High Street Rental Auctions: Non-statutory guidance
Published 2 December 2024
Applies to England
Ministerial foreword
High streets are the beating heart of our communities, but across the country too many are now a shadow of their former selves, blighted by boarded up properties - with 1 in 7 shops now lying empty nationwide.
The government is determined to reverse this decline and bring our high streets back to life as part of our mission to drive growth, raise living standards and deliver an era of national renewal.
As a former local councillor, I know that this transformation must be locally led.
Which is why we are wasting no time in giving local leaders the powers and resources they need to take back control and deliver the change their communities need.
High Street Rental Auctions will be an important weapon in their armoury.
Under this scheme local leaders will be empowered to take action where landlords have not taken sufficient steps to rent property – auctioning off leases on premises that have been vacant for more than a year – and granting local businesses and community groups the ‘right to rent’ empty commercial lots at market prices.
This will play a critical role in spurring regeneration, revival and renewal on a local level – and will be part of a package of measures we are deploying to put high streets and town centres back on their feet.
We know this will take time and effort to achieve and we are under no illusions about the scale of the task we face.
But we can only succeed by putting local leaders back in the driving seat as we work together to lay the ground for a better future.
Creating safer, more welcoming, more vibrant high streets that bring people and businesses together.
A commitment this Labour government is determined to deliver.
Alex Norris MP
Parliamentary Under-Secretary of State (Local Growth and Building Safety)
Introduction
The prolonged vacancy of shops and buildings is a blight on our high streets. Data from the Local Data Company found that nationally, in the final quarter of 2023, 1 in every 7 high street shops were closed. This trend is particularly pronounced in the North East, where nearly 1 in 5 shops stand empty, reflecting a vacancy rate of 17.9%. The West Midlands also faces significant challenges with a vacancy rate of 16.2%. Overall, average vacancy rates across England are 13.5%[footnote 1].
High vacancy rates can significantly impact a place’s economic performance by reducing footfall. Areas of high vacancy can have higher unemployment rates and suffer from clusters of boarded-up empty and vandalised shops, often with upturns in anti-social behaviour. Many residents might relocate, whilst those remaining generally have less pride in their local high street or community.
We want to empower local leaders and communities to take control over the look and feel of their area. High Street Rental Auctions, a new power for local authorities to require landlords to rent out persistently vacant commercial properties to new tenants such as local businesses or community groups, were introduced as part of the Levelling Up and Regeneration Act 2023 (the ‘Act’); Part 10 of the Act sets out the framework for the power, and further details are defined in the Local Authorities (Rental Auctions etc.) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024.
We want to see local authorities working proactively with landlords to encourage vibrant and successful high streets across the country and we know this is already happening in many places. Engagement and cooperation between local authorities and landlords is encouraged in all cases but we know that this is not always working. In these cases, High Street Rental Auctions provide a powerful tool to address persistently vacant premises.
This guidance explains High Street Rental Auctions in detail from start to finish and should be used to guide interested parties through the process. It is for local authorities concerned about vacant commercial premises in their area, commercial landlords and their lenders, businesses and community groups seeking a commercial space and commercial agents who may be responsible for running a High Street Rental Auction on behalf of a local authority.
Alongside High Street Rental Auctions, the English Devolution Bill will deliver the government’s manifesto commitment to transfer power out of Westminster, and into local communities. As well as strengthening the powers of mayors and local authorities, this Bill will also unlock opportunities for community leadership by giving local leaders the tools to kickstart their economies and transform their neighbourhoods and high streets.
Glossary of terms
Term | Definition |
---|---|
Auction | The process by which a tenant and rental value will be selected. |
Auction Period | The 12-week period in which the auction process takes place. The process is set out in Regulations 1 to 14.[footnote 2] |
High Street Rental Auction | The process by which a local authority will be able to auction a tenancy of premises that have been vacant for a required period. |
High street use | Uses which you typically find for premises on high streets, and which are set out in section 192(1) of the Act. |
Landlord | The property owner, who may have a freehold or leasehold interest, with the rights to grant a tenancy of a property that may be subject to a High Street Rental Auction. |
Levelling Up and Regeneration Act 2023 (the Act) | The Act containing the primary legislation under which High Street Rental Auctions are introduced, set out in Part 10. |
Local authority | The council responsible for planning and regenerative efforts for a given area in which a High Street Rental Auction could be used. |
Minimum Standard | The works which are needed so that the premises to be occupied are in a safe, stable, secure condition and with any significant occupational risks removed or managed (as defined in more detail in the tenancy contract entered into as part of the High Street Rental Auction). |
New Burdens Payment | Funding made available from central government where new or amended legislation is assessed to have a financial burden on local authorities. |
Permitted Development Right | Rights that allow certain building works and changes of use to be carried out without having to make a planning application. |
Permitted Development Right for suitable high street use | Provisions of General Permitted Development legislation allowing change of use of qualifying high street premises to a suitable high street use, as provided for by amendments made by Part 3 of the Regulations. |
Regulations | The Local Authorities (Rental Auctions etc.) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024 |
Secondary legislation (Regulations) | The law created by ministers under the powers given to them under an Act of Parliament. The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024 are the regulations which set out detail of how the High Street Rental Auction powers will operate. |
Tenancy | The contract allowing a successful bidder to operate a business from the premises auctioned. More commonly known as a lease. |
Tenancy Contract | A contract following the auction and prior to the tenancy in which obligations are placed on the landlord to allow a tenancy to be granted. More commonly known as an agreement for lease. |
Tenant (successful bidder) | The winner of the auction who becomes subject to the tenancy contract and tenancy in operating a business from the auctioned premises. |
Use Class | Common use of land and buildings are grouped into use classes. The uses within each class are, for planning purposes, considered to be broadly similar to one another. Movement from one primary use to another within the same use class is not development and does not require planning permission. |
Vacant | A term describing properties that do not have a tenant in place and/or are not currently operational as businesses. |
Vacancy (rate) | A term used to describe the collective effect of vacant property within an area. |
Summary
The High Street Rental Auction process is expected to take 22 to 24 weeks from initiation to completion. The stages and timings are summarised below:
Considerations for using a High Street Rental Auction
High Street Rental Auctions will provide local authorities with a strong tool to use in places where vacancy rates are a problem and where there is little cooperation between landlords and local authorities, however, they will not be applicable in all cases of vacant high street premises.
When considering whether a High Street Rental Auction will be appropriate, a local authority should consider whether the specific premises in question meets the requirements of the legislation, as well as whether alternatives to High Street Rental Auctions might be more appropriate.
As part of this, local authorities should note the required time and resource for the process and consider applying for the New Burdens Payment.
Steps prior to using a High Street Rental Auction
Once satisfied that a High Street Rental Auction is the right course of action to take, a local authority must take several preliminary actions before beginning the process:
- Designating a street or area where a High Street Rental Auction can be used, including a 28-day minimum community engagement period;
- Satisfying the vacancy condition and local benefit condition;
- Obtaining information about the premises in question (local authorities may want to capture this information in a vacancy register;
- Engaging with landlords to encourage cooperation between parties; and
- Surveying the premises to assess the suitable high street use and/or the works needed for the premises to reach the Minimum Standard.
Using a High Street Rental Auction
The High Street Rental Auction Process begins with a 10 to 12 week Notice Period and then a 12 week Auction Period.
Notice Period
The Notice Period begins with a local authority serving an initial notice on the landlord of premises they have identified as eligible for a High Street Rental Auction. The landlord will then have the chance to make their own arrangements to enter into a tenancy, if this tenancy begins within 8 weeks of the serving of the initial notice and provided, they meet certain conditions. If the landlord fails to enter into such a tenancy, the local authority may serve a final notice informing the landlord of the local authority‘s intention to run a High Street Rental Auction in relation to the premises. The landlord has the chance to serve a counter-notice, objecting to the final notice, and appeal. Assuming the final notice is not withdrawn by the local authority following counter-notice, or successfully appealed, the process will then move to the Auction Period.
Auction Period
The local authority then has 12 weeks to (1) auction the premises and (2) complete the tenancy contract.
During weeks 1 to 4 of the Auction Period the local authority and landlord should engage with each other, with the landlord being required to provide information about the premises and being afforded the opportunity to make representations on the proposed terms of the tenancy contract and tenancy, so that the auction pack can be created. The tenancy contract and tenancy, along with several other documents, will make up the auction pack. A marketing period (operating during weeks 5 to 9 at a minimum) follows where interested parties can register their bid with the local authority. In weeks 10 to 11 of the Auction Period the local authority must serve the bids on the landlord before a successful bidder is chosen. The auction process concludes when a tenancy contract is exchanged between the successful bidder and the landlord.
