Taking back control – high street rental auctions

The Levelling-up and Regeneration Act 2023 became law in October and includes many, arguably, outlandish provisions. One of the most surprising is in Part 10 of the Act which gives local authorities a mechanism to revitalise high streets by auctioning off leases of vacant premises. The provisions are not yet in force and will require secondary legislation to implement the detail. Of course, it isn't as straightforward as the headline implies. There is a process to be followed which will require the "high street" to be designated as such by the local authority and the vacant premises must meet two conditions before the local authority can proceed: 

• Vacancy condition – this is satisfied if on a given day the premises are vacant and have been vacant for the previous year or vacant for 366 days of the previous two years;
• Local benefit condition – this is satisfied if the local authority considers occupation of the premises for a suitable high-street use would be beneficial to the local economy, society or environment.

The process

Once these conditions are met, the local authority will have the power to take impassive property owners to task and, subject to the notice procedure, enter into agreements to grant leases to successful bidders at auction. The local authority must serve an initial notice and a final notice before the auction can take place and those must remain live (with no counter notice or appeal process pending) for the auction to go ahead. 

During the initial notice and final notice periods, with a few limited exceptions, no tenancy can be entered into by the property owner without the consent of the local authority. During the final notice period, subject to limited exceptions, no works can be carried out at the property without local authority consent. The counter notice and appeal provisions give the property owner some scope to challenge with seven grounds for appeal set out in the Act.

On the hammer going down, the local authority enters a "tenancy contract" with the successful bidder to negotiate the lease terms. If the property owner is uncooperative the local authority can grant the tenancy on their behalf.  Any consents needed from superior landlords or mortgagees will be deemed given and the lease will be outside the security of tenure provisions of the Landlord and Tenant Act 1954.

Will it work?

While the premise of Part 10 is admirable (who could disagree that high streets are in decline?) removing the autonomy of a property owner to deal with their premises as they see fit could be considered an extreme solution. Given well publicised local authority funding gaps and lack of resource, it remains to be seen whether the process will used as a threat for idle landlords rather than reality. The idea of landlords being forced to hand over the lease negotiation process to a local authority and to let their premises potentially contrary to their commercial objectives is of concern. 

Part 10 of the Act is just the tip of the iceberg, with secondary legislation poised to unveil the intricacies. However, the looming uncertainty, of how property owners will react to these changes and whether local authorities will even choose to utilise the high street rental auction process, cannot help but cast doubt on this bold initiative in its attempt to invigorate England's high streets. For now, the success remains speculative and only time will tell if it falls short of its ambitious goals.