Michael Haringman, Partner
On 10 May 2022 in the Queen’s Speech, Prince Charles announced that a Bill will be introduced to Parliament to “drive local growth, empowering local leaders to regenerate their areas, and ensuring everyone can share in the United Kingdom’s success”.
A main element of the Levelling Up and Regeneration Bill (the “Bill”) will be to provide local authorities with new powers to instigate a bidding process for tenants to take leases of commercial properties in town centres and on high streets which have been vacant for more than one year. The aim of these powers is to encourage shops and restaurants to operate from empty premises and thus revitalise the high street.
However, the lack of procedural details provided thus far about these proposed “Compulsory Rental Auctions” has created questions about the practical and operational realities. Some questions that will need to be answered in the Bill include:
- how will the successful bidder at the auction be determined and can/will a reserve price be set for the Compulsory Rental Auctions (e.g. a minimum level of rent that must be paid)?
- what will be the duration of the rental agreements made between the successful bidder and the landlord?
- what happens if the successful bidder at a compulsory rental auction defaults on the payment of rent due under the agreement made via the auction (and would the local authority act as a guarantor)?
Other queries about how the Compulsory Rental Auctions might work include how vacancy will be determined by the local authorities and whether there will be circumstances where a property is exempt from the lease auction process. There are instances where a commercial property appears empty but the property might in fact not available to be let, for example if the property is scheduled to be refurbished/developed or if the property is independently under offer.
A government press release published on 7 May 2022 states that “the number of empty shopfronts has soared to 1 in 7 according to the British Retail Consortium, rising to 1 in 5 in the north east, with boarded up and derelict shops blighting high streets and sapping the life from once bustling town centres. New Compulsory Rental Auctions will ensure that landlords auction shops that have been vacant for over a year to prospective tenants, putting buildings to good use.”
The Compulsory Rental Auctions proposed under the Bill seeks to bring new business to the high streets. However, details of how the auctions will operate and the parameters of the auction are awaited and are indeed needed to provide certainty to the many property owners whose properties are currently unlet.
If you are a commercial landlord or tenant and require advice on property related issues, please contact Michael Haringman (mharingman@quastels.com), a Partner in our Commercial Real Estate team.
Please note – this article does not constitute legal advice.