After the auction
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, which will set out the specific obligations on the tenant and landlord during the term of the tenancy.
Following completion of the landlord’s works the tenancy is granted.
Process flowchart
Alternative plain text version:
Pre-HSRA work
- Considerations for using High Street Rental Auctions (local authority)
- Designating a high street or area (local authority)
- Obtaining property information and creating vacancy register (local authority)
-
Surveying (local authority)
- Local authority and landlord engagement (landlord)
Notice period
Initial notice period
- Local authority serves an initial notice on landlord (local authority)
Grace period
-
Grant or refuse consent on a proposed tenancy (local authority)
- Landlords have 8 weeks to enter a satisfactory tenancy (landlord)
- Restrictions on lettings in place on a landlord during grace period (landlord)
Final notice
- Searches (local authority)
- Local authority serves final notice on landlord (local authority)
Counter-notice period
-
Local authority can choose to withdraw from process (local authority)
- Landlord can serve a counter-notice to set out their ground(s) of appeal (landlord)
- Restrictions in place on lettings and works during final notice period (landlord)
Appeal period
- Landlord can issue an appeal (landlord)
Auction period
Auction period begins
- Conditions to start the auction are met (local authority)
Week 1 and 2
- Serve notice of intention (local authority)
- Setting the use (local authority)
- Provide landlord with proposed tenancy contract / tenancy and request property info from landlord (local authority)
Week 3 and 4
-
Prepare marketing brochure and serve the auction pack (local authority)
- Landlord represent actions (landlord)
- Provide the local authority with pre-contract enquiry details (landlord)
Weeks 5 to 10
- Marketing period (local authority)
- Logging bids (local authority)
- Submit valid bid (tenant)
Weeks 10 to 12
-
Serve bids on landlords (local authority)
-
Choosing a successful bid - exchange tenancy contract (landlord)
After the Auction
-
Inform successful bidder of outcome (local authority)
- Carries out landlord’s works (landlord)
- Enters into tenancy (landlord / tenant)
- Completes fit out works (tenant)
Considerations for using a High Street Rental Auction
High Street Rental Auctions are a permissive power for local authorities which aim to tackle the problem of persistently vacant premises on high streets by empowering places to bring vacant units back into use.
They will provide local authorities with a tool to use in places where vacancy rates are a problem and where there is little cooperation between landlords and local authorities. We know that many landlords are proactive and want to fill their shops and we would always encourage local authorities to work with proactive landlords in the first instance.
Where a landlord is not proactive or has been unable to secure a tenant, local authorities should consider whether there is likely to be interest from prospective tenants were the premises available at the Minimum Standard and at a fair market rent. In these instances, High Street Rental Auctions will provide a viable way to ensure vacant premises once again become active contributors to the local economy and high street experience.
High Street Rental Auctions may also help to fill premises where lenders conditions would otherwise limit a tenancy taking place at market rent, this is because a tenancy entered in to via a High Street Rental Auction is considered to have the deemed consent of lenders[footnote 3].
Conditions to satisfy to use a High Street Rental Auction
The local authority must be satisfied that the premises meet the vacancy condition and the local benefit condition before issuing an initial notice.
The vacancy condition states that premises are eligible for a High Street Rental Auction where it has been unoccupied continuously for 12 months, or for at least 366 days (non-continuously) within a 24-month period[footnote 4].
The local benefit condition states that the local authority must be satisfied that the occupation of the premises for a suitable high-street use would be beneficial to the local economy, society, or environment[footnote 5].
Further details on satisfying the vacancy condition can be found at page 19.
Where High Street Rental Auctions will not be appropriate
High Street Rental Auctions will not be suitable for all high street premises; for instance, large former department stores may be subject to long-term, complex redevelopment plans which may be negatively impacted by being subject to inclusion.
Given the likely significance of repair costs payable by the landlord; premises which are affected by significant issues, such as a dangerous structures notice, contain combustible cladding, or have serious condensation or damp issues are likely to be outside the scope of these measures.
Such issues may be identified during the High Street Rental Auction process. As the local authority will be commissioning a survey of the premises to identify any works required by the landlord, we advise that they ask surveyors to flag if any significant issues of this nature are found.
A High Street Rental Auction will also not be appropriate should the local authority consider that there is not likely to be a sufficient tenant base and demand for the premises, should it be available at the Minimum Standard and at a fair market rent.
Alternatives to High Street Rental Auctions
We want to see local authorities working proactively with landlords to bring properties back into meaningful use. Engagement between local authorities and landlords is encouraged in all cases to ensure other avenues to filling the premises are considered. For example, local authorities could provide planning advice where applicable to unlock further opportunities.
High Street Rental Auctions provide a valuable tool to address persistently vacant premises. However, as per the section above, they will not be applicable in all circumstances.
Where wider redevelopment plans in an area exist, the local authority should make these clear to the landlord. With their buy-in to regeneration plans and knowledge of future inward investment, landlords could be more willing to refurbish their property and find a tenant without the need for a High Street Rental Auction.
Where the premises may be part of upcoming plans for development, or where a sufficient tenant base does not exist, a local authority could consider using powers under section 215 of the Town and Country Planning Act 1990 to require land or a building to be cleaned up when its condition has an adverse impact on an area[footnote 6]. The powers also allow local authorities to undertake the work themselves and recover the costs from the landowner. The use of section 215 by local planning authorities is discretionary and it is therefore up to them to decide whether a notice under these provisions would be appropriate in a particular case, taking into account all the local circumstances. They will need to consider, for example, the condition of the site, the impact on the surrounding area and the scope of their powers. In some circumstances section 215 notices may be used in conjunction with other powers, for example, repair notices in respect of listed buildings or dangerous structure notices. There is full guidance on how best to use these powers online at Town and Country Planning Act 1990 (PDF, 509KB).
Premises which are affected by significant issues, such as a dangerous structures notice, contain combustible cladding, or have serious condensation or damp issues, are likely to be outside the scope of these measures. In such cases, use of compulsory purchase powers may be more relevant. Compulsory purchase is a legal mechanism by which local authorities can acquire properties without the consent of the owner, providing the authority can demonstrate that there is a compelling case in the public interest for the compulsory acquisition to proceed. Local authorities have a power under section 226 of the Town and Country Planning Act 1990 to make Compulsory Purchase Orders (CPOs) for the purpose of regenerating their areas. This power may be used by local authorities to take permanent ownership of empty and/or vacant properties with the purpose of bringing them back into use.
We are aware that many local authorities have been proactive in setting up successful schemes to tackle vacant property in their area. Whilst these approaches will not be directly transferable in all places, there are examples of good practice:
Bristol City Council Vacant Commercial Property Grant scheme
The Vacant Commercial Property Grant aimed to support local businesses to open new premises in the city centre on one of Bristol’s 46 high streets, and trade with confidence.
Grants from £2,500 up to £10,000 were available to new or expanding small organisations who were looking to lease or rent new property either for long term, temporary or meanwhile use.
All organisation types were able to apply, including limited businesses, sole traders, charities, community interest companies (CICs), voluntary organisations, and arts and culture groups.
Funding could be used for capital expenditure including structural works to a property or equipment to be used in the property.
The amount of funding depended on the length of lease or rental agreement. Applicants needed to match the amount they’re awarded by 20%.
The council’s Economic Development team is committed to supporting organisations from all industries, and to making the application process accessible to as many people as possible, representing the diversity of Bristol’s residents and business community.
Successful applicants have received support from the council’s Business Development Officers to help them understand their strengths and weaknesses, grow and sustain their business, manage their marketing, attract new audiences and gain access to other local services.
In the 3 years since launch, in November 2021, the council’s Economic Development team has received over 603 enquiries and supported 137 (including awarded and approved) new and expanding small businesses, charities and social enterprises, allocating £1,108,398 in grants to open new shops and premises.
To date, over 213 (at initial visit) new jobs have been created and the grant has helped to reduce the city centre vacancy rate by 3.7.
The council website includes guidance notes, the application form and case studies of some of the successful applicants who have received funding.
Sustainable Wantage case study
Wantage is a market town in Oxfordshire with a population of around 11,000. In 2013 it had 23 empty shop units and there was a desire to see activation in the town centre again. Sustainable Wantage took over a derelict former off-licence in a line of shops just off the historic market square. This space now runs as The Mix Community Space. The Mix, alongside pop-up shop projects, the ‘place partnership’ involvement of its district and town councils, agents, landlords, businesses and community, and the reduction in vacant unit numbers (which dropped from 23 to 3 in 18 months), contributed to Wantage winning a Great British High Street Award in 2014.
