High Street Rental Auctions – A New Plan to Fill Vacant Commercial Properties

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The Levelling Up and Regeneration Bill 2022 was published by the government last year. One aspect of the Bill which has generated significant controversy is the government’s plan to give local authorities power to let vacant high street commercial properties by way of auctions.

The government launched a public consultation regarding the plans for ‘High Street Rental Auctions’ on 31 March 2023 (open until 23 June 2023) to seek views on the government’s proposals.

What do the High Street Rental Auction proposals involve?

Under the proposals, local authorities would be able to run High Street Rental Auctions to find new tenants for qualifying properties.

The proposal is that a local authority will be able to serve notice on a landlord of a high street unit that has been vacant either for a year or for more than 366 days over a two year period. After being served such notice, the owner of the property will have an eight-week window in which to let out the property. If it does not do so, the local authority will then be free to serve a further notice allowing it to run an auction to find a tenant for the property (although the owner will have rights of appeal).

Prospective tenants will be required to submit details of the rent they are willing to pay and their proposed use of the property. The owner of the property will then be provided with copies of the bids, so that they can choose a preferred bidder. If they do not do so, the local authority will be able to do this instead.

What commercial properties are affected by the Bill?

In theory, any property in an area with a high concentration of ‘high street uses’ and that has been vacant for more than 12 of the previous 24 months could be subject to a High Street Rental Auction. However, this is subject to the occupation of the premises being suitable for a high street use that would be considered to be beneficial to the local economy.

The government has noted in the consultation that the High Street Rental Auction is not intended to be used for all vacant properties, particularly if a property is pending redevelopment or if a landlord is pro-actively seeking new occupants.

What does the public consultation aim to achieve?

The public consultation has been launched to seek views on various aspects of the policy and the way it is going to be implemented.

Several areas of policy are covered by the consultation, including:

  • The auction process
  • The requirements for standardised leases
  • The costs involved (including who should pay them)
  • Requirements of tenants (including rent deposits)
  • Actions tenants can take (including subletting)
  • Energy Performance Certificate requirements (specifically, a proposal to disapply the requirements to meet a required minimum Energy Performance Certificate rating)
  • Permitted development rights

Following the consultation these details will be further developed and laid out in secondary legislation.

What risks does the Bill pose for commercial landlords?

Based on the proposals set out in the Bill, there are several potential risks for commercial landlords. Once a High Street Rental Auction is implemented, a commercial landlord is likely to lose control over exactly who occupies a property and on what terms.  It is therefore essential that commercial landlords who are likely to be affected by the Bill respond to the consultation process so they can have their say on the potential impact that the terms will have on them.

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Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.