For centuries, a large proportion of shop owners have lived above their own premises. No travel time to get to work, increased peace of mind where security is concerned and a lower all-in cost are just some of the benefits they enjoy. But what of the hundreds of thousands of people who live above retail establishments with which they have no commercial connection?

It wasn't so long ago that buyers would have struggled to get a mortgage for a flat above a commercial property. Lenders were often concerned about the potential difficulty of reselling what were generally unpopular properties.

However, the last decade has seen a massive increase in demand for town and city life, which means that finding a buyer is generally not that difficult. Obviously this has had a knock on effect on the lenders, making it much easier to find a mortgage.

Despite the increase in demand, prices for this type of property have not fully caught up. A flat above a property can often sell for around 10 percent less than a similar property elsewhere. This has attracted the attention of investor landlords, who normally find that the rent doesn't really differ that much, therefore increasing their yield and overall return on investment.

Of course, people live above shops and other establishments all over the country, but the majority of non-patron residents tend to be in urban areas. The reason? Urban living is fashionable again. Whether it's high rise tower blocks, townhouses or converted flats, being within easy reach of amenities and social venues is once again the trendy thing to do. Many of those who choose an urban lifestyle want it as urban as possible, and you can't get much more urban that life above a shop or restaurant.

It is difficult to assess why exactly urban living is enjoying something of a renaissance. Perhaps it is the countless regeneration projects that are taking place in towns and cities up and down the country, or maybe people just like the idea of being within walking distance of work, shops, restaurants and their social life.

The fact that the streets on which shops are located tend to be noisier and dirtier than quiet suburban residential areas does not seem to matter, and may even be part of the attraction.

The government has certainly played its part in driving up demand for this type of property, aside from pushing forward the urban regeneration projects that have increased the popularity of city living as a whole. The last decade has seen increased opportunities for the development of housing-over-shops schemes in town and city centres, supported and promoted by the Housing Corporation and the Department of the Environment.

In this year's budget, the Government introduced tax allowances for property owners converting redundant space over shops into flats for letting. The cost of renovating flats over shops in any area is now tax deductible at the outset, though the property must have been unoccupied or used for storage for a year before purchase. It must also have been built before 1980.

The treasury hopes that this measure alone will bring around 1300 new flats per year into use. This is merely touching the tip of the iceberg though, as in London there are said to be around 73,000 potentially vacant units over shops. Expect the increase in popularity of living over a commercial premises to continue for sometime.

The commercial property will belong to one of three classifications, which dictates the type of business that can trade on the premises. Clearly the type of use allowed can be a huge factor in deciding whether living above a shop is right for you. The retail classifications are:

A1 - general retail: newsagents, clothes shops, post offices, and funeral directors
A2 - professional financial services: banks, solicitors, estate agents
A3 - food and drink: bars, restaurants, takeaways and pubs It is absolutely vital that you get clarification of the classification of businesses that are permitted to trade on the premises and ask your solicitor to familiarise you with the laws surrounding change of use.

Businesses come and go, and it is important that you are aware that the use of the premises may be subject to change. You may be perfectly happy to be living above a sub-post office, but if this property was to fall into the hands of a funeral director, would you still be as keen to be living above it? Doubtful.

Changing the use from one classification to another will usually require planning permission. The request is most likely to succeed if the new business will serve a need currently not available within the area. You will have a chance to object, of course, usually on grounds noise, disturbance or smell.

There are a fair number of potential perks related to living above a commercial premises, but these obviously depend on the type of business above which you are living and your own lifestyle and preferences:

• One of the major perks is the fact that flats above commercial premises often get sold at a discount, often around 10 percent less than similar properties elsewhere.
• The flats themselves tend to be set over two floors, with their own separate entrance. This can often give the impression that the property offers more space for your money.
• Flats above commercial premises often benefit from the additional security of the establishment beneath them and are generally more secure and more closely monitored places than most residential housing. You are pretty unlikely to get burgled if you live above a business that uses close circuit TV.
• Convenience is a major benefit. Unless you are living above an isolated commercial premises which does not offer any sort of service you will ever use, the chances are you will be in a convenient location for all manner of things. Having a town centre on your doorstep is a major plus for many people. Depending on your lifestyle, this can also hold true if you live above a fast food establishment, with takeaway dinners being available without having to wait for delivery!
• Most commercial premises are pretty well heated. Living above this, you should benefit in that your winter gas or electricity bills will be slightly lower.

As with the positives, the downsides of living above a commercial premises are very much dependent on the type of business it is and the type of life you lead. Some things which can cause problems are:

• A change of use to a type of business that you will not feel comfortable living above.
• Restaurants, pubs, bars, amusement arcades can all be noisy places - if you like peace and quiet you might want to look elsewhere. If the flat is above a funeral parlour, this shouldn't be a problem.
• Accompanying the noise of restaurants and bars is often a wide range of smells, not all of which are savoury. The beautiful sight of an extractor fan may remove some of the nasty odours, but can be a noisy eyesore to compensate. Fast food joints are particularly bad offenders when it comes to litter - expect to step outside each morning to a rather unpleasant mixture of empty cans, uneaten food and discarded packaging. Bear in mind that this can also cause problems with seagulls, pigeons and even rats.
• Not knowing what business may be occupying the premises further on down the line, it is impossible to know what hours they will keep and how compatible this is with your lifestyle. It may be a 9.30 to 4.30 post office at the moment, but would you still be happy if it was a 24 hour minicab office, or a burger bar open till 3am?