A new government bill could give local authorities the power to conduct rental auctions of vacant high street premises.
The Levelling-up and Regeneration Bill is looking to give greater power to local authorities to fill vacant high street premises and we look at what this means for landlords.
The local authority can designate streets of importance to the local economy. Once designated, premises that have been vacant for a year (or 366 days in the last two years), are at risk of receiving an initial notice from the local authority.
The local authority will serve an initial notice on the landlord which will last for up to 10 weeks. During this time, the landlord will require the local authority’s consent to lease out the premises.
If the premises have not been let within eight weeks of the initial notice, the local authority can serve a final letting notice which will last for up to 14 weeks. During this period the local authority can arrange for a lease of the premises to the bidder offering the highest rent at the auction. If the landlord wishes to lease out the premises themselves, they must obtain written consent from the local authority. Landlords will be able to appeal against the final notice on limited grounds, such as wishing to use the premises themselves, or carrying out works to redevelop them.
The auction process will be set out in future regulations.
The local authority will enter into an agreement to lease with the successful bidder for a period of one to five years at a rent that the bidder is prepared to pay. The lease will be excluded from security of tenure. The landlord will then be expected to complete the lease, failing which the local authority will be able to do so on their behalf.
The landlord can make representations during the negotiation process of the lease but will lose a degree of control over the final outcome.
The bill could well scare off investors from returning to the high street.
Forcing landlords to contract with tenants is likely to lead to strained relationships from the outset and may adversely impact on estate management.
It is unlikely that tenants will be able to receive the same level of information about the property than they would in the normal open market process, although this may be reflected in their bids.