Can High Street Rental Auctions Revitalise High Streets?

New legal powers have come into effect on 2 December 2024 allowing local authorities in England to hold high street rental auctions (HRSAs) to let persistently vacant town centre and high street properties without the consent of owners or their lenders. The aim is to breathe new life into neglected high streets and town centres.

HRAs may take place when the property is a “qualifying high street premises” in a designated high street or town centre which are suitable for “high street use”. High street use includes shops, offices, restaurants, cafes and bars and certain other uses. Premises used wholly or mainly as warehouses are excluded.

The property must have been unoccupied for the whole of the preceding year or 366 days in the immediately preceding two years. The local authority must also be satisfied that occupation of the property for a suitable high street use would be beneficial to the local economy, society, or environment.

Once this is established, a rental auction may be carried out, following detailed regulations that set out the timetable for the process. A survey will be instructed to produce a schedule of condition, detailing the works required to bring the property up to the minimum repair and condition standards prescribed by the regulations. These works must then be completed by the landlord at their own cost (unless the property has significant issues).

The auction pack is to be prepared by the local authority but the landlord is obliged to provide evidence of its title to the property, accurate replies to enquiries and other relevant information such as gas/electrical safety certificates, fire safety certificates and EPCs.

The property can then be marketed, and bids are passed to the landlord, who is not obliged to accept the highest rental bid. If the landlord fails to choose a bid, the local authority may (but is not obliged to) accept a bid. In this instance, the local authority is generally required to choose the highest bid.

If the landlord refuses to grant the lease, the local authority may enter into the agreement for lease and lease on behalf of the landlord. The terms of the lease are set out in the regulations. For example, the length of the lease must be between 1 and 5 years, the will be excluded from the security of tenure provisions of the Landlord and Tenant Act 1954 (so there will be no statutory right to renew the lease at the end of the term) and there will be a rent deposit of the higher of £1000 or a sum equivalent to 3 months’ rent.

The lease can be granted without the consent of the landowner, freehold owner or any mortgages. There is only an obligation for the local authority to serve copies of the relevant notices on them.

The government has committed over £1million of funding to support the auction process and through these HSRA’s believe they are “giving local councils the tools to take back control” of neglected and vacant high street properties. Whether local authorities have either the time or resources to employ these powers remains to be seen.

For more information, or legal advice surrounding HRSA’s, please contact our expert Commercial Property Team today.