Changes afoot on the high street 

 New powers of Local Authorities to let empty high street properties on behalf of their owners.

With the enactment of the Levelling Up and Regeneration Act in October 2023, the Government hopes to be able to fulfil its stated intentions to “ensure new development is built more beautifully; produces more local infrastructure, like GP surgeries, schools and transport links; is shaped by local people’s democratic wishes; enhances the environment, and creates neighbourhoods where people want to live and work”.

There are interesting new powers introduced by the Act and one section in particular may raise eyebrows (and more!) with high street landlords in our towns and cities.  Part 10 of the Act gives local authorities the powers, under certain circumstances, to auction-off empty commercial properties for lease, and let the units to tenants with no reserve.

A local authority may designate a high street as a “designated high street” within a “designated town centre”.  On such a high street, Part 10 can apply to shops, offices, restaurant, pubs, cafes, places of entertainment, communal halls, or even manufacturing/industry which is compatible with these other uses (but not warehouses).

If such a property has remained empty and vacant for at least one year, or 366 days or more in the last two years then, if the local authority considers that the occupation of the premises for a suitable high-street use would be beneficial to the local economy, it can serve notice on the owner that they intend to put the premises up for high street rental auction.

There are provisions for an owner’s counter-notice and appeal, but ultimately (subject to various conditions within the Act), a local authority may let “qualifying high-street premises” on behalf of the landlord on terms set out in accordance with the regulations which will form part of the Act.  This will usually be for a short term between 1 and 5 years and be “contracted out” of the Landlord and Tenant 1954,  such that the tenant would not have automatic rights to renew the lease.

It is hoped that if a property is being actively marketed by a reputable agent, then, with local council resources being as they are, the authority is much more likely to work with the owner, rather than become involved as a proxy agent.  It does, however, remain to be seen what impact this may have upon the high street investment market, especially where leases have short terms left to run and uncertainty exists as to how long a unit may take to re-let.

The final regulations are understood to be not yet in place, but the control over private landlords which the Act may give is likely to come as a surprise to many.  It may have financial implications if, for example, the rent agreed at auction is below market level and insufficient to service a mortgage debt.

This note is a huge simplification of the Act and this briefing note should in no way be taken to offer legal advice, but the point is to alert high street property owners to the possibilities raised within the new Act. They can then take advice from lawyers and surveyors at the earliest opportunity as regards their empty premises and the steps, if any, which they can take to mitigate the risks of having control taken away by the local authority.