‘Fair Warning’ for the High Street

Since the bold mechanism to allow local authorities to auction privately owned, 'persistently' vacant High Street premises was introduced by the Levelling-up and Regeneration Act 2023 in October last year, the market has been curiously waiting to understand the detail.

The succinctly titled, 'Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations' ("the Regulations")' have now been published and will come into force on 2 December 2024. The Regulations build out the powers and process for the high street rental auction scheme ("HSRA"), working through steps and obligations for both the local authority and the landlord to ensure that a tenancy agreement for a targeted property can be safely and successfully exchanged by the end of the timetable of up to 24 weeks (subject to extension due to appeal). 

With one in seven high street shops currently closed, HSRAs could deliver a much-needed boost to the local economies of neglected high streets and town centres. The question remains, however: are we genuinely operating within a market of idle landlords, who require this intervention? If the Regulations only offer a solution for the minority and do not tackle the root cause of a greater economic issue around demand and affordability, both for consumers and occupiers, these detailed provisions may not be the 'breath of new life' the government envisages.

The government has committed to the funding of 'over £1million' to support local authorities in the auction process. However, with 317 local authorities in England, the proportionate financial allocation is limited. Demands and timing under the Regulations are high, both on local authorities and landlords (with risk of non-compliance likely), so whether there will be the appetite, resources and time to activate and enforce these powers remains to be seen.

Properties Affected

The Regulations apply to a 'qualifying high-street premises' situated on a 'designated high street' or in a 'designated town centre'.

A local authority has the power to so designate a street or area if it considers it to be important to the local economy due to a concentration of high-street uses of premises (this is a wide definition including: shops, offices, restaurants, bars, cafes, community use, services to visiting members of the public, entertainment, manufacturing/industrial processes which can be carried out alongside other high street uses).

A local authority may start the HSRA process if a property in a designated area meets the following two conditions:

1. Vacancy Condition: the property has been unoccupied for a whole year or was unoccupied on at least 366 days during the preceding two-years.
2. Local Benefit Condition: the local authority considers that the occupation of the property for a suitable high-street use would be beneficial to the local economy, society or environment.

And, finally, Planning

To facilitate the auction process, attract more bidders and remove costly and time-consuming planning procedures, the Regulations have amended the Town and Country Planning (General Permitted Development) (England) Order 2015. A new temporary permitted development right has been created (which will apply for the duration of the HSRA tenancy) permitting a change of use for a 'qualifying high-street premises' to a 'suitable high-street use (Class DB). This will not, however, override an exclusion of permitted development rights.

Going once, Going twice…

Landlords of vacant property situated in potential designated high streets and town centres need to start considering stock and the possibility of intervention permitted by the Regulations. This could be particularly relevant where landlords have redevelopment strategies in play.

The government has stated that the use of HSRAs will be at the discretion of the local authority. They explain that it is not intended to apply in cases where landlords are actively seeking to fill their premises and they recognise there can be good reasons for vacancy (such as redevelopment). Ultimately, however, the Regulations remove a property owner's fundamental right to control occupation of its own property and intervene in their entitlement to make commercial and strategic decisions on risk and value.

The real effects of the Regulations are yet to be seen: will local authorities find resource and time to change the face of high street letting as we know it, or will the Regulations work by driving an increased motivation in landlords to seek out occupiers in a bid to retain control? We watch with interest – the hammer is yet to fall.