;
from January 1, 2021 for hotels with more than 15 rooms;
from January 1, 2021 – for all other hotels.

Source: https://openhospitality.org/blog/proekty/pomeshchenie-svobodnogo-naznacheniya-chto-eto-takoe-opisanie-i-funktsii/