Part 10 of the Levelling-up and Regeneration Act 2023 came fully into force on 2 December 2024, giving LAs in England power to auction off leases of vacant high street commercial property.
With the introduction of HSRAs, the government aims to reduce vacancy rates and improve the use and perception of designated high streets and town centres.
Properties suitable for HSRAs will need to meet the following criteria:
The LA's power to implement HSRAs is discretionary and a government consultation in 2023 stressed that the new power was not intended to apply to landlords who are proactively seeking to rent their property.
There are strict procedures that need to be followed by the LA, which includes service of an initial notice to the landlord. The initial notice kicks off the start of a 8-week grace period in which the landlord can let the property itself; however, the LA's consent to let must be obtained.
The LA can serve a final notice to the landlord if the property is not let within the grace period, and this commences the formal pre-auction and auction process.
Tenancies will be granted for a minimum term of one year and a maximum of five years, and will be excluded from security of tenure under the Landlord and Tenant Act 1954, meaning that tenants will not have an automatic right to remain in the property once the lease term has expired. Superior landlords and lenders cannot bar the lettings process, and their consent will have been deemed given on the grant of such tenancies.
Information - LAs can request information about the property from the landlord, such as replies to enquiries and documents that will form part of the auction pack. Failure to comply with information requests will be a criminal offence punishable by fine.
Works - Properties will need to be at a "minimum standard" of physical state and condition, and landlords must bring property up to this standard if it is not already. The property needs to be safe and secure, with the landlord ensuring mains water, electricity and (if applicable) gas are connected, certified as safe and capable of re-connection without significant expense to the tenant.
MEES regulations - Landlords will need to carry out works to improve the energy efficiency of properties if the energy performance is below the required minimum rating (currently an E rating or higher), to comply with the MEES Regulations.
Considering the time and cost expense involved in the HSRA process, it remains to seen how and in what circumstances the LAs will use their new discretionary power, but landlords with qualifying property should be alive to the possibilty that these auction rights may be used against them.
If you are a landlord with a vacant unit in high streets and town centres, get in touch and we can help you navigate the detailed and complex rules governing HSRAs.