Concerns are regularly expressed about the state of the high street and the number of vacant and derelict shops in town centres.

To address these concerns, Councils have acquired new powers to intervene where high street units have stood empty for too long. Regulations came into force on 2 December 2024 under Part 10 of the Levelling-up and Regeneration Act 2023 (LURA 2023) and have given discretionary powers to Councils to designate areas assessed as important to the local economy as “high street”. Councils can let units within those designated areas through a compulsory rental auction process where they have been unoccupied for the whole of the previous year or at least 366 days in the previous two years.

The decision to exercise these powers is subject to a local benefit test which references uses which would benefit the local “economy, society or environment” and Councils are encouraged to engage with property owners before exercising these powers.

The Regulations set out a notice procedure by which the Council is able to serve an “initial letting notice”, following which the landlord has an eight week grace period to find its own tenant. Restrictions will apply within this period requiring that the landlord obtains the Council’s consent to any new letting (or agreement to create a tenancy or licence) in order to ensure that a bona fide tenancy or licence for a high street use is created.

Where no permitted high street letting is created within the initial grace period, Councils will be able to trigger a final letting notice procedure lasting two weeks which could eventually lead to the compulsory rental auction process. Where the auction process identifies a suitable bidder, the Council has the power to enter into any tenancy (or agreement of tenancy) on the landlord’s behalf and benefits from deemed consent from any superior landlord or mortgagee. Tenancies created under these powers will be excluded from the security of tenure provisions contained in the Landlord and Tenant Act 1954.

The rental auction process includes powers for the Council to require the landlord to deduce title, respond to enquiries and provide all relevant test and safety certificates. The Council also has the power to enter the property to conduct surveys and to require the landlord to carry out works to bring the property to a minimum lettable standard. The auction procedure is supported by criminal sanctions including those for failing to provide information or obstructing the survey process.

Questions remain as to whether Councils will have the resources to make the most of these powers given the limited funding available for marketing auction and legal costs. The relatively short timescales within which the auction process is to run may also prove a strain on Council resources.

How Capsticks can help

At Capsticks, we aim to be the firm of choice for local authorities. If you have any questions as to the content of this insight and for further details regarding the rental auction process, please contact Vicki Moore or William Ogden.