Landlords with vacant High Street property beware… A ‘High Street Rental Auctions’ policy is in the pipeline
28th July, 2023
If you are a landlord with an empty high street property then watch out as the local authorities may have an eye on your property!
The Government has proposed a ‘High Street Rental Auction’ policy as part of the Levelling Up and Regeneration Bill, which will tackle the ongoing issue of vacant commercial properties on the high street. The initial consultation on the Bill has now closed but the Government invited input on its proposed high street lease arrangements and rental auctions.
The proposal is to enable local authorities to arrange an auction to sell off, by way of lease, private commercial high street property that has been vacant for longer than 12 months in a 24 month period.
The policy will provide new controls for local authorities to require landlords to rent out persistently vacant commercial properties. Local authorities are expected to make reasonable efforts to contact the landlord to discuss the property before beginning the auction process. However, if landlords are unwilling to cooperate, this may not be possible.
Under the proposals, landlords will be granted an eight-week grace period to find a tenant following notification that a local authority is intending to undertake an auction for their property. If the landlord is unable to let the property within this period, the local authority can arrange a rental auction. The use of auctions will be at the discretion of the local authority and is not intended to apply to properties whose landlords are actively seeking to fill their premises – rather where vacancy rates are a significant issue and landlord cooperation is low.
Most commercial properties on high streets will be within the scope of the policy, although the Government has specifically excluded:
- Heavy industrial properties
- Warehouses; and
- Residential property
The Government also invited responses as to properties that are vacant for reasons such as redevelopment. Further detail is awaited whether this will be a specific exclusion and/or what landlords would need to demonstrate to prove this.
The proposal envisages that a successful bidder at auction will enter into an agreement for lease on completion of the auction. The rent is to be determined through the auction process. A lease can be granted for a term between one and five years and outside of the security of tenure provisions of the Landlord and Tenant Act 1954.
The Government’s intention is to reduce the amount of persistently vacant commercial properties and make town centre tenancies more affordable and accessible for tenants such as community groups and small businesses who may have previously found it difficult to agree terms with private landlords.
What sits behind the Levelling Up and Regeneration Bill is the Government’s desire to encourage growth and recovery to transform struggling areas and reinvigorate the high street. The intention is that the auction process will not only focus on receiving the highest bid but also on the most appropriate tenant for the property.
The Government is striving for sustainable tenants which are providing economic, social and environmental benefits for areas. However, this may bring uncertainty for landlords which include the likely covenant strength of potential tenants, the costs related to the auction process and the new powers of local authorities to control the use of their property.
It does remain to be seen if this really is workable in practice. With local authorities already stretched as to their budgets, resources and staff and this also depends on how property owners react to these new powers.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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