Taking on The Mix allowed Sustainable Wantage to transition from ad hoc pop-up events to having a fixed venue where people can find them and where they can run regular activities. This helps them to achieve their overarching goal of promoting and providing opportunities for people to make sustainable choices.
Obtaining funding to get started was a major obstacle as at the time of taking on the space, Sustainable Wantage were a small Community Action Group with no track record of long-term projects. In order to sign a lease Sustainable Wantage had to formalise its structure; they chose to incorporate as a Community Benefit Society, a form of co-operative. Getting the building fit for purpose took 6 months of renovation, which was achieved through the input of local residents and the generosity of local businesses that provided their services for free or at greatly reduced rates. Following this, Sustainable Wantage had 6 months of rent-free use and then took on a paid licence/ lease. In 2016 the project received Section 106 funding for ten hours per week paid co-ordinator time. The use of the building has since gone from strength to strength, with Sustainable Wantage taking on an employee to coordinate activities in the space in December 2019.
Impacts of Sustainable Wantage taking on The Mix include:
- Building relationships with individuals and with organisations and interacting with a wide range of the community.
- Providing a venue for community projects to take place.
- Bringing new visitors into town from the surrounding area.
- Giving people opportunities to chat about sustainability and related topics. Cross-pollination of ideas and projects.
- Sustainable Wantage has been able to share their experience and support other local groups
Some pieces of advice from Sustainable Wantage’s experience:
- Community support is crucial, e.g. tradespeople - providing services free of charge, volunteer help (without which The Mix couldn’t operate), and general community goodwill.
- You need a few key people who are really invested and committed, there will be tough times (finding funding is an ongoing challenge).
- Make use of people’s skills and knowledge, there’s a huge amount of expertise within the community, everyone can help in their own way.
- You don’t have to reinvent the wheel, there are lots of community projects around the UK achieving great things; ask questions, explore, and share what works.
- Don’t be afraid of trying something, seeing what happens and what it leads to - dream big!
Find a full case study
Wolverhampton Vacant Properties Taskforce
The City of Wolverhampton Vacant Properties Taskforce is a proactive response to the issue of empty buildings in the city centre and surrounding urban centres which supports wider regeneration work already underway by the Council and its public and private sector partners.
The Taskforce works directly with property owners to encourage redevelopment of key vacant sites and repurposing of empty high street units to bring them back into use. The Taskforce is also tackling the impact of untidy buildings by requiring owners to properly maintain their properties, utilising enforcement powers where necessary.
Since its inception in February 2024, the Vacant Properties Taskforce has helped to facilitate the redevelopment of iconic buildings in the city centre such as the iconic former Beatties department store. Planning permission was granted in September 2024 for the site’s redevelopment into a mixed-use scheme with 73,000 square feet (sq ft) commercial space and 306 apartments, including the restoration of the building’s distinctive historic features.
The Taskforce has also harnessed planning enforcement powers under Section 215 of the Town and Country Planning Act to address antisocial behaviour issues associated with unkempt vacant buildings. Properties requiring improvement in the city centre and surrounding areas have been identified and Section 215 Notices are being served to compel owners to improve the condition of their properties.
Ultimately, the Taskforce’s efforts are helping to secure the full potential of Wolverhampton’s city centre and town centres by promoting development that increases footfall and demand for new amenities and services. It also enhances the appearance of the built environment to attract further investment, complement new public realm and improve the experience of residents, workers and visitors alike.
New Burdens Payment
What is the New Burdens Payment?
To ensure that the pressure on council tax is kept to a minimum, funding is made available from central government where new or amended legislation is assessed to have a financial burden on local authorities. The New Burdens Payment will compensate local authorities for costs incurred in the implementation of new powers during a 3-year transition period. The New Burdens Payment is a non-discretionary payment. This payment will offset the marketing, auction and legal costs incurred as a result of implementing the Regulations. Further information on the New Burdens doctrine is available at New burdens doctrine: guidance for government departments.
How was the New Burdens Payment calculated?
As High Street Rental Auctions are permissive powers, funding is available to those local authorities who implement the process. Funding has been calculated based on the estimated net deficit as a result of direct costs incurred by a local authority. This means that where the process allows for costs to be recovered, these have been offset and are not included in the payment value. Costs have been tested in the open market and the average has been applied to establish the likely ‘burden’ incurred.
How and when do I apply for the New Burdens Payment?
Local authorities can apply for the New Burdens Payment to cover the cost of implementing a rental auction per property. All local authorities in England are eligible to apply, and the indicative (non-ringfenced revenue) grant is available to cover the cost incurred to run a single High Street Rental Auction. There is no limit to the number of auctions an authority can undertake.
The payment is expected 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.
We have engaged on the costs that amount to a burden and expect the total cost per High Street Rental Auction to be £5,223. This amount will be reviewed on an annual basis. Funding will be awarded under section 31 of the Local Government Act 2003 via a Grant Determination Letter.
The New Burdens Payment is available to all local authorities in England during the 3-year transition period which is when activities are deemed business as usual. Grant payments can be requested from 15 January 2025 until 14 January 2028 or until the burdens are met through a Spending Review bid or a Local Government Finance Settlement.
The New Burdens Payment will be released in a single application:
i. If an initial notice has been served and the local authority does not progress the case to the marketing stage, then they are entitled to draw down £1,791. This is to cover the legal costs incurred in issuing the initial notice and to gain access to the premises. Local authorities will need to attest that the initial notice has been issued in accordance with the regulations and to confirm the address of the premises subject to a High Street Rental Auction.
ii. Where the High Street Rental Auction enters the marketing stage, local authorities are entitled to draw down the full £5,223 to cover the legal, marketing and auction costs. Local authorities will need to attest that the marketing period has been entered in accordance with the regulations and to confirm the address of the premises subject to a High Street Rental Auction.
Ideally grant payments will be requested within the same financial year in which the activities take place. Local authorities can outsource delivery in line with the outsourcing section of the guidance provided that they retain overall responsibility for, and ensure compliance with their legal obligations, as set out in the Act, the Regulations and within this guidance.
Applications for the new burdens payment opened on 15 January 2025 and will close on 14 January 2028. Information on how to apply can be found in the New burdens payments for High Street Rental Auctions: prospectus.
Steps prior to using a High Street Rental Auction
To qualify for a High Street Rental Auction, premises need to be situated on a designated high street or in a designated town centre and the local authority needs to consider them to be suitable for a high-street use.
The local authority is responsible for designating their streets or areas where a High Street Rental Auction could be used. The local authority must maintain and make available to the public a list describing, and a map showing, any high streets or areas it has designated. This is similar to the process a local authority would take to designate and display a conservation area.
In designating a street or area in which a High Street Rental Auction could be used, the local authority must be satisfied that the street or area is important to the local economy because of a concentration of premises undertaking high-street uses on the street or area.[footnote 7]
Any use of premises that falls within any of the following is deemed a “high-street use”:
1. use as a shop or office;
2. use for the provision of services to persons who include visiting members of the public;
3. use as a restaurant, bar, public house, café, or other establishment selling food or drink for immediate consumption;
4. use for public entertainment or recreation;
5. use as a communal hall or meeting-place; and
6. use for manufacturing or other industrial processes of a sort that can (in each case) reasonably be carried on in proximity to, and compatibly with, the preceding uses.[footnote 8]
A street or area should not be designated if the local authority considers that its importance derives principally from goods or services purchased in the course of business. For example, a premises in an industrial estate where transactions or business are principally conducted between one business and another.
The local authority can withdraw or vary their designations at any time. The designation is a local land charge. This means that the designation will be shown on a local land charges search. The local land charges department of a local authority will usually be responsible for this, or HM Land Registry where the local authority data has migrated across.
Community engagement on high street designation[footnote 9]
The local authority must publish any proposed high street designation, or any variation of an existing high street designation. They should invite comments from the local community via email and post and for no less than a period of 28 days.
The premises
The premises to be auctioned can comprise:
- The whole of a building that is designed or adapted to be used as a whole; or
- 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[footnote 10].
This means that premises on different floors of a building could be auctioned if they are designed or adapted to be used separately from other parts.
We have provided standardised lease documentation with this guidance to account for scenarios where premises form part of a building or the whole of a building.
Premises are situated on a street if the building comprising or containing the premises directly adjoins the street or is separated from the street only by the curtilage of the building.
A “street” means a street to which the public has access on foot and is otherwise defined by reference to s.48(1) of the New Roads and Street Works Act 1991.
