Parts of the UK have seen the vacancy rate of high-street properties climb. The North-West, whilst being one of the greatest improvers since the pandemic, has a vacancy rate of roughly 16%.
In order to address this, local authorities, as of 2 December 2024, were granted new powers under Part 10 of the Levelling-Up and Regeneration Act 2023 (“Act”). Specifically, the power to conduct rental auctions in order to let otherwise vacant high-street premises. This article will take you through some of the procedures and key features of this new power.
What is a “Qualifying High-Street Premises”?
In order to apply, the premises must be a “Qualifying High-Street Premises”.
The local authority must first be satisfied that the premises (1) have been unoccupied continuously for 12 months, or unoccupied (non-continuously) for at least 366 days within a 24-month period; and (2) the occupation of the premises for a “Suitable High-Street Use” would be beneficial to the local economy, society, or environment.
What is a “Suitable High-Street Use”?
The Act defines all of the following as suitable high-street uses:-
- shop or office;
- the provision of services to visiting members of the public;
- restaurant, bar, public house or café;
- public entertainment or recreation;
- communal hall or meeting place; and
- manufacturing or other industrial processes compatible with the preceding uses.
Note: premises used primarily for warehousing or storage are explicitly excluded.
What is the Procedure the Local Authority Will Use?
Once the local authority is satisfied that a premises qualifies and the Act applies, it will issue an initial notice to the landlord. This initial notice triggers an 8-week grace period, in which the landlord may let the property to a tenant with the local authority’s consent.
If the premises is not let, the local authority will serve a final notice. Once this has been served, the landlord is unable to grant a lease, licence or agreement of the relevant premises. After a further 14 days, if the landlord does not serve an appeal in the form of a counter-notice, the auction process can commence.
Who Deals with the Auction Pack and Costs?
The local authority will be responsible for preparing the auction pack and the fees associated with the marketing and auction. However, the landlord will be required to provide accurate replies to enquiries and provide documents such as EPCs and fire safety certificates.
The landlord may be responsible for any work that is needed to bring the premises up to a prescribed minimum standard.
Are there Prescribed Terms for the Contract and Lease?
The Act regulates the forms of contract and lease documentation (of particular note):-
- Term: 1 – 5 years.
- Deposit: the higher of £1,000.00 or three months’ rent.
- Rent payment dates: the first day of the month, paid in advance.
- Repair obligations: limited by a schedule of condition.
- Alterations: the installation of shop fittings is permitted without the landlord’s consent. Other alterations are permitted, subject to the landlord’s consent.
- Dealings: only assignments of whole with the landlord’s consent. AGAs required if requested by the landlord.
- Use: a suitable use, as proposed by the successful auction bidder. Change of use not permitted.
- Security of tenure: excluded.
Thoughts
Concerns will likely arise between the conflicting interests of maintaining tenanted high-streets, versus a landlord’s ability to freely deal with its premises.
It is currently early days, with pilot schemes being undertaken, and it is unknown as to the likely level of use of these powers by local authorities across the country. If you own a vacant high-street premises, or are looking to purchase high-street premises, you would be well advised to take prior legal advice in connection with this issue.
Please do contact our Commercial Property Team on 01524 846846.
