Real Insights: High street rental auctions

Chanéz Lowe

Associate, Real Estate, Mishcon de Reya

We’ve all noticed the number of empty shops on our High Streets in recent years but from 02 December Local Authorities will have new powers to force landlords of empty units to rent them out.  I’m Chanéz and this is Real Insights.

These rules aren’t just about shops.  Offices, restaurants, bars and entertainment venues will also be caught.  A Local Council can decide to implement these powers for a particular High Street or town centre, they won’t apply automatically.

If a property has been empty for at least a year the Local Authority can then serve a notice on the landlord.  For the next ten weeks the landlord can’t rent out the property without the Local Authority’s approval.  If the property remains empty the Local Authority can serve a final notice which restricts what the landlord can do for another fourteen weeks.  After that the Local Authority can go ahead with a rental auction which the landlord can only object to in limited circumstances.

Anyone interested in renting the property submits a bid to the Council with their proposed rent and use of the property.  There is no min cap on the rent so it seems the bidder can offer just £10.  The landlord then has two days to pick a tenant from these bids and if the landlord doesn’t like any of them, the Local Authority can step in and accept a bid.  But it must chose the bidder offering the highest rent and if the landlord fails to provide the Local Authority with information about the property or gives false information this is a criminal offence and the landlord could be fined.

The Government has pledged over 1 million pounds to kick-start this process but this doesn’t seem a huge amount of money to share between more than 300 Local Authorities.  The new rules also do nothing to tackle the root causes of the problem which include wider economic factors and high business rates.  Most landlords don’t want their properties to stay empty but for the minority of landlords who may have been sitting on their hands over the past few years, the threat of these new rules might be just the nudge they need.

For more on this topic, read our latest article above.

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