Satisfying the vacancy condition[footnote 11]
The local authority must be satisfied that the premises falls within a designation and meets the vacancy condition and the local benefit condition[footnote 12] before issuing an initial notice[footnote 13]. The vacancy condition states that premises are eligible for a High Street Rental Auction where it has been unoccupied continuously for 365 days, or for at least 366 days within a 24-month period.
For the purposes of High Street Rental Auctions and assessing the vacancy condition, occupation of a premises must amount to activity that is substantial, sustained, and involves the regular presence of people.
Obtaining information about premises (to establish vacancy)
To determine whether premises are vacant for the purpose of a High Street Rental Auction, the local authority should carry out due diligence into the length and nature of any occupation of the premises over the last 2 years.
The local authority may wish to consider checking any of the records and information available to them or making requests. This may include:
- Carrying out searches at HM Land Registry;
- Making enquiries of the occupiers of adjoining premises;
- Liaising with their Business Rates team (to the extent it is possible to share information between teams);
- Seeking information from marketing agents who may be advertising vacant premises;
- Seeking information from former tenants or occupiers of the premises;
- Asking the landlord directly, either informally or using their power to require any ‘interested person’ to give information about premises[footnote 14];
- Evidence of vacancy captured digitally – land registry, street view imagery;
- Evidence of vacancy captured physically – officer site visits, reports, photos; and
- Evidence of planning/enforcement actions taken to date.
Note that an ‘interested person’ means a person who appears to the local authority to have an interest in the land (e.g. tenancy or other occupational interest) in which the premises are comprised.
The local authority should give separate consideration as to who is the “landlord” of the premises for the purpose of serving the initial notice. The landlord for these purposes is the person who is entitled to possession of the premises and has sufficient interest in the premises to be capable of granting a tenancy of the premises of at least one year in duration.[footnote 15]
The local authority can seek to establish who is the “landlord” by carrying out searches at HM Land Registry and using their power to require any ‘interested person’ to give information about premises.
See Annex 17 for an example letter for local authority to request information about premises – general request e.g. who is in occupation.
Vacancy Register
We encourage the local authority to create a register for the purpose of identifying potential vacant properties to be considered for a High Street Rental Auction. This could be a simple spreadsheet of data collected using the methods set out in the section above to include key information about commercial premises such as:
- Address details;
- Ownership and occupation details;
- Landlord details;
- Agent details;
- Details of vacancy captured digitally – HM Land Registry, street view imagery;
- Details of vacancy captured physically – officer site visits, reports, photos; and
- Details of planning/enforcement actions taken to date.
Satisfying the local benefit condition[footnote 16]
The “local benefit condition” will be considered satisfied 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.
Whilst the policy has been designed in recognition that the filling of vacant property will usually be beneficial in one of these areas, we recommend that the local authority consider likely societal, economic, and environmental effects of using a High Street Rental Auction on a given property and record these in writing. They should ensure that they consider there to be a positive impact in one or more of these areas before proceeding.
Engaging with landlords
We expect local authorities to work proactively with landlords to bring properties back into meaningful use, where possible. Local authorities are therefore encouraged to engage with landlords in the first instance. Where landlords and local authorities are both constructive and pragmatic, alternative options for bringing the premises back into use may be identified, avoiding the need for a High Street Rental Auction to take place. Equally, we recognise that there are many good reasons for a property being vacant including plans for its redevelopment. In these circumstances, we encourage the consideration of alternatives such as meanwhile use or, where High Street Rental Auctions are to be used, the compromise of a shorter tenancy.
Where a High Street Rental Auction is taken forward, we will also be looking for local authorities to work with landlords within the rental auction process, where the landlord is willing to do so. Much of the process – for example, the auction model – has been designed to allow landlords to input into decisions that determine the details of the tenancy and who the tenant will be. The landlord must however feed in within a timely manner and local authorities are provided powers to proceed unhindered where a landlord does not respond or comply.
It is a criminal offence (the potential of a fine up to level 4 on the standard scale, with level 4 currently set at £2,500) for a landlord not to respond to requests for information about premises made by a local authority without reasonable excuse or to give false information in response to such requests[footnote 17]. Local authorities should make landlords aware of this in communications. It is not in a landlord’s interest to refuse to supply the required information because, as noted above, where information is not supplied, local authorities are empowered to proceed with the process in default of this information. The lack of information may lead to lower rental bids.
Surveying [footnote 18], [footnote 19], [footnote 20]
Prior to serving an initial notice, the local authority may wish to survey premises to consider their suitability for a High Street Rental Auction. This survey could be completed by a member of the local authority and/or a qualified building surveyor and should identify whether premises are suitable for a High Street Rental Auction, potential uses for which the premises could be used (see below), and/or the works needed to bring the premises up to the Minimum Standard.
The local authority should also consider the position with the Energy Performance Certificate (EPC) for the premises and whether one exists. This is because when premises are offered for rent, the asset rating of the building in the Energy Performance Certificate must be stated in commercial marketing where one is available. The local authority may therefore need to commission an Energy Performance Certificate before marketing if there is no existing valid certificate. The local authority will need to make the valid certificate for the premises available to prospective tenants. For further details see: A guide to energy performance certificates for the construction, sale and let of non dwellings.
By the end of Week 2 of the Auction Period, the local authority must also have conducted a survey of the premises to ascertain a list of works required from the landlord for the premises to reach the Minimum Standard. This survey must be conducted by a qualified building surveyor. See further details on the required landlord’s works.
For ease, local authorities may wish to instruct a surveyor to complete a single survey which assesses suitability and ascertains appropriate uses and a list of works ahead of serving the initial notice. However, local authorities should note the costs for this survey would be unrecoverable should the landlord find a tenant prior to the serving of a final notice.
The local authority should try to agree with the landlord that access for surveys is provided voluntarily. Where this is not possible, the local authority can utilise the power to enter and survey land contained in the Act. This includes entry to the premises which are proposed to be auctioned, and other land in order to gain access to such premises. This power may be exercised only if the local authority has given, or made all reasonable efforts to give, notice of the survey to the landlord (or person who appears to the local authority to be in possession of the premises) at least 14 days ahead of the survey taking place.
Where the local authority opts to conduct a survey to ascertain a list of works at a later stage, they will need to account for the 14-day notice period and may therefore wish to consider serving notice of entry in good time ahead of service of the final notice. This will allow the survey to take place as soon as possible when the final notice is served and ahead of their requirement to provide the list of landlord’s works in Week 2 of the Auction Period.
The landlord must provide access to the local authority for the survey. If they fail to do so, the local authority may proceed to enter the premises without consent, subject to the following safeguards for landlords[footnote 21]:
a. The power may be exercised only at a reasonable time;
b. The power may not be exercised in a way that involves the use of force, except on the authority of a warrant issued by a justice of the peace;
c. Such a warrant:
i. may be issued only on an application supported by evidence given on oath,
ii. may be issued only if the justice of the peace is satisfied that reasonable efforts have been made to exercise the power without the use of force; and
iii. must specify the number of occasions on which it can be relied,
d. A person exercising the power must produce:
i. evidence of any authorisation given by the local authority for a person to enter the premises; and
ii. a copy of any warrant issued if so requested by any person who appears to have control over the premises or other land,
e. If no person who appears to have control over the premises or other land is present when the power is exercised, the person exercising the power must leave the premises or land as secure against trespassers as when the person entered.
It is important that the local authority follows the process above to ensure the safeguards put in place for landlords are met.
Those occupying the premises to be surveyed should be aware that it is an offence for a person who, without reasonable excuse, obstructs a person who is exercising the power to enter and survey the premises (which is liable on summary conviction to a fine not exceeding level 3 on the standard scale (currently £1,000)).[footnote 22]
Local authorities should also note that it is an offence for a person who, in the exercise of the power to enter and survey premises, discloses confidential information (i.e. trade secrets or information likely to prejudice the commercial interests of any person) obtained in the exercise of these powers (which is liable on summary conviction to a fine, or on conviction on indictment to imprisonment for a term not exceeding 2 years, or a fine, or both)).[footnote 23]
See Annex 19 for example letter requesting access for local authority to enter and survey the premises and other land.
Setting the use[footnote 24]
The local authority can set the use(s) for which bids to enter a tenancy of the premises will be eligible. This includes:
a. use as a shop or office;
b. use for the provision of services to persons who include visiting members of the public;
c. use as a restaurant, bar, public house, café, or other establishment selling food or drink for immediate consumption;
d. use for public entertainment or recreation;
e. use as a communal hall or meeting-place; or
f. use for manufacturing or other industrial process of a sort that can (in each case) reasonably be carried on in proximity to, and compatibly with, the proceeding uses.
