Local authorities in England now have the power to auction lettings of vacant, high street commercial property. Known as a 'High Street Rental Auction' (HSRA), they may be used in situations where a landlord is not proactive or has been unable to secure a tenant. We highlight some of the key issues facing the industry.
1. Only certain properties to be impacted
HSRA will not be suitable in all instances. For example, large former department stores may be subject to long-term, complex redevelopment plans, which may be negatively impacted by a HSRA. Or, in a case where notices have already been served against buildings that are dangerous structures or those with defective cladding.
HSRA can be utilised for all or part of a property, which has been unoccupied continuously for 12 months or for at least 366 non-continuous days within a 24-month period; and, the authority is satisfied that occupation of the property for a suitable high-street use would be beneficial to the local economy, society, or environment.
2. Does not automatically defeat a landlord's power to let
Guidance for a complete HSRA process has been published, which includes the requirement for service of an initial notice and final notice, with the intention to get to exchange of tenancy contracts within 10-12 weeks. If the authority serves an initial notice, a landlord then has 8 weeks to enter into a tenancy, for which it must have obtained the authority's consent to do.
3. Non-compliance with the auction process could result in fines
Landlords will be required to provide information in relation to the property during the HSRA process, such as responses to pre-auction enquiries. A failure to do so will be a criminal offence, punishable by way of fine.
4. No exemption from MEES Regulations
If the energy performance of a property is below the required minimum rating (currently an E rating or higher and expected to rise to C rating in 2027), works to improve energy efficiency will be required and notice may be served on the landlord to raise the standard (unless an exemption has been registered).
For further information on the changes to MEES, please see our previous blog on the topic here.
5. Exclusion of tenant statutory security of tenure
Lettings entered into as a result of a HSRA are to be excluded from security of tenure provisions of the Landlord and Tenant Act 1954. Meaning that tenants will not have an automatic right to remain following the contractual term of a tenancy ending nor be entitled to a new lease from the landlord.
If you are a commercial landlord or local authority dealing with vacant high street commercial property or, you have any concerns or questions about how the HSRA scheme may impact you or your business, please do not hesitate to get in touch with our Real Estate Disputes team or your usual Brodies' contact.
