Unoccupied High Street Property Auctions

The Government is currently running a 12-week consultation on high street rental auctions. The consultation started on 31 March 2023 and will end this month on 23rd June. The consultation is being run by the Department for Levelling Up, Housing and Communities. The Government introduced the idea of High Street Rental Auctions in its draft Levelling Up and Regeneration Bill on 11 May 2022.

Vacant properties on the high street are a driving force behind the Government’s new proposal. The Government wants to tackle the link between vacant properties and economic downturn. By reducing the number of vacant properties on high streets, the Government hopes to increase consumer footfall and reboost the economy. Government guidance states that high street rental Auctions will create “a new power for local authorities to require landlords to rent out persistently vacant commercial properties to new tenants, such as local businesses or community groups.”

The Proposed High Street Rental Auction Process:

Initial notice period – Local authorities can only service notice on landlords if  vacancy conditions are met (a property is unoccupied for 12 continuous months or 366 days in 2 years).

Grace period – 8 weeks will be allowed for landlords to enter a tenancy which their local authority finds satisfactory and consents to.

Final notice – If landlords fail to re-let within the grace period local authorities can serve final notices. Local authorities can start the auction process if no counter notice is served by the landlord after 14 days of final notice being served.

Counter notice period – During this period landlords can serve a counter-notice setting out different grounds of appeal. The deadline for counter notices is 14 days from service of final notice.

The local authority can serve a withdrawal notice within 14 days of counter notice. This stops the auction process. If no withdrawal notice is served then landlords can appeal.

Appeal Period:

Landlords can issue appeals within 28 days of counter notice.

Grounds for appeal:

•  Premises not considered suitable for high-street use identified

• Vacancy condition not satisfied

• Local benefit condition not satisfied

• Local authority should have consented to letting

• Development affecting premises

• Landlord intends for their own occupation

If the ground of appeal is successful, the auction process will stop.

In the absence of a successful appeal or counter notice/appeal, local authorities have 12 weeks to auction the property and complete the tenancy contract. Section 94 of the Government’s draft Bill stipulates that the local authority will act “under its own name, but with an indication that it is acting so as to bind the landlord rather than itself.”

Importantly, leases created under the auction process will not benefit from security of tenure provisions under the Landlord and Tenant Act 1954 . This means that tenants will not have the right to renew their lease once it expires under the same terms as the first lease originally created by the auction process.

How Workable is the Auction Process Likely to be?

The Government’s proposal of high street rental auctions is controversial because it will create an imbalance of power between landlords and local authorities. There are concerns that this new power will create anxiety for current landlords and deter future investors from buying into high street property.

Forced auctions also have the potential to strain and create tension in the tenant-landlord relationship. The importance of a good landlord and tenant relationship seems to be overlooked by the proposed plans. This is evidenced by suitability of tenant not being a ground of appeal for landlords.

There is still time to respond to the Government’s consultation on high street rental auctions.

For more information, please click the below:

 https://www.gov.uk/government/consultations/high-street-rental-auctions/high-street-rental-auctions

The contents of this post do not constitute legal advice and are provided for general information purposes only.