The long anticipated “Levelling up and Regeneration Bill: reforms to national planning policy” consultation paper (“the Consultation”) was published on the 22nd of ­December 2022 which details the government’s proposals for reforms to national planning policy. This includes an introduction to the Levelling Up and Regeneration Bill (“the LURB”), reforms to the National Planning Policy Framework (“the NPPF”) and an explanation about implementation of the new National Development Management Policies (“the NDMPs”). A follow-up consultation (“High Street rental auctions”) was published in March 2023 which closes on 23 June 2023.

The proposals being put forward would allow a local planning authority (“LPA”) to conduct compulsory rental auctions of qualifying vacant commercial properties in nominated high streets and town centres. This new power, granted by the LURB, comes under the wider policy objective umbrella of “Levelling Up and boosting economic growth” and is found within Part 10 of the draft LURB “Letting by Local Authorities of Vacant High-Street Premises”. The government estimates there are approximately 172,000 vacant commercial premises, of which in 2021 over 8 in 10 were vacant for more than two years and over 1 in 5 vacant for more than four years.

Conditions 

There are a number of conditions that would need to meet before an LPA could undertake a compulsory auction of premises:

They must be within a designated ‘high-street’;

They must be ‘qualifying high-street premises’;

The premises must be ‘vacant’; and

Occupation of the premises must satisfy the ‘local benefit’ condition.

High-Street Designation 

As a starting point, the LPA must designate a street within the area as a “high-street” for the purposes of this part of the LURB. An LPA may designate an area within its administrative boundary as a town centre, for the purposes of this part if: (i) the built environment is characterised principally by a network of streets; and (ii) the LPA considers the area important to the local economy due to the concentration of high-street uses in the locality. A designation under this section is registered as a local land charge. The LPA must maintain a publicly available list of designations under this section.

Qualifying High-Street Premises

For premises to be considered for compulsory auction they must also be “qualifying” high-street premises. The definition for “qualifying” use is wide. It covers not only uses within Class E (shops, restaurants, bars offices etc) but other uses such as public entertainment or recreation, and public meeting places. The Government proposes to introduce new permitted development rights that would allow these changes of use without the need for new permissions.

Vacancy Condition 

The next test is the ‘vacancy’ condition. This requires the premises satisfy the following requirements: (i) the premises are currently unoccupied (ii) the premises have been unoccupied for the last twelve months (or cumulatively over the last two years).

The ‘vacancy’ condition will not be satisfied if there has been any occupation of the premises during the relevant period which has been (i) substantial, (ii) sustained, and (iii) involved the regular presence of people at the premises. 

Local Benefit Condition 

The final condition that must be met in relation to qualifying vacant premises is the ‘local benefit’ condition. This condition is met if occupation of the premises for a suitable high street use is considered by the LPA as being beneficial to the local economy, society or environment.

Notices

Once all four criteria are met, the LPA will serve an ‘initial letting notice’. After receipt of an ‘initial letting notice’ the landlord cannot agree to grant a tenancy or licence to occupy without the written consent of the LPA. The ‘initial lettings notice’ will expire after 8 weeks.

If no agreement is reached between the Landlord, LPA and prospective tenants, the LPA will issue a ‘final lettings notice’. A final lettings notice will expire at the end of 14 days and it is during this period that a landlord may serve a ‘counter-notice’.

A counter-notice must state that the landlord intends to appeal and specify the grounds on which the appeal would be brought. If the LPA wishes to withdraw from the process at this stage, it must do so within 14 days of receipt of the counter-notice. If the LPA does not serve a ‘withdrawal notice’ the landlord must bring the appeal within 28 days following service of the counter-notice.

Rental Auctions 

An LPA may arrange a rental auction in respect of qualifying high-street premises if: (i) a final lettings notice is in force (ii) it is no longer possible for that notice to be revoked on appeal and (iii) either no tenancy/licence has been granted, or the LPA is satisfied that any agreement entered into is consistent with the exercise of its powers.

Once a bidder is successful, the LPA will negotiate the agreement for lease before requiring the landlord to grant the lease on those terms. The LURB sets out basic required terms, these include: (i) a minimum term of 1 year or maximum of 5 years, (ii) obligations requiring tenant to repair and insure property, (iii) terms on which the tenant can dispose of its interest, (iv) provisions regarding how the landlord may forfeit or terminate the lease, and (v) a requirement for the tenant to hand back the property with vacant possession at the end of the term.

So how have these new compulsory powers been received? The majority of feedback to date has been highly critical and doubts abound as to whether these powers will solve anything since many premises are vacant due to lack of commercial demand as opposed to landlords being reluctant to find a tenant. In addition, it is difficult to see how already under resourced local authorities will cope with this additional level of micro-management for high streets. However, the draft legislation is still making its way through Parliament and it will be interesting to see whether there are any amendments proposed.