The ability for a local authority to set use has been designed with placemaking in mind and as such local authorities can, within the tenancy, restrict the use beyond the broader planning use class of a property. A tight restriction on use may not, however, always be appropriate and in some instances may restrict the pool of bidders for the premises. When setting the use, local authorities should consider the demands of the surrounding area, and which type of use(s) are likely to attract a successful business which will add most value to the high street. They are advised to consider community representation in relation to the make-up of the high street or town centre. They should also consider amenity impacts and other relevant planning matters when considering the suitability of any future use, including compatibility with neighbouring uses and existing planning conditions. Local authorities are further advised to engage with their planning teams or the local planning authority (where this is not the local authority) when making these considerations.
The Permitted Development Right for suitable high street use supports the policy and allows for any change of planning use which may be required following the auction. It serves to ensure bidders are free from the uncertainty of knowing whether a planning application for change of use will be successful; limits the need for speculative planning applications from bidders; and prevents new tenants entering a tenancy whilst still requiring consent for a change of planning use. The change of planning use will be applicable only to and for the duration of the tenancy agreed through the relevant High Street Rental Auction.[footnote 25]
The local authority will set the uses for which bids will be permitted, with the Permitted Development Right for suitable high street only providing for a temporary change of planning use, as required. For example, if the local authority is of the view that a vacant pub should stay a pub, they can limit an auction to only prospective pub businesses.[footnote 26]
To note, it is expected that most qualifying high-street premises and suitable high-street uses will be in use Class E – a broad planning use class encompassing many commercial, business and services uses, including shops, offices, cafes, gyms, GP surgeries and nurseries. In these cases, no change of planning use will occur, so the Permitted Development Right for suitable high street will not be needed. However, it should also be understood that being in use Class E does not in itself allow the High Street Rental Auction property to move use to any use within use Class E following commencement of the tenancy, as the tenancy will stipulate which uses are permitted.
Local authorities should also consider which buildings, and which locations, may benefit from the High Street Rental Auction process. In doing so, they should consider the impact on any relevant designations: such as if the building in question is listed, or in a conservation area.
The Permitted Development Right for suitable high street does not permit any physical works that would amount to development, unless other permitted development rights apply (N.B. generally speaking works affecting only the interior do not require planning permission).
Separate from planning permission, listed building consent will be required for any internal or external works affecting the character of a listed building.
Planning use class[footnote 27]
The Permitted Development Right for suitable high street use that supports the policy should be relied upon if the building’s extant planning use and the proposed use of the successful bid are not in the same planning use class.
As noted above, in the majority of cases, we expect that the existing planning use and proposed planning use of the building will fall within use Class E, a broad use class that includes most commercial, business and service use(s), such as shops, cafes, or gyms. In these cases, no change of use requiring planning permission will occur and the Permitted Development Right for suitable high street will not need to be engaged.
The Permitted Development Right for suitable high street allows for the change of use of a building which is a qualifying high street premises. The permitted development right does not apply in military explosive storage areas or safety hazard areas. The local authority needs to inform the local planning authority of:
a. the suitable high street use for which the premises will be used;
b. the date on which the use will commence; and
c. the date on which the use will cease.
The date on which the use will commence ((b) above) will arise once the tenancy is granted and the tenant has assumed occupation of the premises. The tenancy contract obliges the landlord to serve notice on the local authority as soon as the landlord’s works are complete (the completion of the landlord’s works then triggers the grant of the tenancy). This notification should then allow the local authority to notify the local planning authority of the date on which the use will commence under the tenancy.
The tenant should also ensure this step has been completed by the local authority to make sure the use of the premises is legal for the duration of the tenancy.
Any change of use permitted through the Permitted Development Right for suitable high street use only applies for the duration of the High Street Rental Auction tenancy, and the building’s planning use will revert at the end of the tenancy.
The Minimum Standard[footnote 28]
Following the High Street Rental Auction, the landlord may need to undertake works to ensure the premises is in a condition which is safe and from which a tenant may trade following their own fit out. A tenant can enforce this requirement through the terms of the tenancy contract.
The survey referred to above within this guidance will be used to ascertain if any works are required. In considering the need for works, surveyors will be considering the property’s compliance with a minimum standard which is set out in the tenancy contract and defined as the “Minimum Standard”:
“Minimum Standard” means a condition which is safe, secure and with any significant occupational risks removed or managed by which it is meant:
a. there can be no significant water ingress or leaking pipework, no unstable or loose elements which may fall and cause harm;
b. all internal doors, and external doors (used to access the premises), are capable of operation for safe ingress or egress;
c. all external windows are capable of operation (where so designed) for ventilation or escape in an emergency;
d. the interior of the premises will be clear from debris, vermin, significant deviations from plan;
e. all fire safety requirements for a vacant building must be in place, with fire and smoke detection operating and certified, and fire doors and compartmentations in a condition supported by a fire risk assessment;
f. mains water and electrical supplies, should be connected, certified as safe, or capable of re-connection without significant expense to the tenant;
g. gas, if present, should be connected, certified as safe, or capable of re-connection without significant expense to the tenant;
h. toilet and hand washing facilities should be provided and be operational and capable of free-flowing discharge to a mains drainage connection;
i. any shop fronts forming part of the premises should be provided with glazing, frames and entrance doors which are intact, sound, and operational;
j. there should be no fungal decay, or mould growth which presents a risk to, respiratory health, or the structural integrity of the premises.
Find further information on the landlord’s works and tenancy contract.
Using High Street Rental Auctions
Notice Period (prior to auction)
Weeks 1 to 8
To start the High Street Rental Auction process, the local authority must serve an initial notice on the landlord of premises they have identified as eligible for a High Street Rental Auction. A minimum 8-week grace period for the landlord then begins following the initial notice taking effect.
Serving initial notice[footnote 29]
The local authority can serve the initial notice when:
a. the premises falls within a high street designation; see further details on making a high street designation.
b. the local authority considers the premises is suitable for the proposed high street use; see more information on setting the use.
c. the local authority considers the vacancy condition is satisfied; see more information on vacancy condition.
d. the local authority considers the local benefit condition is satisfied, see more information on the local benefit condition.
The initial notice must be served on the landlord at both the premises and an appropriate address of the landlord, such as their registered office (in the case of a company). The initial notice must either be left at (i.e. hand delivered) the premises and appropriate address or sent by registered post service or a postal service which provides for delivery to be recorded. Where the initial notice is left at an address, it is deemed to be served on the day of delivery, provided it is left before 4.30pm on a working day. Where the initial notice is sent by the required postal method, it is taken to have been received 48 hours after it was sent unless the contrary is shown.[footnote 30]
An initial letting notice expires (if it has not been withdrawn) when:
a. a final letting notice in relation to the premises takes effect, or
b. at the end of the period of 10 weeks beginning with the day on which the initial letting notice takes effect.
If the local authority is aware of any person who:
c. has an interest in the affected premises, which is superior to that of the landlord, or
d. is a mortgagee of the affected premises,
they must also serve a copy of the initial notice on that person. The local authority must use reasonable endeavours to determine whether there is a superior landlord or mortgagee.
An initial notice served by a local authority must be in the form set out at Form 1 of this guidance, and contain the information required by that form.
The local authority must complete the details of the initial notice carefully. This includes completing:
i. the date on which the initial notice takes effect, which must be after the date on which the initial notice is considered to have been served under Regulation 14 of the Regulations (see guidance above on when the initial notice is deemed to be served), and
ii. the date on which the initial notice expires, which must be the date at the end of a period of 10 weeks starting on the date on which the notice takes effect.
See Annex 1A for guidance on completing Form 1 and completing the date on which the initial notice takes effect and the date on which it expires.
See Annex 1 for the Initial Notice Form Template (Form 1).
See Annex 11 for the example covering letter for local authority to serve an initial letting notice.
See Annex 12 for the example covering letter for local authority to serve a copy of an initial letting notice on mortgagee or superior landlord.
Grace period and restrictions on letting
During this period, landlords have 8 weeks to enter a tenancy or licence with the consent of the local authority. The local authority must give consent to the tenancy or licence if the following conditions are met:
a. it begins within the 8-week grace period;
b. it is one year or longer (and a term which includes a landlord or licensor break right within the first year shall be taken to be less than one year); and
c. it is likely to lead to the occupation of the premises for a high street use.[footnote 31]
Any tenancy or licence granted by a landlord of premises (subject to the initial notice) during this period without consent of the local authority is void.[footnote 32]
Local authorities should consider the possibility of the landlord having purported to grant a tenancy which is void. It may wish to monitor the position during the grace period by inspecting the premises at various intervals and making enquiries of any occupants, as well as the landlord.
