Any time you think they've outgrown the space. 12 inches away would equal full sunlight so I'd start at 16 inches and drop it down an inch every day to 12 to get them adjusted to the stronger light.
Not sure by what your saying Out grow the space. I start my seed in paper towels 24hrs until 1/16 root is showing, then put them in starter plugs kinda like rock wool but these are soft spoungy brown, then in a starter tray and they pop in 4 days, then when they have roots showing out of the bottom (6 to 8 days), I put them in 16 cups. I would like to put them under Metal Halide asap, but I am thinking to wait another 7 days just so they dont get hot or stressed.
when the plants are so big the light isn't covering all the leaves anymore, but you can change ANY time you want. I like to grow my seedlings outdoors if it's warm enough.