Starting 4th December 2024, a transformative piece of legislation comes into effect in England - the High Street Rental Auction provisions of the Levelling-Up and Regeneration Act 2023. Designed to revitalise town centres and high streets, this new law empowers local authorities to auction off vacant commercial properties for letting. By aiming to reduce long-term vacancies and boost local economies, the law represents a significant shift in how underutilised urban spaces are managed. Below, we break down the key provisions of this law and what it means for landlords, local authorities, and communities.
What are High Street Rental Auctions?
Local authorities will be able to hold high street rental auctions and auction off vacant town centre and high street properties to encourage economic and social revitalisation. The government hopes that such powers will “breathe new life back into high streets and transform long-term empty shops”
From 2nd December 2024, Part 10 of the Levelling-Up and Regeneration Act 20231 (the Act) will govern the new local authority powers with ‘high street use’ being the central notion behind the regime.
Which types of properties or premises qualify for High Street Rental Auctions?
High street usage extends beyond just retail. It encompasses a broad definition that is similar to, yet more expansive than, the commercial, business, and service use classified under Class E2. This includes, but is not limited to, various activities such as shops, offices, restaurants, cafés, bars, public entertainment venues, community halls, and manufacturing facilities3.
Only certain premises will be within the scope of the powers of the local authority and the properties must satisfy the following criteria:
- Designation – the property must be within an area designated by the local authority as a high street or town centre. A Local authority is able to designate a street in its area for the purpose of the Act if it considers that the street is important to the local economy4.
- Suitable – the property must be considered suitable for high street use by the local authority.
- Vacant – the property must have been unoccupied for the whole of last year or 366 days in the immediately preceding 2 years5.
- Beneficial – the property must be suitable for high street use and must benefit the local economy, society and environment6.
Warehouse premises are specifically excluded from the regime.
Steps in the High Street Rental Auction process
- Notice to the Landlord from the Local Authority
If the property meets the vacant and beneficial conditions as set out above the Local authority must serve an initial letting notice (ILN) lasting a period of 10 weeks on the landlord7 during which time the landlord is subject to restrictions on letting the property8, where they will be unable to let the property without the written consent of the local authority9.
The local authority must then serve a final letting notice (FLN) on the landlord to the property on any day which the period of 8 weeks has lapsed since the ILN was served and no tenancy or licence has been granted10. A FNL expires at the end of a 14 week period11, again during this period there are restrictions on letting and works carried out by the landlord.
Landlords have 14 days from the date of the FLN to submit a counter-notice indicating their intention to appeal, along with the specific grounds for appeal from the seven allowed under the Act. One of these grounds is that the landlord plans to undertake significant construction, demolition, or reconstruction work and cannot reasonably do so without retaining possession of the property. If the FLN is not retracted, the landlord has 28 days from the receipt of the counter-notice by the local authority to file the appeal in the County Court12.
- Rental auction takes place
A local authority may carry out a rental auction once the period in which a counter notice has lapsed and the FNL remains in force13. The regulations detail the auction process which takes around 11 weeks.
- Landlord responsibilities under the High Street Rental Auction legislation
Whilst it is the responsibility of the local authority to prepare the auction pack, the landlord will be required to provide:
- Complete and accurate answers to general pre-contract inquiries related to commercial property transactions, including any additional inquiries pertinent to the tenancy grant.
- Evidence of the landlord’s ownership of the premises.
- If available, up-to-date copies of the following certificates: electrical installation testing, energy performance, water safety, gas safety, fire safety, and any relevant mechanical, electrical, or life safety system test certificates. Additionally, the fire risk assessment and asbestos survey (along with an asbestos management plan, if applicable).
During the auction period, the landlord may also present their views on the proposed lease agreement and tenancy terms.
- Marketing of auction properties
The marketing phase occurs between the 5th and 10th weeks of the auction period, during which bids will be accepted. The same restrictions on landlords granting their own leases and licenses apply during the FLN. Furthermore, the landlord is prohibited from making any alterations to the premises during this time without consent from the local authority, although there are a few specific exceptions.
- Tenancy contract
The local authority may then enter into a tenancy contract14 by serving a notice on the landlord providing two working days to accept a successful bid, if the landlord then fails to serve notice of acceptance of a successful bid the local authority may then decide.
- Finalising the lease: landlord and Local Authority responsibilities
A tenancy contract entered into under S 20415 are deemed to have been entered into or granted with the express consent of any person who is:
- A superior lessor of the land
- Any mortgagee of that land16
Any tenancy contract entered into17 is excluded from the security of tenure provisions of the 1954 Act18
Challenges and future expectations of the High Street Rental Auctions legislation
While the High Street Rental Auctions legislation offers a promising framework for revitalising town centres, its success hinges on the capacity and resources of local authorities. Many councils are already operating under significant financial and staffing constraints, which may hinder their ability to fully implement the Act19. Ensuring sufficient funding, training, and administrative support will be crucial to realising the intended economic, social, and environmental benefits. Additionally, the long-term impact will depend on how effectively local authorities balance landlords' rights with the need for community revitalisation, as well as how quickly and transparently the auction processes can be conducted.
Expert property legal advice
If you are a commercial property owner and / or landlord, with vacant premises and concerned about the new legislation, please contact the Property Law team at Ralli Solicitors LLP who are here to help. Contact our Manchester office on 0161 832 6131 or our London team on 0207 535 0750, or you can email enquires@ralli.co.uk, and one of our team will respond.
Footnotes references:
1 As supplemented by the Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024
2 The Town and Country Planning (Use Classes) Order 1987 as amended
3 Levelling-Up and Regeneration Act 2023, S 192
4 ibid S 191
5 ibid S 193
6 ibid S 194
7 ibid S 195
8 ibid S 196
9 ibid S 197
10 ibid S 198
11 ibid S 198 (3)
12 ibid S 201
13 ibid S 203, (1)
14 ibid S 204
15 Levelling-Up and Regeneration Act 2023
16 ibid S 208
17 ibid S 204
18 Landlord and Tenant Act 1954, S 24 – S 28
19 Levelling-Up and Regeneration Act 2023