The landlord is allowed to sell the premises while the initial notice is in force, however any purchaser will remain subject to the initial notice and its restrictions on letting[footnote 33].
Local land charge
The initial notice is not affected by any change in landlord of the premises, and it is also stated in the Act to be a local land charge[footnote 34].
This means that the initial letting notice should be shown on a local land charges search. The local land charges department of a local authority will usually be responsible for this, or HM Land Registry where the local authority data has migrated across.
Entering a tenancy during the grace period
Should a landlord believe they have a suitable tenancy to enter, they should present details of the proposed tenant including a draft tenancy agreement to the local authority.
The local authority should review the terms of the proposed tenancy or licence to see if it meets the conditions before informing the landlord of their decision.
The local authority must give or refuse consent to the landlord within a reasonable timeframe. What constitutes “reasonable timeframe” will depend on the facts and circumstances but will generally be measured in terms of days or weeks rather than months.
If the local authority is content that the conditions of a tenancy have been met and the premises is brought back into high street use, the High Street Rental Auction is no longer required and does not proceed.
If the local authority is not content that the conditions of a tenancy have been met and does not approve the tenancy, the landlord still has the remainder of the 8-week grace period to enter a tenancy which complies with the conditions above. If no tenancy complying with the conditions is entered into by the end of the 8-week period, the High Street Rental Auction progresses to the next stage.
Issuing a notice to survey the premises
The local authority must conduct a survey on the premises to ascertain a list of works required from the landlord in order for the premises to reach the Minimum Standard. Find [further details on the required landlord’s works](#landlords]. Notice of the survey[footnote 35] must be given to the landlord at least 14 days ahead of the survey taking place, meaning such notice should be served by the end of Week 8 to avoid delays during the Auction Period.
Weeks 9 and 10
If a landlord fails to let their premises during the 8-week grace period, local authorities can serve a final notice on the landlord.
Serving the final notice [footnote 36], [footnote 37]
The deadline for serving the final notice is 14 days from expiry of the 8-week grace period. If this period passes without service of a final notice, the initial notice will expire, and the local authority would need to start the process again (should they wish to continue).
The final notice must be served on the landlord at both the premises and an appropriate address of the landlord, such as their registered office (in the case of a company). The final notice must either be left at (i.e. hand delivered) the premises and appropriate address or sent by registered post service, or a postal service which provides for delivery to be recorded. Where the final notice is left at an address, it is deemed to be served on the day of delivery, provided it is left before 4.30pm on a working day. Where the final notice is sent by the required postal method, it is taken to have been received 48 hours after it was sent, unless the contrary is shown.
A final notice served by a local authority must be in the form set out at Form 2 of this guidance, and contain the information required by that form.
If the local authority is aware of any person who:
a. has an interest in the affected premises, which is superior to that of the landlord, or
b. is a mortgagee of the affected premises,
they must also serve copy of the final notice on that person. The local authority must use reasonable endeavours to determine whether there is a superior landlord or mortgagee.[footnote 38]
The local authority must complete the details of the final notice carefully. This includes completing:
a. the date on which the final notice takes effect, which must be before the date on which the initial notice expires and later than the date on which the notice would be considered served under regulation 14[footnote 39] (see guidance above on when the final notice is deemed to be served); and b. the date on which it expires, which is at the end of the period of 14 weeks beginning with the day on which it takes effect.
If, after 14 days of the final notice taking effect there is no counter-notice served by the landlord, the local authority can start the auction process. Find further details of the process to serve a counter-notice.
See Annex 2A for guidance on completing Form 2 and completing the date on which the final notice takes effect and the date on which it expires.
See Annex 2 for the Final Letting Notice Form Template (Form 2).
See Annex 13 for the example covering letter for local authority to serve a final letting notice.
See Annex 14 for the example covering letter for local authority to serve a copy of a final letting notice on mortgagee or superior landlord.
Restrictions in place during the final notice period
Restrictions on letting[footnote 40]
Landlords are not permitted to enter into tenancy agreements whilst the final notice is in force on their premises. The landlord of the premises may not:
a. grant, or agree to grant, a tenancy of, or licence to occupy, the premises, or
b. enter into any other agreement resulting in another person becoming entitled to possess or occupy the premises (except as a result of the transfer or extinction of the landlord’s interest), without the written consent of the local authority that served the notice.
Unlike the grace period where the local authority must permit letting under certain conditions, following service of a final notice, any letting will be at the discretion of the local authority. The local authority must give or refuse consent to the landlord within a reasonable timeframe. What constitutes “reasonable timeframe” will depend on the facts and circumstances but will generally be measured in terms of days or weeks rather than months.
Any tenancy or licence granted by a landlord on their premises during this period without consent of the local authority is void.
Local authorities should consider the possibility of the landlord having purported to grant a tenancy which is void. It may wish to monitor the position following service of the final notice by inspecting the premises at various intervals and making enquiries of any occupants, as well as the landlord.
The landlord is allowed to sell the premises while the final notice is in force, however any purchaser will remain subject to the initial notice and its restrictions on letting[footnote 41].
Local land charge
The final notice is not affected by any change in landlord of the premises, and it is also stated in the Act to be a local land charge[footnote 42]
This means that the final letting notice should be shown on a local land charges search. The local land charges department of a local authority will usually be responsible for this.
Restrictions on works[footnote 43]
While a final letting notice is in force in relation to premises, the landlord of the premises may not carry out, or permit the carrying out of, any works to the premises without the written consent of the local authority that served the notice.
“Works to the premises” includes the alteration or removal of any fixtures or fittings on the premises.
This does not apply to works that are:
a. urgently necessary for repair or preservation, or
b. necessary to fulfil an obligation of the landlord, other than one voluntarily assumed after the initial letting notice preceding the final letting notice took effect.
It is a criminal offence to contravene this restriction and anyone who does so is liable on summary conviction to a fine of up to level 4 on the standard scale (currently £2,500).[footnote 44]
Weeks 11 to 14
Counter-Notice[footnote 45]
The landlord of premises in relation to which a final notice has been served may give a counter-notice to the local authority that served the final notice.
There are several grounds on which a landlord can contest a final notice[footnote 46]. These are:
1. That the vacancy condition was not met in relation to the premises on the day on which the initial notice was served.
2. That the premises cannot reasonably be considered suitable for the use identified in the final letting notice as the suitable high-street use.
3. That the local authority’s view that the local benefit condition was met in relation to the premises was one that no authority giving reasonable consideration to the matter could have reached.
4. That the local authority failed, while the initial letting notice was in force, to give consent to a proposed tenancy, licence, or agreement where the authority:
a. was required to give consent, or
b. would have been so required had it not failed to be satisfied when any authority giving reasonable consideration to the matter would have been so satisfied.
5. That the landlord:
a. intends to carry out substantial works of construction, demolition or reconstruction affecting the premises, and
b. could not reasonably carry out those works without retaining possession of the premises.
6. That the landlord intends to occupy the premises for the purposes, or partly for the purposes, of a business to be carried on by the landlord in the premises.
7. That the landlord intends to occupy the premises as the landlord’s residence. A counter-notice must: a. state that, if the final letting notice is not withdrawn, the landlord intends to appeal against it, and b. specify the ground (which must be a permissible ground) on which the appeal would be brought.
A counter-notice must be received by the local authority within 14 days of the day on which the final letting notice took effect.
Serving counter-notice
A counter-notice served by a landlord must be in the form set out at Form 3 of this guidance, and contain the information required by that form.
See Annex 3 for the Counter-Notice Form Template (Form 3).
Responding to counter-notice
The local authority must determine whether they agree with the grounds put forward by the landlord when considering the counter-notice.
The local authority may ask the landlord for proof that they satisfy the grounds relied on by the landlord, for example in a case where a landlord claims they are intending to carry out substantial works of construction to the premises, the local authority may wish to see redevelopment plans. The local authority may also wish to seek legal advice on the landlord’s chance of success should the matter proceed to appeal.
Where the local authority is prepared to accept the grounds are satisfied, they may then serve a withdrawal notice on the landlord and the process stops. The local authority has 14 days from receipt of the counter-notice in which to serve a withdrawal notice should they decide to do so.
See Annex 15 for example letter for local authority to withdraw a final letting notice.
If the local authority does not serve a withdrawal notice, the landlord may then appeal.
