230: Vacant high street premises to be let by compulsory rental auctions

The Levelling Up and Regeneration Bill will give powers to local authorities to bring empty commercial premises back into use, as announced in last week’s Queen’s Speech.

How will it work?

The draft Bill sets out provisional details about the proposed rental auctions process for vacant commercial premises in town centres and high streets. The drafting suggests it will work as follows:

• the local authority designates a street or an area as important to the local economy because of the concentration of high street uses. The range of high street uses is wide and includes shops, offices, restaurants and light industrial;
• once designated, vacant premises will be subject to local authority intervention if it considers occupation would be beneficial to the local economy, society or environment. Vacant means unoccupied for at least a year;
• the local authority serves an initial letting notice on a landlord of vacant premises, which prevents letting whilst the notice is in force without the consent of the local authority, unless the landlord had a pre-existing contract with a tenant. The initial letting notice may not expire for up to ten weeks;
• during the initial letting period, the landlord can only let out the premises with the local authority’s consent. Consent must be given if the tenancy is for at least a year and the local authority is satisfied that it will lead to the premises being occupied by “the regular presence of people”;
• if the premises have not been let within a period of eight weeks, the local authority can serve a final letting notice on the landlord before the initial notice has expired. The final letting notice will expire at the end of a maximum fourteen week period if it has not been withdrawn or revoked on appeal;
• during the final letting notice period, the landlord cannot let the premises or carry out works without the local authority’s written consent and the local authority may offer the premises for letting to the highest bidder for a “suitable high-street” use;
• the new lease is to be for a term of between one and five years. It will automatically be excluded from the Landlord and Tenant Act 1954;
• the rent will be whatever the successful bidder offered, even if this is less than existing rents for comparable premises in the area;
• the local authority is given the power to enter into an agreement for lease with a tenant on behalf of the landlord, and to grant the lease itself if the landlord refuses to do so;
• if there is a mortgagee or superior landlord, their consent will not be needed; and
• the landlord can resist a letting notice if the premises are not suitable, if it intends to carry out a redevelopment, or it intends to occupy for its own business or as its residence.

Comment

There are a large number of questions still unanswered on how this process will actually work for landlords and tenants. For example, how do you decide which rent package is the best and what the term of the lease will be?

Unfortunately, the Bill ignores the fact that most landlords of high street premises want to rent out their vacant premises, but that business rates payable are prohibitively high and there may be a lack of demand from suitable tenants.