What is a High Street Rental Auction?
As part of the Levelling Up and Regeneration Bill, the Government is proposing to introduce a system known as “High Street Rental Auctions”. This would give local authorities the power to insist that landlords rent out commercial properties that have been vacant for more than 12 months in a 24-month period. The consultation document has been published by the Department for Levelling Up, Housing & Communities.
When would a High Street Rental Auction be used?
Under the Bill, the local authority will be responsible for designating their high streets or town centres where a High Street Rental Auction could be used. The local authority must be satisfied that: the street or area is important to the local economy; has been unoccupied for 12 months within a 24-month period; that the occupation of the property would be suitable for high street use and that it would be beneficial to the local economy, society, or environment.
Will landlords be notified?
The local authority will issue an initial notice to the landlord of the property. The landlord will have eight weeks to find a tenant. If the landlord successfully finds a tenant, the landlord may only enter into a letting agreement if they have the consent of the local authority. Consent must be given if the term of the letting is more than one year and is likely to lead to high street use. If the landlord does not find a tenant, the local authority can serve a final notice on the landlord. There is an appeals process available to the landlord, but if this is unsuccessful then the local authority will have 12 weeks to auction the premises and complete the contract for the tenancy.
What are the proposed terms?
The consultation proposes a standardised framework for the agreement for lease and the lease agreement and is seeking views on the standards and terms that should be included. There is a proposal for the Minimum Energy Efficiency Standards to be relaxed for these properties, given that vacant properties are often in a state of disrepair. Kylie Cooper’s article, Changes to the Minimum Energy Efficient Standard Regulations, explains the current regulations.
If a property is put to auction, the successful bidder would enter into an agreement for lease on completion of the auction. The rental figure for the property would be determined through the auction and a lease would be entered into for a term between one and five years. The lease would not have the protection of the Landlord and Tenant Act 1954.
Would the rental figure always be the most important factor?
No. Whilst the auctions we are familiar with favour the highest bidder, the High Street Rental Auction may take into consideration other factors, such as the use of the property and whether it would help diversify the high street when determining the winning bid. The consultation seeks views on the auction process and what should be used to determine the winning bid.
What are the cost implications?
Costs will need to be incurred as part of the High Street Rental Auctions process. It seems likely that the local authority will have to bear some costs upfront, including surveying the property, marketing, running the auction, preparing the auction pack, and a schedule of condition.
It is anticipated that each party will bear their own costs, for example:
- Landlord - costs associated with works that are required to bring the property up to the minimum standard and any costs involved in surveying or obtaining legal input on participating in the process.
- Bidders - surveying or legal input in carrying out due diligence.
- Successful Bidder - surveying or legal input in carrying out due diligence and then completing the legal agreements, and costs from fitting out the property for a particular high street use.
How can I have my say?
The consultation is being run by the Department for Levelling Up, Housing & Communities until 23 June 2023. You can express your views on the gov.uk website.
Whilst high street rental auctions could be a useful tool in attracting businesses and reinvigorating the high street, they are one component of a much-needed broader strategy. For the high street to thrive again, multiple approaches are essential. Andrew Jones’ article, How can we save the UK high street?, provides some additional ways we can all support the high street regeneration.