Appeals[footnote 47]
If the local authority does not serve a withdrawal notice within the required timescales the landlord can make an appeal to the county court before the end of a period of 28 days beginning on the day on which the counter-notice was received by the local authority.
The appeal must be brought on the ground(s) specified in the counter-notice.
The County Court will make the decision to either revoke or confirm the final notice.
If the final notice is revoked the process stops and if the final notice is confirmed, the process continues.
If no appeal is brought with the 28-day period, the process continues.
Searches
As soon as possible after serving the final notice local authorities should consider preparing part of the auction pack. This should include undertaking the following searches:
a. local authority enquiries, on conveyancing form CON29[footnote 48], but without including the optional enquiries in conveyancing form CON29O[footnote 49];
b. an official search of the local land charges register; and
c. the standard commercial drainage and water enquiries on conveyancing form CON29DWCom[footnote 50];
d. Flood risk search.
These are standard searches commonly undertaken by lawyers in relation to property transactions. The local authority is only required to undertake these searches as soon as possible after serving the notice of intent (see further guidance below in relation to Week 1 of the Auction Period)[footnote 51]. However, as searches can take some time to return and will be needed at Week 4 of the Auction Period, we recommend the local authority consider beginning the searches before the start of the Auction Period, however, in making this decision they should also be aware that were the auction not to proceed due to a successful counter-notice or appeal, they may lose some or all of the costs incurred.
Extending the time limits
In some instances, such as where a landlord has obstructed the local authority from entering and surveying premises, or if the local authority has not been provided with information about premises which is required for responses to pre-contractual enquiries, the local authority can apply to court to extend the time limits which apply throughout the process.[footnote 52]
The local authority applies for an extension through an application to the County Court. The local authority should communicate its intention to apply to the landlord before doing so. We would advise that the local authority seeks legal advice when making this application. Should the application be successful, the court will extend the time limits by such period as it deems appropriate.
Auction Period
Conditions to start the auction process
Assuming the final notice is not withdrawn by the local authority following counter-notice or successfully appealed, the local authority then has 12 weeks to (1) auction the premises and (2) exchange the tenancy contract.
To begin the auction process the local authority must have done the following:
1. Designated the high street or area in which the premises is situated.
2. Be satisfied the vacancy condition is met.
3. Be satisfied the local benefit condition is met.
4. Served an initial notice, followed by a final notice.
5. Ensured that there is no active counter-notice and that the time periods for this to be served has expired, or ongoing appeal.
Outsourcing
To aid local authority capacity in delivering the policy, local authorities can choose to outsource all parts of the auction process including marketing of the premises. Equally, they may choose to outsource some parts and retain others, to meet their expertise and capacity. For example, they could choose to administer the auction whilst outsourcing marketing.
Commercial agents will be available to local authorities and will be empowered to set their own fees. We encourage local authorities to consider value for money and expertise. For example, an agent with knowledge of the local area, its market, and the type of premises may be better placed to encourage bids from a range of prospective tenants. This may include a local marketing agent who may be better placed for dealing with smaller high street units.
Where we refer to the ‘local authority’ in this section, it is acknowledged that commercial agents may undertake some of these steps on behalf of the local authority if they have opted to outsource some or all of the process.
Auction costs[footnote 53]
Should the local authority wish, the tenant can be required to pay the following costs:
(1) the legal costs incurred by the local authority in the preparation of the auction pack, including:
i. the preparation of the tenancy contract;
ii. the preparation of the tenancy;
(2) the search fees incurred by the local authority; and
(3) the costs of carrying out a survey of the property.
The local authority may require the successful bidder to pay the above costs as part of the consideration for the grant of the tenancy.
The local authority (aided by New Burdens funding as set out on page 16) will be required to cover the remaining costs, including:
i. serving the initial or final letting notices;
ii. listing the premises on a commercial website;
iii. the registration process for bidders;
iv. managing the auction process;
v. marketing the premises; or
vi. any other costs associated with the auction process.
Due to the position of the local authority administering High Street Rental Auctions, we envisage they will need to pay all costs up front, with costs borne by the tenant being recovered during the process.
Local authorities should seek to be as open and transparent as possible about fees the successful tenant will incur following the auction so that bidders may factor the costs into any bid made. In the standard auction form we have provided a section for the local authority to complete which will set out the fees payable by the successful bidder.
During the Auction Period (exchange of information)
Throughout the process set out within this guidance, the landlord and local authority are required to provide each other with a series of information which must be served in accordance with the provisions set out within the Regulations.[footnote 54]
Following the service of a notice of intention (as set out below) the parties should have exchanged email addresses. We recommend that following this, notice service is then undertaken by email where possible, as this will act to reduce the administrative burden on the landlord or local authority.
The email addresses which can be used for service are:
- In the case of the local authority, the email address provided by the local authority when serving the notice of intention (under Regulation 6 at Week 1 of the Auction Period), or
- In the case of the landlord, the email address provided by the landlord in response to the local authority’s notice of intention (under Regulation 6 at Week 1 of the Auction Period), or another email address used by the landlord to send representations or information as part of the rental auction process.
Week 1[footnote 55]
Week 1 of the Auction Period[footnote 56] starts with the first day on which the final notice is no longer capable of being revoked on appeal. The final notice will no longer be capable of being revoked on appeal where:
a. the landlord has failed to serve a counter-notice within 14 days of the final notice taking effect;
b. the landlord has failed to issue an appeal in the County Court within 28 days beginning with the day on which the local authority received the counter-notice; or
c. the landlord has appealed to the County Court but this has been unsuccessful, having been either finally determined, withdrawn, or abandoned.
Week 1 of the Auction Period starts with the requirement for the local authority to serve a notice of intention to go to auction on a landlord.
As soon as possible after serving the notice of intention, and beforehand, if possible, the local authority should carry out searches on the premises. See more information on searches.
Serving the notice of intention
Where a local authority intends to arrange for a rental auction to be conducted in respect of qualifying high street premises, the local authority must serve notice of its intention to do so on the landlord.
The notice served must:
a. inform the landlord that the local authority intends to arrange a rental auction;
b. identify the premises;
c. provide an email address of the local authority that the landlord may use in connection with the auction process; and
d. request the landlord to provide an email address which the local authority may use to contact the landlord in connection with the auction process.
See Annex 16 for example letter from local authority giving landlord notice of its intention to start the auction process.
Week 2[footnote 57]
In Week 2 of the Auction Period the local authority must provide the landlord with details relating to the tenancy contract and tenancy. The landlord must also provide the local authority with pre-contract enquiry details relating to the premises.
Information provided by the local authority to the landlord
By the end of Week 2, the local authority must provide:
a. a notice containing requirements (under section 210(2) of the Act) for the landlord to provide information in relation to the premises (as set out below under ‘Information provided by the landlord to the local authority’).
i. The notice must contain a statement that if the person on whom the notice is served fails without reasonable excuse to comply with a requirement in the notice or provides false information which that person knows or should reasonably know to be false, that person commits an offence and is liable on summary conviction to a fine. This information is included within Annex 18.
b. the terms of the proposed tenancy contract (see tenancy contract section on page 46).
c. the proposed terms of the tenancy (see tenancy section).
Drafting the tenancy contract[footnote 58]
In Week 2 of the Auction Period the local authority must consider the drafting of the legal agreements so it can provide the landlord with the proposed form of tenancy contract and tenancy. The landlord must also provide the local authority with replies to pre-contractual enquiries relating to the premises.
Drafting the tenancy
This guidance includes standard forms of tenancy for use by local authorities which comply with the requirements of the Regulations. There are forms for:
1. Retail premises (where they form part of a building);
2. Retail premises (where they form the whole of a building);
3. Pub premises;
4. Unit in a shopping centre.
Local authorities will need to carefully consider and complete the details of the landlord, the premises, the building (where applicable), the length of term, the permitted use, rights granted, and the signature blocks, as well as other terms, all of which are highlighted in yellow in the forms of tenancy at Annexes 5 to 8 for ease of reference.
The rent can only be entered once the auction has been completed.
The length of term specified in the tenancy can be between 1 to 5 years[footnote 59]. Where the landlord’s interest is leasehold rather than freehold, the length of term specified should not be any longer than the landlord’s own leasehold interest in the premises.
The permitted use specified in the tenancy should not be one which is outside the suitable high street use which was specified by the local authority ahead of the rental auction[footnote 60].
The local authority will need to consider what rights can be granted to the tenant under the tenancy. The potential rights are listed in clause 3 of the forms of tenancy. This may need to be adjusted following landlord’s representations (if any) at Week 3 of the Auction Period.
