The Levelling-Up and Regeneration Act 2023 ("LURA") received Royal Assent on 26 October 2023. The LURA promotes regeneration by providing measures to help re-vitalise our empty high streets. Part 10 of LURA proposes sweeping changes to allow local authorities to facilitate the lettings of vacant high street properties.
Part 10 is not yet in force and detailed regulations are to be published before it can be implemented. However, the consultation provided sufficient detail to enable local authorities to consider this a useful tool to help revitalise local high streets.
The proposals to grant local authorities powers to force landlords to potentially contract with less favourable tenants (in the opinion of landlords) may seem draconian to landlords. However, the letting process will allow landlords to have input into the decisions as to the details of the lease and who the tenant will be. The local authorities must make reasonable efforts to contact a landlord to discuss the property before beginning the auction letting process.
What are high street rental auctions ("HSRAs")?
Local authorities will have the power to oblige landlords to rent out persistently vacant commercial properties to new tenants. The rental rights of a "qualifying" commercial high street property will be auctioned. Successful bidders will enter into an agreement for lease with the landlord upon completion of the auction. A lease with a term of up to five years will be granted following completion of any pre-tenancy works.
Such powers will be implemented at the discretion of local authorities and will not apply to properties whose landlords are actively seeking to fill their premises.
What properties are "qualifying"?
Rental auctions will apply to properties:
- in an area designated by the local authority as being in an area where high street rental auctions could be used;
- in an area significant to the local economy because of a concentration of premises undertaking usual high street use in that area;
- unoccupied for 12 the last months or unoccupied for at least 366 days in the last 24-month period;
- suitable for a use routinely found on a high street; and
- beneficial to the local economy, society, or environment.
Properties will not qualify if they are in remote or un-concentrated streets, in areas where other premises undertaking a typical high-street use are not present or properties used for heavy industrial use, warehouses, and residential property.
How is the successful bidder determined?
LURA provides the skeleton for the HSRA process but future regulations will confirm the details. It was proposed in the initial government consultation that a 'sealed bid' auction process might work best for HSRA. The successful bidder will be chosen by the landlord. Interestingly, it will not necessarily be the highest rental bidder who is successful and other factors may be more valuable allowing a lower bidder to succeed. Where a landlord does not engage with the process, the local authority will step into the landlord’s role, but they must choose the highest rental bidder.
It is unclear at this stage how the upfront costs initially incurred by local authorities in the implementing the auction process will be funded. It remains to be seen how much appetite authorities will have in actually exercising their powers when, Part 10 does actually come into force.
It is hoped that local authorities can work with landlords in the rental auction process. LURA aims to incentivise landlord's to proactively fill voids in order to reinvigorate the high street, enhance the local economy and reduce anti-social behaviour as a result.