The government proposes to give councils powers to let vacant high street premises through compulsory rent auctions 

Power to the people? Power has been given instead to local authorities in new proposals contained in the Levelling - up and Regeneration Bill 2022 (Bill) with the aim of regenerating the high street. Part 8 of the Bill (which applies to England only), contains new powers for local authorities to force commercial landlords to let empty premises (for example, shops, offices, restaurants and pubs) in town centres and on high streets by instigating compulsory rent auctions. Commercial landlords need to be aware of the potential impact, although further regulations will be published on the auction process, and there may be further changes as the Bill progresses through Parliament. Understandably, concerns have been expressed in the property industry. 


Vacant premises (after a two stage notice procedure and a short grace period for landlords to fill the vacancy) could end up being subject to an auction process for a letting which is forced on the landlord. The local authority will be empowered to grant the lease on behalf of the landlord (including provisions for works) after inviting bids from prospective occupiers. Any tenancies granted will be for a minimum of one year and a maximum of five years (with deemed consent from superior landlords and mortgagees). Some comfort is offered to landlords as any lease granted will be outside the security of tenure provisions of the Landlord and Tenant Act 1954. 

See below for further detail.

The Bill in More Detail

What type of premises will be affected?
  • High street/town centre designation: Local authorities (LAs) can designate a street in its area as a high street, or an area as a town centre, if it considers it to be important to the local economy because of a high concentration of "high-street" uses (see list below). A designation will be registered as a local land charge. Any premises located in a designated area could be affected by the new proposals if the following two conditions are met: 
    • Vacancy condition: the premises are unoccupied and have been unoccupied for the whole of the previous year or for at least 366 days out of the previous two years (occupation by a trespasser does not count and it is not specified whether such 366 days should be consecutive occupation); and
    • Local benefit condition: the occupation of the premises for a suitable high street use would be beneficial to the local economy, society or the environment.

High street use means any use of premises:

  • as a shop or office;
  • for the provision of services to people (including visiting members of the public);
  • as a restaurant, bar, public house, café or other establishment selling food or drink for immediate consumption;
  • for public entertainment or recreation;
  • as a communal hall or meeting place;
  • for manufacturing or other industrial processes that can be reasonably carried out in proximity to and are compatible with the uses specified above.

Warehouse use is excluded. When considering whether a use is suitable, the LA can take into account any work which the landlord may be required to do or which the tenant would be allowed to carry out.

Occupation requires the "regular presence of people at the premises". Further guidance on the precise meaning of occupation and what is meant by a "regular presence" will be welcomed. There are provisions in the Bill which require landlords to give information on their premises to the LA, including information as to the occupation of the premises. Failure to respond to such requests for information or giving false information in response is an offence punishable by a fine. 

What is the process for letting qualifying premises and starting the rental auction process?
  • Initial letting notice: The LA can serve an initial letting notice on the landlord giving it a minimum 8-week period in which to let the premises (the notice expires after 10 weeks if a final letting notice has not been served);  
  • Restriction on letting while initial letting notice is in force: Once an initial letting notice has been served, it prevents the landlord from granting (or agreeing to grant) a lease or licence to occupy the premises without first obtaining the LA's consent (such consent to be given or refused within a reasonable time). Any lease or licence granted without LA consent is void. It is not clear how this would work in practice. However if there is an existing agreement for the letting of the premises, the service of an initial or final letting notice will not prevent the landlord completing that agreement;
  • Permitted lettings: The LA must give consent to a lease or licence to occupy which is for one year or more (without a right to terminate during the first year) which begins within eight weeks from the initial letting notice taking effect and results in the premises being occupied for an activity that involves the "regular presence of people at the premises" (quite what this amounts to, remains to be seen);
  • Final letting notice: If the landlord is unable to let the property within an 8-week period, the LA can serve a final letting notice. This starts the rental auction procedure. The final notice starts a 14-week window during which the LA is entitled to run a rental auction to try to find a tenant for the business. The landlord cannot grant or agree to grant a lease or licence during this period without the LA's consent.
  • Counter-notice and appeal: There is a process for the landlord to appeal the service of a final notice by serving a counter-notice. The permitted grounds are specified in the Bill. They are (broadly) that the relevant conditions for exercising the rental auction process have not been satisfied, that the owner intends to carry out substantial works or intends to occupy the premises for its own business or residential purposes. If the final letting notice is not withdrawn, the owner of the premises can make an appeal to the county court within 28 days of serving the counter-notice. The county court must either revoke or confirm the final letting notice;
  • Rental auctions: The LA may arrange a rental auction to find prospective occupiers willing to take a tenancy and at what rent. Regulations will detail the process, how the successful bidder will be identified and allow the LA to specify the suitable high street use ahead of the auction. The LA can ultimately decide and grant the tenancy at an agreed rent for a suitable high street use;
  • Grant of tenancy to successful bidder: The Bill provides that the LA has the capacity to enter into any tenancy with the successful bidder on the landlord's behalf, at the end of the auction. The landlord will then be required to grant the lease, and if it does not do so, the LA can do so on the landlord's behalf. The lease is deemed to be granted with the consent of any mortgagee or superior landlord;
  • Terms of tenancy: The terms of the agreement for lease and lease can be decided by the LA (having regard to any representations made by the landlord). There are no provisions allowing the landlord to challenge the terms agree by the LA. The detail of the clauses will follow in further regulations but the Bill does set out the types of covenant that must be included. All leases will be contracted out of the Landlord and Tenant Act 1954 and the contractual lease term must be between 1 and 5 years (subject to the length of the landlord's own interest) and must include a restriction on use to the relevant high street use notified by the LA in the rental auction process. The agreement for lease can also include terms forcing the landlord to carry out pre-tenancy works to the premises or allowing the tenant to enter the premises to carry out fitting-out works.


The proposals are understandably controversial and there is some scepticism whether they will achieve the desired effect. Whilst no landlord wants to see a property sitting empty, the proposals are radical and local authorities may not have the time and resources available to implement these proposals when they are already stretched.  Many of the premises caught by the Bill are already offered by landlords for a peppercorn or nominal rent. If there is no appetite for them on that basis, is there going to be any interest in the rental auctions?

The RICS, while welcoming the move to bring empty commercial property back into use, has commented that the government’s proposals to effectively force commercial landlords to rent out empty property may be ‘too blunt a tool’ and one which does not fully address the challenges faced in the retail sector. They have said that the reasons why many shops are unoccupied are complex, including demand, business rates, planning permission, shifting consumer habits, the rise of online retail and the impact of the pandemic and this proposed new legislation does not address these issues. Concerns have been raised that rental values may fall as tenants request reduced rents or financial incentives to take on the liability of a commercial lease. A prospective tenant will only want to occupy premises if they can operate viable businesses from them. There is also the question of who will pay for repairs where neither the landlord or tenant has the means to do so. We wait to see what further developments lie on the horizon. In the meantime, landlords need to be aware of the proposals if they have vacant properties.

Key Contacts

Gregory Simms

Gregory Simms

Legal Director, Real Estate Disputes
London, UK

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Frances Richardson

Frances Richardson

Partner, Real Estate Disputes

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Julie Middlemass

Julie Middlemass

Partner, Real Estate Disputes
Leeds, UK

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Chris Perrin

Chris Perrin

Partner, Real Estate Disputes

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