The regulations are broadly as expected, but are a dramatic measure, nevertheless. They allow the local authority to identify persistently vacant premises and auction leases of those premises.
The new regulations came into force on 2 December 2024 (although, whether most local authorities are ready and have the resources to implement the regulations is a separate question, save that central Government funds are to be made available to help offset costs). Some early adopter local authorities have stepped up and have worked with the Government to create guidance based on their experience and that other local authorities can follow.
The guidance is clear that local authorities should be working proactively with co-operative landlords to encourage viable high streets. If that is not working, and if landlords do not engage or cannot secure a tenant, High Street Rental Auctions are a tool local authorities can use. Nervous landlords may perhaps relax a little when they understand the pre-conditions:
- first, the local authority must designate a relevant street or area (and they have to publish and consult on their proposal);
- second, only certain ‘high street use’ properties qualify, such as shops, restaurants or offices; others such as industrial, warehouse and residential premises are not caught by these measures;
- third, the property has to have been vacant for the previous year or on at least 366 days in the previous two years; and
- fourth, the local authority has to consider the property suitable for high street use that is beneficial to the local economy, society or environment.
Only if those pre-conditions are satisfied can the process begin – this starts by the local authority serving a prescribed ‘initial letting notice’ on the landlord, followed by a ‘final letting notice’ if the property has not been leased within eight weeks.
Unless the final letting notice has been successfully appealed the local authority may arrange for the auction to take place. Naturally the regulations set out a timetable of various steps and procedures for both local authority and landlord to follow ahead of the auction, and they also prescribe key details to be included in the tenancy to be granted following a successful auction (the process is estimated to take 22 to 24 weeks to compete).
It is important for landlords to be aware that a survey commissioned by the local authority can identify works necessary to bring the property to the ‘Minimum Standard’ ready to receive the tenant’s fit-out. The landlord must cover the cost of those works and use all reasonable endeavours to ensure the works are completed within three months of the date when the auction tenancy is completed.
The Government’s guidance makes it clear that not all properties are suitable for High Street Rental Auctions – large former department stores for instance will require more complex redevelopment plans; properties with significant problems such as structural defects or significant damp issues are unlikely to be suitable; and if it is unlikely there is a sufficient tenant base and demand for the premises the High Street Rental Auction process is probably not worth pursuing.
Some landlords may have struggled to have filled premises where lender conditions would otherwise limit a tenancy taking place at a market rent. High Street Rental Auctions may help here – a tenancy entered in to via a High Street Rental Auction is considered to have the deemed consent of lenders.
We will wait with interest to see the extent of take up of the new regulations and the number of auctions held. Our view is that the mere existence of the regulations may be sufficient to encourage positive engagement from otherwise reluctant landlords, hopefully motivating them to consider lettings outside of the norm and which will revitalise our high streets and benefit the local community.
Our dedicated team of specialist commercial landlord and tenant solicitors can assist you with a wide range of property matters – call 03333 231 580 or contact a member of our Commercial Real Estate team today.
