The Levelling-up and Regeneration Act 2023

High Street Rental Auctions are here, but who is really in the driving seat?

The Government has introduced a number of measures under the Levelling-up and Regeneration Act 2023, which came into force on 2 December 2024. One of the most significant changes affects Landlords of Shops, Offices, Restaurants, Pubs, Meeting Places, Community Halls, and Light Industrial Units.

Several local authorities have already engaged with the process, including Bassetlaw, Darlington and Mansfield Councils. Bournemouth, Christchurch and Poole (BCP) Council are currently taking advice on adoption. In March 2025, more local authorities came onboard.

How it works

If a qualifying high street premises has been vacant for at least 12 months (365 days or more) within the past two years, the local authority may notify the landlord of its intention to place the property into a High Street Rental Auction.

In deciding whether to proceed, the local authority must consider whether occupation of the premises would be beneficial to the local economy, society or environment. A key requirement is that the proposed use must provide a “people presence” at the premises.

Unless the property is already contractually bound, the local authority must consent to a proposed tenancy of at least a year, provided the occupation ensures people are physically present on site.

If the premises are not let within 8 weeks, the local authority may serve a Final Letting Notice. Which can remain in force for up to 14 weeks.

Once a Final Letting Notice is served, the Landlord is restricted from letting the property or carrying out works without the local authority’s consent.

The Rental Auction

The local authority may then hold a rental auction on behalf of the Landlord, offering a lease for a term of between 1 and 5 years.

While the tenancy remains subject to standard legal requirements, the terms may include obligations for:

• The Landlord to carry out works, or
• The Tenant to undertake works required for occupation

The local authority acts in its own name, but the outcome is legally binding on the Landlord. A copy of the completed tenancy agreement must be provided to the Landlord, and the authority must take into account any representations made by them.

Landlord Options

 Landlords may serve a counter-notice in response to a Final Lettings Notice. Grounds for objection include:

• An intention to carry out substantial construction, demolition, or reconstruction works
• An intention to occupy the premises for the Landlords own business or residential use

Compliance Requirements

 An agreement for lease will be put in place, during which time:

• The Landlord must bring the premises up to a minimum standard
• The Tenant must return the premises in the same condition, supported by a schedule of condition

Notably, any lender and freeholder Landlord will be deemed to have consented to the lease.

There is no express obligation to upgrade the premises to meet MEES (Minimum Energy Efficiency Standards), although the Landlord may still face separate enforcement action for non-compliance.

The local authority will be responsible for preparing the auction pack. The Landlord must respond to all enquiries raised, including deducting title, providing proof of ownership and supplying all relevant documents. A key unanswered question remains: who pays the Landlord’s legal fees incurred in responding to these enquiries?

Failure to comply with the process may expose the landlord to penalties, including fines of up to £2500.

Timeframes

 The auction process is intended to last no longer than 11 weeks, and the premises will be marketed for 6 weeks.

• Week 2: Landlord receives the proposed agreement for lease.
• Week 3: Landlord may take representations regarding suitable high street use
• Week 11: All bids must be submitted

After the bidding closes the Landlord is notified of all bids and has 2 days to inform the local authority of its preferred bid. The preferred bid does not have to be highest offer but may be the best overall value (e.g. longer lease term). If the Landlord does not respond, the local authority may also choose not to accept any bid. Otherwise, the local authority must accept the highest bid unless it is not reasonably practicable.

The Landlord will have up to 3 months (at their own expense), to bring the premises up to standard, including:

• Fire Safety Compliance
• Asbestos Assessment
• Gas and Electrical Inspections
• Any other health and safety matters

Completion occurs within 10 working days of the Landlord completing the works, or earlier, if both parties agree to bring the date forward.

Food for thought

 The legislation may feel unsettling. It allows a local authority to step into the Landlord’s position and, in effect, dilute fundamental proprietary rights. Does this undermine one of the core principles or property ownership?

Are commercial Landlords fully aware of these new powers now vested in local councils? And are they prepared to receive an enforced letting opportunity, requiring significant expenditure and compliance, only to grant a lease that may last as little as 1 year?

If you need advice on this, or any other matter relating to commercial property, our team will be happy to help. Please contact [email protected] or call 023 8235 4554