High Street Auctions | Update | Southampton

Here, we provide a follow-up to our previous article – High Street Rental Auction Policy Consultation which discusses the points covered in the High Street Rental Auction Policy Consultation and the process that such rental auctions will follow.

Since our article, the previous UK Government (which we will refer to as “the Government” for simplicity) published its response. However, regulations that will regulate in detail are still waiting.

What should be included in standard rental arrangements, terms and documentation

So far, the following provisions have been confirmed:

• Repair Standards:
  • The property owner must bring the selected property to “Minimum Standard” condition and physical condition – the site must be in a safe, stable and secure condition.
  • The tenant’s improvement agreement will be limited by a schedule of conditions (taken after the landlord has brought the property up to “Minimum Standards”).
• Assignment and rental:
  • Assignments will be permitted subject to homeowner approval (not to be unreasonably withheld or delayed).
  • Subletting will not be permitted.
• Tenant adjustment work:
  • There must be a 4 week rent free period for tenant adjustment work.
  • Internal and non-structural work is permitted, but the tenant must remove the work at the end of the term.
  • Any external or structural adjustment work requires the homeowner’s consent (must not be unreasonably withheld or delayed).
• Definition of place:
  • The rent of the entire building will be determined by the red line with a general description.
  • Parts leased are for internal damage only, plus shop front if required, with the right for the hirer to attach to the parts retained for installation.
• Deposit:
  • All rentals will require a 3 months rental deposit, or £1,000, whichever is greater.

How the costs of the High Street Rental Auction process should be spread out

The local government will be responsible for property marketing costs and auction fees.

The tenant will be responsible for the costs of the search and survey, plus the local authority’s solicitor’s fees for preparing the lease.

Whether Minimum Energy Efficiency Standards (MEES) requirements should apply to properties subject to the High Street Rental Auction

There will be no exceptions for MEES. This could still mean that substandard properties remain empty, as landlords may wish to avoid costly work to achieve minimum levels of energy efficiency.

Property marketing and auction processes

With regard to marketing and auction elements, so far we know that:

• marketing period of at least 5 weeks (with a minimum recommendation of 6 weeks);
• the property must be listed on local authority websites and at least one major commercial property website, with photos and confirmation of floor area;
• no reserve price will be set; And
• this will be a closed-bid tender process outlined in Appendix C of the Government consultation.

Requirements for Proposed Development Permit Rights

It is expected that local authorities will determine and, when marketing and auctioning properties, specify the uses for which bidding will be permitted. However, permitted development rights will not continue after the end of the lease term (as previously proposed).

What is next?

In light of the recent general election which resulted in a change of government, no further steps have been taken in relation to this initiative, and Labor does not appear to have commented on their intentions in relation to the major auction. Therefore, the intent to implement the regulations necessary to fully implement this initiative remains unclear.

Additionally, the questions we raised in the previous article still remain; will local governments have sufficient resources, even with the funding provided, to utilize high-level bidding powers even after they come into force?

Conclusion

The nature and impact of road auctions will only become clear once the necessary regulations are in place and the first road auctions begin to take place. Therefore, we will be watching this space very carefully and will try to bring you more updates as they arise.

RENEW

Continuing from our article above, we now have confirmation that the road rental auction process will take effect today, December 2 2024.

However, its full implementation in practice may be delayed as local governments begin to implement their new powers under the new law, namely:

• Section 10 of the Leveling Up and Regeneration Act 2023
• Local Government (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024

So will the High Street Rental Auction ultimately help rejuvenate our high streets? This remains to be seen.

Landlord

Landlords may find that through these auctions, empty shops are filled and this can help if there are service charge gaps that they would otherwise have to fill themselves.

However, draft standard rental agreements contained in statutory regulations, which can be imposed on parties who cannot be involved by the landlord, can have the opposite effect because they do not contain detailed service provisions and are in accordance with the provisions others that already exist. rent a neighboring unit.

Landlords may also have to undertake expensive work to bring vacant properties up to minimum standards of repair and energy efficiency levels in exchange for short-term rentals at low rents (because there are no minimums imposed by law) for tenants who ideally might not they want to handle.

Local Authorities

The government is reportedly setting aside £1 million to support the auction process. This is not a large number when looking at all the highways throughout the region. It is likely that many local authorities are still aware that they do not have the funds necessary to carry out a thorough clean-up of empty shops on their local high streets.

Local authorities may also consider the risk of no one bidding on a property, thereby causing the local authority to incur unrecoverable costs for the auction process, notice service and survey, to be too high if those costs can only be recovered from the winning bidder.

There seems to be hope that the threat of the introduction of High Street Rental Auctions will put pressure on “disengaged landlords” to take positive steps in engaging with their local communities to find suitable tenants and let properties, to avoid auctions that could result in losses. otherwise, let them make expensive repairs, in exchange for short-term rentals with low rents and possible unwanted tenants.

If you would like to discuss any points regarding high end auctions or have any other commercial property questions, please contact Claire Long or Ed Watson in the Commercial Property team.

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