Now that at least one local authority begun to pilot compulsory high street rental auctions under radical reforms, commercial landlords need to understand the circumstances in which their properties could be within scope.
High street rental auctions (HSRAs) hand local authorities powers intended to transform stagnating high streets across England under Part 10 of the Levelling-up and Regeneration Act 2023. The details are set out in further regulations*; and non-statutory guidance has also been published.
Early this year, an HSRA pilot began in Brixton and further pilots in the north of England are almost ‘ready to go’.
The reforms came into force on 2 December 2024 and were targeted, in part, at “disengaged landlords” sitting on empty properties. But the reality is that the high vacancy rates in town centres - still above pre-pandemic levels – more often reflect high rent and services charges.
Compulsory rental auctions
HSRAs allow councils to intervene in the case of empty or unoccupied commercial buildings and require compulsory auction in ‘designated’ high streets and town centres. A high street or town centre may be ‘designated’ as such after the council has undertaken a community engagement period for a minimum of 28 days.
A register of vacant properties will also list empty properties, ranging from shops, restaurants, cafes to entertainment venues, and even offices. When a vacant property is within scope, the local authority will be expected to engage with landlords to encourage cooperation between the parties. It’s reassuring that the aim is not to ‘take over’ but rather, ‘work with’ landlords.
When can the local authority intervene?
Two conditions must first be satisfied:
- The property must be ‘persistently vacant’, ie empty for at least a year; or at least 366 days (non-continuously) over the previous 2 years and
- There must be a local benefit condition – i.e the council’s intended letting must benefit the local economy, society or environment
Even if the owner is marketing the property, the council can intervene and serve an initial letting notice. This will give 10 weeks to let or agree to let, or give occupation of the premises, with the consent of the local authority. Consent can only be refused if the intended letting is not for high street use and is for less than a year.
If the landlord cannot find a tenant, the council can serve a final notice two weeks before the initial notice expiries, giving a further 14 weeks to find a tenant (with its consent).
Unless an occupier is found, a compulsory 12-week auction period may then begin. A successful bidder at auction will be expected to sign two agreements with the landlord:
- A tenancy contract governing works required before the tenancy can begin
- The tenancy agreement of one to five years on standard prescribed terms
What does this mean for the owner?
There is an appeal route for landlords; and it will be important to take specialist legal advice. A notice appealing a final letting notice must be given to the council within 14 days. A landlord may have genuine reasons to resist a notice and specific statutory grounds are set out, eg proposed demolition, or construction work which will not be possible with a tenant in occupation.
High street regeneration is long-overdue, but commercial landlord’s interests must be properly protected. Disputes could arise in relation to, for example:
- The conditions required for a council intervention
- A council argues that the landlord is not taking reasonable steps to find a tenant
- Refusal of consent to a letting
- Required works before a tenancy commences
- Disagreement as to whether circumstances amount to a statutory ground to appeal a notice
How we can help
If you have any concerns about how the new powers may impact you and your property, contact Harjie Bindra at harjie.bindra@mfgsolicitors.com or call 01527 831691.
*Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024