Business Rates

Landlords forced to let vacant high street properties through council-led rental auctions

The Levelling Up & Regeneration Bill was published on 11 May and fleshes out the contents set out in the previous White Paper. I could spend hours on this, but one section particularly stands out as causing major disruption. Part 8 Letting by Local Authorities of Vacant High-Street Premises aims to revitalise our high streets by forcing landlords to let properties at low rents.

Local authorities can designate what they consider to be a High Street based on some pretty broad characteristics. Properties that fall within a ‘high street use’ includes pretty much anything that the LA thinks suitable. There is a broad ‘local benefit’ condition – basically, if it would be beneficial to the local economy, society or environment then the condition is met.

If a vacant property has been empty for more than a year and more than 366 days in the previous two years, then it will be subject to the proposed legislation. This is a clear attempt to avoid empty rates mitigation or other form of intermittent occupation excluding the property.

This is where it starts getting really interesting. If the empty period and local benefit conditions are met then the council can serve a notice. Whilst this notice is in force, the landlord cannot let the property without the express consent of the LA unless it’s for more than a year, starts within eight weeks and involves the regular presence of people. Again, this is an attempt to avoid subversion.

The whole notice, counter-notice and appeals mechanism is convoluted with limited opportunities to intervene or derail once it’s started. The clear aim is to prevent the landlord producing a ‘stooge’ tenant to avoid the letting via the council-triggered process.

So if the LA serves valid notices that the landlord can’t refute then how is the rent to be set? The LA will have powers to arrange a rental auction on any ‘qualifying high-street premises’. Remember, this could be any type of property within an area deemed to be a high street, including offices as well as the obvious shops. The LA will need to be satisfied that the specified user is appropriate in advance of the auction and that they can tie down the successful bidder at the end. The exact operation will be down to the LA and whilst they must have regard to representations from the landlord, it looks like the LA will have the final say. The term granted must be no less than one year or greater than five years.

The powers for creating the rental contract will also sit with the LA, albeit acting as if it was the landlord, as well as providing for works that must be undertaken by the landlord (at their cost), before the contract starts, plus rights of remedy if the landlord fails to act!

There is a fine line between genius and insanity and the Bill produces a mechanism for increasing occupancy on the high street. But at what cost? There is no mention of service charges, the impact on investment values or the turmoil this will cause in determining true rental values. The LAs will be left to their own devices to implement a process around the notice mechanisms. Recent schemes including Expanded Retail Discount and Covid Additional Relief Fund have had wildly different interpretations and huge variations in effectiveness. There is real potential for more of the same with ensuing chaos.

At this stage, it’s just a Bill and there will be changes before it reaches its final incarnation and legislation. It is however clear that the government is prepared to take draconian action to try and revitalise the high street. Will it work? It just might, but to say that this will be unpopular with property owners is perhaps the understatement of the decade.

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