Blog: 23 September 2022 - Womble Bond Dickinson, Corporate Partner

High Street Rental Auctions – worth a bid?

One of the more eye-catching provisions in the Levelling Up Bill is the proposal to give local authorities the right to auction vacant properties on their high streets for letting.

The property industry has not exactly welcomed the proposal. The British Property Federation referred to rental auctions as a "political gimmick" and a recent article in EG described the idea as a "half-baked horror".

The industry's main objection is to the idea of imposing an unwanted letting on a landlord. There are valid concerns as exactly how a reluctant landlord can be forced to comply with an imposed letting arrangement and how the landlord and tenant relationship will play out once the local authority's role has ended.

The industry has also questioned how local authorities will be able to find occupiers when landlords will have no doubt already tried and failed to do so to offset their holding costs, including business rates.

So should local authorities just quietly ignore the legislation if it reaches the statute books?

In fact, assuming they can find funding (a perennial challenge with many of the proposed levelling up initiatives), local authorities may want to consider designating high street and town centre areas. They can then use the proposed rental auction procedure in a number of ways:

• Addressing rates mitigation schemes. All too often, premises are occupied in passive ways which confer no benefit on the high street as they only meet the criteria for rateable occupation, for instance storing goods at the premises. The Levelling Up Bill deliberately defines occupation as involving the regular presence of persons at the premises. This is likely to be no accident: the legislation intends to generate more active high streets. A targeted notice might force a landlord to be more active in securing a tenant.

• Using the designation of an area as a high street/town centre to encourage landlords to engage with the council about their proposals for vacant properties, knowing the council has these powers.

• Using the rights in the draft legislation to obtain useful information about vacant properties.

• Often, premises are left empty because the tenant has closed down. In the legislation, "landlord" includes tenants with at least a year to run on their lease. The property owner may have no influence over their occupation. The local authority can apply pressure to the retail tenant in a way that the landlord cannot.

The rental auction itself may well be unworkable unless undertaken with the co-operation of the landowner but the preliminary steps (designation, initial and final notices) in the Levelling Up Bill may help kick-start constructive conversations with landlords about the local authority's vision for the high street. 

Tim Burbidge

Partner, Womble Bond Dickinson