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Local authorities are being given new powers to enable them to auction off leases on empty commercial properties; these High Street Rental Auctions are being implemented as a new tool to try and help revive high streets in England. In addition to supporting retail, these powers are particularly aimed at encouraging leisure and hospitality businesses to occupy vacant premises, thereby enhancing the vibrancy and appeal of high streets.
The idea is that where vacancy rates are a problem, and there is little or no co-operation between landlords and the local authority, with landlords taking insufficient steps to rent their properties, the local authority will be able to auction off leases on premises which have been persistently vacant. This will enable local businesses, community groups, and particularly leisure and hospitality enterprises to make use of empty spaces and contribute to a thriving local economy.
The framework for this power was introduced within the Levelling Up and Regeneration Act 2023, with further details being set out in the Local Authorities (Rental Auctions etc.) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024.
In deciding whether to use a High Street Rental Auction for a property, the local authority will need to consider if that premise meets certain requirements, whether alternative action would be more suitable, and the time and resources required of the local authority to undertake the process.
Certain conditions need to be met for a property to be subject to the High Street Rental Auction process:
Where the above conditions are met, the local authority can consider using a High Street Rental Auction, however, engagement between the landlord and the local authority and the consideration of other options should be considered in the first instance to help fill properties by other means.
Some properties may not be deemed suitable for the scheme, these include:
The local authority must satisfy certain steps before beginning the High Street Rental Auction process:
The complete High Street Rental Auction process is anticipated to take 22-24 weeks from beginning to end.
Prior to the Auction Period there is a notice period of 10-12 weeks where the local authority must serve a notice on the landlord (and any person with a superior interest, or mortgagee) of the selected premises.
Options for the landlord during the notice period:
If the landlord enters a lease and the local authority is satisfied that the required conditions have been met, and the premises is now back in high street use, the High Street Auction Process does not proceed any further as it is no longer required. The landlord must obtain the local authority’s consent to any lease set up during the notice periods, otherwise the lease will be void.
If the local authority does not withdraw the final notice following a counter-notice by the landlord, or there is no successful appeal against the final notice, the process then enters the Auction Period.
The local authority has 12 weeks during the Auction Period to auction the lease on the vacant property and to complete the agreement for lease.
During the first 4 weeks, the landlord will be required to provide information on the premises to the local authority and will have the opportunity to make representations on the proposed terms of the lease and agreement for lease. This will result in the creation of an auction pack, which will contain the agreement for lease, lease itself and other documents.
If the landlord fails to respond to requests for information from the local authority without a reasonable excuse or gives false information in response to a request, this is a criminal offence and can incur a fine. The local authority can proceed with the process without the requested information, and there is a risk the landlord will end up with lower rental bids for the premises due to the lack of information provided.
Over the following 5 to 9 weeks, there is a marketing period where bids are registered with the local authority by interested parties.
During weeks 10 to 12 of the auction process, bids are served on the landlord by the local authority and a successful bid is chosen. The landlord must serve notice on the local authority regarding the chosen bidder before the end of 2 working days after the day the landlord receives the late bids, or a notice from the local authority that no late bids have been received.
Where the landlord does not choose a bidder, the local authority will choose instead, unless it is decided that no bid should be accepted.
The auction process is concluded when the agreement for lease is exchanged between the landlord and the successful bidder.
The successful bidder enters an agreement for lease with the landlord, which sets out any works required by the landlord before the lease commences. The bidder also enters the lease itself with the landlord, which sets out the obligations on both the parties for the duration of the lease.
The landlord carries out the works required on the premises, the successful bidder’s lease then commences, and the new tenant carries out any fit out works needed as part of their lease.
Where a sufficient local tenant base does not exist or there are issues with a vacant property that may be affecting the immediate surrounding area, the local authority may consider using powers other than High Street Rental Auctions, such requiring the land or a building to be cleaned up, or they may consider the compulsory purchase of a premise in order to bring it back into use.
Co-operation with landlords is desirable in the first instance before schemes such as a High Street Rental Auctions are considered, as there may be alternative options and advice that the local authority can provide to help a landlord get their vacant premises back into use.
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