Lifting the shutters on our high streets!

Do you own commercial property? This may affect you.

The government has made a commitment to bring life back into the high streets as one in seven shops are shut. Councils now have powers to force shops to open under Part 10 of the Levelling-up & Regeneration Act 2023, which was brought into force on the 2 December 2024. The powers enable councils to run rental auctions for empty properties on their high streets. Regulations have been issued to set out an auction process which, after an initial notice period, lasts only 12 weeks from start to finish. However, the Government has said that councils should work with owners to get shops open both before and while using these powers.

What are the councils' new powers?

• Designate an area as a high street for the purposes of the Act
• Require further information about a property by serving notices on interested persons
• Gain entry to a property to carry out a survey
• Restrict an owner's ability to let the property by serving an initial notice
• Serve a final notice eight weeks after the initial notice to continue the letting restriction and also restrict works being carried out by the owner during the rental auction process
• Conduct a rental auction to provide successful bidders with suitable premises, with any works required to raise the standard of the premises to be carried out by the owner
• Enter into an agreement for lease and lease as if it is the owner if an owner fails to do so. Any consent required from a lender or superior landlord is deemed to be given
• Automatic permitted development rights to allow properties to change their use to a high street use for the duration of a tenancy granted following an auction.

What property is at risk?

Any non-residential property within the designated high street which is empty and has been for 366 days in the previous two years.

How could it affect you as an owner of an empty property?

• Failure to respond to the request for information or giving wrong information is a criminal offence.
• After a successful auction, you can be required to carry out works to raise the property to the minimum standard as defined in the regulations.
• Following receipt of an initial notice, you will need consent from the council before you can let the property yourself. Consent will only be given if your proposed letting is for a high street use that is due to commence within eight weeks of the initial notice. A high street use includes use as a shop, office, restaurant and also a communal hall or meeting place.
• You will need consent from the council to carry out works (unless they are urgent repairs) and also let the property once a final letting notice has been served. You have only limited rights under the Act to serve a counter-notice and require the council to withdraw the final letting notice.
• You can be required to provide proof of title, risks assessments and safety certificates for utilities on a week's notice under the auction timetable.
• You will have to choose a successful bidder within two working days of the auction's conclusion.
• You could end up with a tenant for up to five years with a lease in a form prescribed by the regulations for a use you do not want. The tenant will not have any security of tenure rights under the Landlord and Tenant Act 1954.

What are the key takeaways?

Will councils want to use these powers?

Commentators point to councils being stretched and wonder whether the powers will be used. The prescribed timescale for the auctions are extremely tight and in our opinion will require a dedicated team to run them. The financial cost is therefore unlikely to be fully covered by the funding available from the Government (£5,223 per auction) and any costs which the regulations permit to be re-charged to successful bidders.

Is there another way?

The Government is encouraging councils to talk to owners. It may be that designating an area as a high street will serve as a starting point for conversations between councils and owners around empty properties and how they can work together to support their opening. Our advice is to engage with councils at an early stage to get the best outcome for your investment.

Further information

Guidance issued by the Government on the powers together with the standard forms can be found here.

If you want to check whether your property is at risk or need any other help on this, please contact us.