Use it or lose it – local authorities to get control over empty high street premises

The compulsory commercial property auction is one of the most radical, but least reported on, concepts contained within the Levelling-up & Regeneration Act 2023. 

Part 10 of the Act sets out a mechanism whereby (after following a set procedure and subject to detail) a local authority will be able to hold an auction of vacant commercial premises, with the owner of those premises then being legally required to grant a lease to the successful bidder – whether they want to or not. 

The Act only sets out a high level framework.  And much more detail, in the form of regulations issued by the Government, is awaited before the law becomes a legal reality.  But, from the bare bones of the framework contained within the legislation, it is clear that the powers are a significant encroachment by ‘the state’ on the property rights of the private sector.

The powers will only apply within areas which the local authority has designated as a high street or town centre area.  The criteria for that will be that the street or area is important to the local economy because of the concentration of what are defined in the Act as ‘high street uses’. These include shops and offices, restaurants and bars and places of public entertainment or recreation. 

The powers will only be exercisable in relation to premises which satisfy both the ‘vacancy condition’ and the ‘local benefit condition’.  The vacancy condition will require that the premises have been vacant for the whole of the previous year or on at least 366 days during the previous two years.  The local benefit condition is met if the local authority considers that the occupation of the premises for a suitable high street use would be beneficial to the local economy, society or environment. 

The powers authorise the local authority to start a process the end result of which may be an auction of the premises. That auction is run by, and at the behest of, the local authority - not the owner of the premises.  The local authority will have the power to enter into a contract with the successful bidder to grant them a shortish lease (between 1 and 5 years).  That contract will bind the owner of the premises, so they will be contractually bound to grant that lease.  And if, despite that, they don’t - then the local authority is given the power to grant that lease. 

The Levelling-up & Regeneration Act 2023 received Royal Assent at the end of last year.  But as referred to above, these provisions will not become operative until after the Government have introduced regulations providing much needed detail on how precisely the process will work.  But the message from the Government is already clear.  If high street property owners try to sit on their empty assets rather than working to revitalise the area, local authorities will be given the power to intervene.