High Street Rental Auctions

Piers Harrison’s recent editorial in Landlord & Tenant Review provides a practical overview of the High Street Rental Auction (HSRA) regime introduced by the Levelling Up and Regeneration Act 2023.

Local authorities were given novel and intrusive powers to instigate rental auctions of properties in designated areas. The primary legislation was contained in the Levelling up and Regeneration Act 2023 (the 2023 Act); this was fleshed out in the Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024/1139 published in December 2024, and non-statutory Guidance issued by the government in June 2025. In summary, these powers enable councils in England to conduct a “rental auction” of premises that have been empty for over a year in a two-year period, the result of which will bind the landlord.

Much has been written in the form of online articles by law firms anticipating a new source of business, but there has not been a great deal of coverage by practitioner texts perhaps because this is a difficult area to pigeon-hole given that it contains elements of landlord and tenant law, compulsory purchase and local authority law.

The Guidance refers to “High Street Rental Auctions” (HSRA) and, although that is probably the term that will stick, it is well to note that both high streets and town centres can be designated by a local authority. That is the first step in the process and a handful of local authorities have now taken that first step (Ministry of Housing, Communities & Local Government, “Pride in Place Strategy”, GOV.UK (25 September 2025), https://www.gov.uk/government/publications/pride-in-place-strategy/pride-in-place-strategy).

The local authority may designate a street in its area as a high street for these purposes if it considers that the street is important to the local economy because of “a concentration of high-street uses of premises on the street”. On the same grounds, a local authority may designate an area within its area as a town centre if the built environment of the area is characterised principally by a network of streets. “High-street use” is a defined term and includes, for example, use as a shop or offices, use for the provision of services, use as restaurant, or use for public entertainment or recreation.

The local authority must maintain and make available to the public a list describing, and a map showing, any designations that are in force in its area. A designation is a local land charge, so practitioners should report to purchasers of a unit in such an area that it is susceptible to the HSRA regime. That may change, however, because a designation may be varied or withdrawn at any time.

The second step in the process is the service of an “initial letting notice”. That can be served on any day on which it appears to a local authority that “the vacancy condition” and “the local benefit condition” are met. Broxtowe Borough Council claims to have become the first local authority in England to have served such a notice (“Council first in the UK to serve a High Street Rental Auction notice”, West Bridgford Wire (20 September 2025), https://westbridgfordwire.com/council-first-in-the-uk-to-serve-a-high-street-rental-auction-notice/).

The “vacancy condition” is satisfied if the premises are unoccupied on the day of the notice and either were unoccupied for the whole of the period of one year ending with the previous day, or during the period of two years ending with the previous day, the premises were unoccupied on at least 366 days. The drafting avoids an obvious pitfall of landlord’s claiming that premises are occupied by a minimal presence of chattels. It is expressly provided that occupation must be substantial, sustained, and involve the regular presence of people at the premises. The Guidance contains suggestions of the type of due diligence which local authorities might wish to carry out, which includes, for example, officer visits, street view imagery, making enquiries of adjoining premises.

The “local benefit condition” is satisfied in relation to premises 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. There is a prescribed form in the regulations. Helpfully, the government has published all the prescribed forms, along with precedents for tenancies of various kinds of premises and letters on the www.gov.uk site (Ministry of Housing, Communities and Local Government, “High Street Rental Auctions: Non-statutory guidance”, GOV.UK (2 December 2024), https://www.gov.uk/government/publications/high-street-rental-auctions-non-statutory-guidance).

Prior to serving an initial notice, the local authority may wish to survey premises to consider their suitability for a HSRA. They are granted a power to enter and survey the land by the 2023 Act. The power may be exercised in a way that involves the use of force only with the authority of a warrant issued by a justice of the peace. The purpose would be to ascertain whether premises are suitable for a HSRA, potential uses for which the premises could be used (see below), and/or the works needed to bring the premises up to a minimum standard. Compensation is payable for any damage caused by the exercise of the power with any dispute to be determined by the Upper Tribunal (UT).

The initial letting notice gives the landlord information about the scheme and informs it that there is a prohibition on letting without the consent of the local authority. The purpose is to give the landlord an opportunity to let the premises without the local authority exercising its power to carry out a HSRA. The local authority must give or refuse consent within a reasonable time after it is sought and must give consent to the letting where the letting is for one year or more and the local authority is satisfied that it would be likely to lead to the premises being occupied for a high street use. The term of the letting must begin within eight weeks of the initial letting notice taking effect. The “letting” can be by way of licence or lease.

