What is the latest on high street rental auctions?

In the wake of the Government’s 2023 consultation on its proposed policy for High Street Rental Auctions (HSRAs), it has been confirmed that “The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024 No. 1139” will be brought into force from 2^nd December 2024 as part of the recently elected Labour Government’s drive to revitalise and renew our high streets.

In a recent statement, Local Growth Minister Alex Norris has said that the Government is “giving local councils the tools to take back control. High Street Rental Auctions will put local communities first, re-energising town centres and driving local opportunities and growth.”

These regulations lay out new powers for local authorities to force landlords to let out their properties which have stood vacant for at least 365 days in the preceding 24 month period. If their premises is caught by this legislation, Local Councils will have the power to oblige Landlords to engage in a process to arrange for a rental auction to take place for their vacant property, if the property is a relevant premise in a designated street or town centre.

Will my premises be affected by high street rental auctions?

This legislation will affect premises which are for “high-street use” and which are deemed to be “qualifying high-street premises”. The relevant definitions are laid out in s.192 of The Levelling-Up And Regeneration Act 2023.

A premises which is for “high-street use” is any premise whose use is, or was when last occupied:

• a shop or office;
• for the provision of services to persons who include visiting members of the public;
• a restaurant, bar, public house, café or other establishment selling food or drink for immediate consumption;
• public entertainment or recreation;
• use as a communal hall or meeting-place; or
• use for manufacturing or other industrial processes of a sort that can (in each case) reasonably be carried on in proximity to, and compatibly with, the preceding uses.

A premises will form a “qualifying high-street premises” if:

• they are situated on a designated high street or in a designated town centre, and
• the local authority considers them to be suitable for a high-street use.

Premises will not be a “qualifying high-street premises” if they are, or when last used were, used wholly or mainly as a warehouse.

Who will bear the costs of high street rental auctions?

During the consultation in 2023, there was disagreement between landlords and local authorities on who would bear the majority of costs of operating a HSRA. In the new regulations, the costs have been split, with the majority of costs subsequently placed on the tenant as tenants can factor costs into their bids. In order to further address concerns that HSRAs are too burdensome, local authorities will be permitted to outsource all or part, of the process.

Further, during the consultation in 2023, many responses (predominantly from Landlords) suggested that any premises subject to HSRAs be exempt from the Minimum Energy Efficient Standards (MEES) in an effort to keep costs down. However, due to concerns around avoidance, and the perceived risk of some Landlords waiting for their property to become subject to HSRAs before letting it out so that they do not have to comply with MEES, the Government has decided that premises subject to HSRAs will not be exempt from MEES requirements.

This means that Landlords may have to bear costs in relation to bringing their property up to the acceptable Energy Performance Certificate (EPC) standard of level E (and likely the proposed increase of these standards to levels C and B over the coming years.)

Will this change make an impact on our high-streets?

Whilst on the face of it, these look like promising changes, the Government is not undertaking enough of a  major overhaul of the current Business Rates scheme (other than as announced in the Chancellor’s recent Autumn Budget), which many have commented for a long time are the true root cause of vacancies on our high streets. For more details of the Chancellor’s announcement on Business Rate changes and reliefs in her Autumn Statement, please read our previous article on this here It is the view of many sector experts that serious rejuvenation is unlikely to occur until this core issue has been dealt with.

It remains to be seen what effect these new powers granted to councils will have. On 21 November, Minister Norris will speak at an HSRA Showcase event where he will explain the powers in greater detail and introduce Early Adopters of the scheme.

If you are a landlord or a tenant of a relevant property, and have any questions or queries in relation to this new regulation, or you are looking for advice on how to comply with any new obligations you may be under, please get in touch with either Alisa Sweeney or Oliver Butler.

You can read our previous article on this topic here and here.