Since the pandemic, the high street has been on a declining trend. In response, the Government has announced new powers – that came into effect 2 December – which aim to revitalise the high streets by giving councils new powers to tackle the scourge of empty shops.

High Street Rental Auctions (HRSAs) will enable businesses and community groups to rent neglected town-centre commercial properties.

HRSAs will empower local leaders to auction the leases of vacant properties, preventing landlords from leaving them unoccupied for more than 365 days within 24 months.

The local authority must also be convinced that occupying the property for a suitable high street use would benefit the local economy, society, or environment.

Once established, the rental auction can be carried out.

How will commercial property be auctioned?

A survey will be commissioned to create a condition report, outlining the necessary repairs to meet the minimum standards set by regulations. These repairs must be completed by the landlord at their own expense unless the property has substantial issues

The local authority prepares the auction pack, but the landlord must provide title proof, accurate responses to enquiries, and relevant documents like safety certificates and Energy Performance Certificates (EPCs).

Once marketed, the property receives bids which are forwarded to the landlord. The landlord is not required to accept the highest offer. If the landlord doesn’t select a bid, the local authority can step in and typically must choose the highest bid.

If the landlord refuses to grant the lease, the local authority can sign the lease agreement on their behalf. Lease terms include a duration of 1 to 5 years and exclusion from the Landlord and Tenant Act 1954’s security of tenure, meaning no automatic right to renew. A rent deposit of the higher of £1,000 – or three-months’ rent is also required.

How will the new commercial property rules impact landlords and business owners?

The Act and Regulations may be controversial for landlords as they limit their freedom to choose tenants, set rents, and manage properties.

However, with one in seven high street shops vacant nationwide, the government is incentivised to revitalise high streets and prevent long-term vacancies through this legislation.

The initiative’s success depends on potential tenants bidding on vacant properties. Long-term vacancies may be due to high business rates, redevelopment costs, and low footfall.

However, the new rules could motivate owners to lease their persistently vacant properties on their own terms, avoiding the new statutory auction process.

The new regulations are bringing significant changes to the high street landscape. It will be important for landlords to familiarise themselves with the new legislation so they can be prepared for how it may affect them.

There are also new opportunities for business owners or prospective business owners to take their market to a new high street.

Having the right legal guidance is crucial. Get in touch with one of our team.