The concept of Compulsory High Street Rental Auctions was introduced as Government Policy in 2022.
The policy behind the idea (as set out in the Government’s 2023 consultation) is “Prolonged vacancy of shops and buildings is a blight on our high street” saying high vacancy rates negatively impact footfall, risking businesses shutting down, more jobs being lost, people moving away from high street and lower economic activity in the heart of communities”.
The legislation dealing with Compulsory High Street Rental Auctions is the Levelling-up and Regeneration Bill which received Royal Assent in October 2023.
The legislation is intended to apply to high streets or town centres which are deemed important to the local economy due to concentration of high street uses, where premises which have been vacant for a whole year or over a year during the previous two years and the local authority considers high street use would be beneficial to the local economy.
Sections of the Bill will become law on 31 March 2024. These sections bring in a power to make regulations in relation to the notice and counternotice procedure which will initiate the process, the form of contract and the terms of the tenancy.
The regulations themselves have still to be published and will contain the detail of the process. The commercial property industry is keen to see the detail in the regulations.
A consultation was conducted in 2023, but the results have yet to be published.
There has been a mixed response from the commercial property industry. The British Property Federation, for example, gave written evidence to the consultation saying shops are more likely to be empty due to high business rates, giving the example of properties being offered at nil rent which are still not let. It also pointed out that property owners often have financial duties to shareholders or investors to receive rental income. The BPF recommended a form of Enterprise Zone to be created in High Streets where regeneration is key, reducing rates and planning limitations in a similar way to Enterprise Zones which exist to assist industry.
The Compulsory High Street Rental Auction process, if and when it becomes law, is complex. It will be something else to be administered by local authorities who are already struggling to resource the functions they currently hold. The process also creates some controversial new principles, such as letting a property without the owner’s consent, negating the need for superior landlord’s consent or lenders consent. This could put a landlord in breach of borrowing obligations against its will. There has to be a possibility that lack of co-operation with this process from a landlord could well delay or frustrate the process, and the larger landlords might find their own avoidance techniques.
The process through Parliament is likely to be delayed as 2024 is almost certainly an election year. We do not know if legislation will be progressed by the new Government. Two years since the principle was first announced the commercial property industry is still unsure about when, if at all, this will become law. If it does become law will local authorities have the appetite and resource to apply it, and will landlords adopt new tactics to frustrate it?