Overview of High Street Rental Auctions
We are all aware of the battering that traditional retail and some elements of hospitality trade on our high streets have suffered as a result of online trends, consumer habits and the aftermath of the pandemic in recent years, with one in seven high street shops currently closed. The Government has plans to help revitalise town centres and high streets by implementing High Street Rental Auctions (“HSRA”) as a measure for local regeneration. Starting in December 2024, local authorities can auction leases for high street properties vacant for over 12 months within a 24-month period, a power introduced under the Levelling-up and Regeneration Act 2023. Non-statutory guidance has been published to outline the process and provide necessary documents for local authorities, landlords, and other stakeholders.
High Street Rental Auctions Process
Local authorities in England can auction leases of vacant commercial premises without landlord consent, but must first attempt to let the property through engagement with landlords. The process applies to properties in designated high street or town centre areas, including shops, restaurants, and offices. The auction process begins with an initial letting notice, followed by a final letting notice if the premises remain unlet after 8 weeks. Landlords can appeal within 14 days of the final notice on specified grounds, such as intending to carry out substantial works. The auction process lasts 12 weeks after the final notice, with a 6-week marketing period for bid submissions. Landlords have 2 working days to select a successful bid, failing which the local authority may choose the highest annual rental value bid. The local authority can then enter into a lease agreement, binding the landlord.
Lease terms
The statutory framework includes a draft standard agreement for lease, with some flexibility for changes. Key lease terms include a deposit of the higher of £1,000 or three months’ rent, a term of one to five years, and no security of tenure. Rent is determined by the successful bid and paid monthly. Repair obligations are limited by a schedule of condition, and permitted use is as proposed by the successful bidder. Change of use is not allowed, and alienation is restricted, with assignment subject to landlord consent.
Challenges and considerations
The auction process imposes costs and deadlines on landlords, who must ensure premises meet minimum repair standards before lease grant. The effectiveness of HSRAs in improving high streets and local economies is uncertain, with concerns about local authorities’ resources (we are aware of the resourcing issues at local authorities, which will hinder the positive enactment of HSRAs) and the impact of this process on landlords and their property rights. There is skepticism about tenant demand and also concern over the potential for landlords to face significant repair costs and unfavorable lease terms.
Practical experience from Moore Barlow
At Moore Barlow, we have not yet seen the effects of these changes, nor have we seen the transformation of high streets on the ground. We await to see what effect HSRAs will have, if any, over time. For more information and to get further guidance please contact our Commercial property team.