If the landlord does not let the premises in accordance with the initial notice, the local authority may serve a final letting notice on the landlord provided eight weeks have elapsed since service of the initial notice. The initial letting notice remains in force for 10 weeks and a final letting notice must be served whilst the initial letting notice is in force. So effectively there is only a two-week window for service of a final notice. The final notice is in a prescribed form and must, inter alia, state the “high-street use” for which the local authority considers them suitable. It also continues the restriction on letting without consent and imposes a further restriction on the landlord prohibiting the carrying out of works without consent.

Only on the service of a final notice can the landlord serve a counter-notice initiating an appeal of the final notice. The landlord must give a counter-notice within 14 days of the final letting notice taking effect. There are seven prescribed grounds of appeal, all of which are set out in the final notice. These include the obvious such as that the conditions for service of an initial letting notice were not met, that the local authority failed to give consent to letting when it ought to have done so, that the landlord intends to carry out substantial works of construction and that the landlord intends to occupy the premises for the purposes of a business or as a residence. If, in the face of the counter-notice, the local authority does not withdraw the final notice then the landlord may appeal that notice to the County Court and must do so within 28 days beginning with the day on which the counter-notice was received by the local authority. The RTM legislation gave landlords far fewer grounds of challenge yet spawned numerous appeals. The highly technical requirements of the HSRA regime and the comparatively abundant seven grounds of appeal might be expected to create a large number of cases, assuming that is, that HSRAs are widely used.

Practitioners familiar with more generous time limits in other areas such as the enfranchisement legislation may question how sensible these extremely tight deadlines are. A local authority serving an initial notice would be expected to have lawyers acting who are already familiar with the process, but the landlord recipient of a letting notice may well need to seek advice. In that context, 14 days to serve a counter-notice and 28 days to appeal in the context of a recently created area of law is very tight.

If the final notice is not appealed or the appeal fails, then the local authority may then set in train the process which results in the auction. The auction period lasts 12 weeks and, during that time, the local authority is to auction the premises and complete the tenancy contract. The procedure to be followed in the 12-week period is set out in the 2023 Act and the Regulations and summarised in the form of a process flowchart in the Guidance.

The scheme not only compels landlords to rent premises against their wishes, it also requires them to improve them. By the end of week two of the Auction Period, the local authority must conduct a survey of the premises to ascertain a list of works required from the landlord for the premises to reach a minimum standard. The minimum standard is defined in the Regulations and includes, for example, making sure that there no significant water ingress or leaking pipework, there is safe access and egress, and utilities are in a safe condition. An obligation to carry out works to reach that minimum standard will be imposed on the landlord in the tenancy contract imposed at the end of the auction process.

The premises to be auctioned may comprise any part of a building that is designed or adapted to be used separately from the other parts or could with reasonable adaption be so used. That raises the prospect of a landlord’s property being divided in ways that the landlord never intended. The Regulations amend the T own and Country Planning (General Permitted Development) (England) Order 2015 to permit any change of planning use which may be required following the auction.

The “successful bidder” is not necessarily the highest bidder; the landlord may choose to accept any of the valid bids as the successful bid. If the landlord does not choose any valid bid, the local authority must choose the bidder offering the highest annual rental value for the premises unless it appears to the local authority that it is not reasonably practicable to enter into a contract with that person, in which case the local authority may choose the bidder offering the highest annual rental value for the premises with whom it is reasonably practicable to enter into a contract as the successful bidder. On the same grounds, the local authority can substitute a person chosen by the landlord.

The successful bidder at auction will enter into two legal agreements with the landlord. The first is the tenancy contract, which governs the landlord’s required works prior to the tenancy commencing, and the second is the tenancy itself. A tenancy entered into under the 2023 Act will be:

• At a rent determined through the rental auction;

• For a term of between one and five years;

• Excluded from security of tenure under the Landlord and Tenant Act 1954;

• For the specific high street use(s), which the tenant is permitted to use the premises

for.

Following completion of the landlord’s works, the tenancy is granted. One obvious concern is how local authorities will find funding to properly institute the new HSRA regime. The Guidance reveals that local authorities may apply for “New Burdens Payments” from central government. At the time of writing, local authorities have applied for such funding. The payment is intended to cover the following costs:

• Issuing legal notices;

• Gaining access to the premises;

• Marketing and promoting the auction and premises to be let; and

• Administering and managing the auction process.

Although the primary and secondary legislation has been in place for some time now, it is early days in the HSRA regime, and it remains to be seen whether it is widely adopted. TheMinistry of Housing, Communities & Local Government have confirmed that as far as they are aware, about a dozen authorities have taken steps to designate an area, no auctions have taken place, no applications for new burden payments have been made and no final notices have been appealed to the county court as at 29 October 2025. If it isadopted more widely given that some landlords are well resourced and object to interference with their possessions, it seems likely to generate many disputes.

This article first appeared in Landlord & Tenant Review (2025), Volume 29, Issue 6 and is reproduced here with the permission of the publisher, Thomson Reuters.