High-Street Rental Auctions – England’s local authorities gain powers to let vacant premises

Local authorities (LA) now have powers to let long-term vacant properties on England’s high streets.

The aim of these new powers, which came into force on 2nd December, is to “breathe new life back into high streets and transform long-term empty shops”. However, landlords should be aware that if a property enters the high street rental auction process, they may lose a significant degree of autonomy over who occupies the property, at what rental level and for what purpose. The process also places additional burdens on landlords to engage with LA, including the need to provide certain information to them within set timeframes. If the property is dilapidated, a landlord may also have to incur the cost of works to bring it up to a minimum standard of repair. Failure to engage in this process could lead to criminal sanctions.

Which properties are affected?

These new powers only apply to vacant properties on streets or in areas that have been designated by LA as being “high-streets”, or “town centres”.  

The vacancy condition is met where premises are vacant for a year, or for large periods of time within a 2 year period immediately before the auction process is triggered.

The “high street” and “town centre” criteria is set out in the Levelling up and Regeneration Act 2023, but crucially there needs to be a concentration of high street use, which includes for example, shops, offices and restaurants. LA are required to maintain a list of designated high streets/town centres.

What does the process look like?

To trigger the process, the LA will serve notices on the landlord. This effectively gives the landlord a “last-chance” to let the premises itself (although the LA’s consent is needed before a tenancy can be granted).

If the premises remain unlet when the notices expire, the LA may market the premises. The various steps are set out in the Regulations in some detail but it is worth highlighting that:

• the landlord is required to assist the LA by providing replies to pre-contract enquiries and title information (it will be a criminal offence for the landlord to fail to co-operate with this)
• bidders must specify a rental offer and a proposed use (which must be one of the “high street” uses specified in the marketing)
• the landlord may choose the winning bid, but if it does not select a bid, the LA will select the highest rental offer
• the legal documentation will be in a standard form (which in parts is more tenant-friendly than many commercial leases)
• the Regulations permit the grant of short term tenancies (1-5 years) which are excluded from the security of tenure provisions in the Landlord and Tenant Act 1954, i.e. the right to seek a renewal lease is excluded

Key points:

• the Regulations specify strict, short timescales for each step of the process. If the landlord fails to comply with certain steps by the deadline, it will commit a criminal offence, so it is crucial that landlords take action upon receipt of notices under these Regulations
• there is scope to challenge the designation of a high street or town centre and also to appeal notices served by LA. However, this requires landlords to be alert to the designation process and take action on notices served on it under these new powers
• the LA will survey the premises in the early stages of the process. If the premises do not meet the minimum standard prescribed by the Regulations, the landlord will be required to bring them up to standard at its own cost (work to be done after the tenancy contract is entered into but before completion of the tenancy)
• the Regulations may also affect certain third parties, as they provide that any superior landlord’s and mortgagee’s consents needed for the letting will automatically be deemed to have been given
• it remains to be seen whether these powers will be exercised in practice. Early indicators suggest that the Regulations are intended to encourage LAs and landlords to talk with a rental auction being a last resort. Stretched LA may also struggle to devote the human resource to the auction process and although the LA can recover some (but not all) of the costs from the ultimate tenant, there will be an initial outlay that will need to be funded