In relation to service charge, the local authority should include option 1 (no service charge regime) or option 2 (standard service charge regime). Option 3 (bespoke service charge regime) will only be included following landlord’s representations at Week 3 of the Auction Period. See further guidance below for Week 4 of the Auction Period.
Clause 14 of the forms of tenancy should be included if the local authority anticipates it will need to enter into the tenancy (under its powers in s.207(2) of the Act) rather than the landlord.
Once the local authority has completed the details and terms of the tenancy contract and tenancy it should send this to the landlord.
See Annex 4 for the form of standard tenancy contract.
See Annexes 5 to 8 for the forms of standard tenancy.
See Annex 18 for example letter for local authority to provide the landlord with the proposed terms of tenancy contract and tenancy and request information about premises.
Information provided by the landlord to the local authority
The information the landlord is to be required to produce is:
a. full and accurate responses to general pre-contract enquiries for commercial premises transactions, including any supplemental pre-contract enquiries relevant to commercial premises on the grant of a tenancy. We suggest using:
i. the Commercial Standard Property Enquiries 1 (general pre-contract enquiries for all commercial property transactions) (version 4.0),
ii. the Commercial Standard Property Enquiries 3 (supplemental pre-contract enquiries for commercial property on the grant of a new tenancy) (version 3.1).
b. proof of the landlord’s title to the premises;
i. where the landlord’s title is registered, in the form of official copies of the entries relating to the landlord’s title at HM Land Registry, with the title plan;
ii. where the landlord’s title is unregistered, evidence of title to the premises in the form of-an abstract of title or an epitome of title with photocopies of the documents referred to, and production of every document or an abstract, epitome or copy of it with an original marking by a conveyancer either against the original or an examined abstract or an examined copy
c. the following certificates, if available:
i. a current electrical installation testing certificate;
ii. a current energy performance certificate;
iii. a current water safety certificate;
iv. a current gas safety certificate;
v. a current fire safety certificate;
vi. a test certificate for any mechanical, electrical or life safety systems present in, or which serve, the premises;
d. if available, a fire risk assessment, and
e. if available, an asbestos survey, and where relevant, an asbestos management plan. The local authority should make this request for information from the landlord under section 210 of the Act.
See Annex 17 for an example letter for local authority to request information about premises.
If the landlord fails without reasonable excuse to comply with the request for information in the notice, or provide false information which that person knows or should reasonably know to be false, that person commits an offence and is liable on summary conviction to a fine (level 4 on the standard scale, currently £2,500). [footnote 61]
Week 3[footnote 62]
In Week 3 of the Auction Period the landlord will need to respond to the request made in Week 2 of the Auction Period. It may be beneficial for the local authority to start considering terms and engaging with the landlord at an earlier stage than Week 2 of the Auction Period.
Landlord representations
As set out above, the local authority is required to send the proposed tenancy contract and tenancy to the landlord by the end of Week 2 of the Auction Period and must state that the landlord can make representations on those matters set out in Regulation 7(3) of the Regulations. The landlord must serve any representations on the local authority by the end of Week 3, and the local authority must take those representations into account when finalising the tenancy contract and tenancy in Week 4.
The local authority is not bound by the landlord representations but must provide a brief explanation as to how the landlord’s representations have been taken into consideration when it sends the landlord the auction pack in Week 4.
The landlord may make representations before the end of Week 3 on:
a. the description of the premises, and where the premises form part of a building, on the description of the building;
b. the length of the term;
c. what, if any, service charge provisions are to be included;
d. what rights need to be granted for the use and enjoyment of the premises by the tenant;
what title guarantee is to be given;
e. whether the contract should, where the landlord fails to complete the landlord’s works within the period required in the contract for tenancy— (i) provide for liquidated damages as set out in paragraph 6(1) and (2) of Schedule 2 of the Regulations, or (ii) give the tenant step-in rights to complete the landlord’s works as set out in paragraph 6(3) of Schedule 2 of the Regulations.
Where the premises concerned comprise a unit in a shopping centre, the landlord may also make representations before the end of the Week 3 of the Auction Period on the definitions of “the Centre,” and the “tenant’s plant.”
The local authority may also amend any of the terms of the contract for tenancy or the terms of the tenancy if the landlord proposes, or agrees to, the amended term[footnote 63].
Week 4[footnote 64]
Local authority serves auction pack
Before the end of Week 4 of the Auction Period, the local authority must serve the “auction pack”. This information helps bidders to pitch their bid.
The local authority will be responsible for putting together the auction pack and should, where possible, include particulars supplied by the landlord in response to enquiries. The “auction pack” must contain the following:
a. the tenancy contract, and the terms of tenancy, revised to take account of any representations made by the landlord;
b. a brief explanation of how the landlord’s representations have been taken into consideration;
c. the replies to the enquiries made of the landlord (as per page 37), where provided;
d. the evidence of the landlord’s title to the premises provided by the landlord (as per page 37), so far as is available;
e. a marketing brochure;
f. the results of the searches undertaken (as per page 31), so far as they are available;
g. the certificates and other information requested from the landlord under Regulation 7(2)(c), (d) and (e) of the Regulations, so far as they are available; and
h. any survey of the premises carried out on behalf of the local authority.
The landlord may make representations that a bespoke service charge regime should be included in the tenancy. This may be a service charge regime contained in —
a. the landlord’s own leasehold interest;
b. other leases of the building, of which the premises form part;
c. in the case of a shopping centre, other leases of the Centre, of which the premises form part; or
d. other leases of any adjoining premises in which the landlord has an interest.
The landlord should provide to the local authority the drafting of the bespoke service charge regime so that the local authority can consider whether to include this drafting in the terms of the tenancy. If the landlord does not provide this then the local authority will need to decide whether to include option 1 (no service charge regime) or option 2 (standard service charge regime) instead.
Local authorities should also include in the auction pack a form which can be completed by bidders, setting out their rental bid and proposed use of the premises. The form can also set out the terms and conditions upon which a bid is submitted.
The local authority should also specify on the form the legal costs, search fees and costs of carrying out a survey, which will be payable by the bidder if their bid is successful.
See Annex 9 for an example auction form to be used for bidding.
See Annex 20 for example letter for local authority to serve auction pack.
Marketing brochure
As above, the auction pack served to the landlord during Week 4 of the Auction Period must include a marketing brochure.
It is mandatory for the marketing brochure to include:
a. the postal address for the premises;
b. the suitable high-street use(s) for the premises determined by the local authority; and
c. the contact details for the local authority or for the person who is acting on behalf of the local authority in relation to the rental auction.
The marketing brochure should also include the Energy Performance Certificate rating (for further details see: A guide to energy performance certificates for the construction, sale and let of non dwellings (PDF, 955KB).
The local authority must use its reasonable endeavours to include the following information in the marketing brochure:
a. a plan showing the location of the premises;
b. photographs of both the internal and the external parts of the premises;
c. the floor areas of the premises;
d. the business rates liability for the premises;
e. the business improvement district levy applicable to the premises, if any;
f. where available, the service charge payable for the premises for the last service charge year, and the service charge proposed for the current service charge year;
g. the insurance premium payable in relation to the current insurance policy for the premises; and
h. whether supplies made to the tenant pursuant to the tenancy are exempt from value added tax.
In addition, though not required by law the local authority may wish to include some or all of the following in the marketing brochure:
a. details of how tenants can make a bid and the bidding form. See page 43 for further information on making a bid.
b. listed Building Status and/or Asset of Community Value Status;
c. planning Use Class;
d. any other relevant planning or use restrictions, such as extant planning permission conditions or covenants;
e. guidance on business rates relief; and
f. a video tour of the premises.
As it is in the landlord’s interest to secure the highest rental bid possible, we encourage landlords, local authorities, and commercial agents (where employed) to work together to ensure the marketing brochure is likely to achieve this.
See Annex 10 for an example marketing brochure.
Weeks 5 to 9
Marketing Period[footnote 65]
Marketing will be essential to ensuring that bids are received. A higher number of bids is likely to benefit landlords and local authorities by offering greater choice and diversity. The marketing period must be at least 5 weeks, but we recommend a marketing period of 6 weeks if possible. As there may be times when local authorities are not reasonably able to begin marketing at the start of Week 5 of the Auction Period, this ensures that there is some degree of flexibility for the local authority and that they are not operating outside of the law if commencing marketing slightly late.
Where possible, we recommend that local authorities or those acting on behalf of a local authority take steps to establish interest in the premises between service of the final notice and Week 5 of the Auction Period.
As noted above, landlords are encouraged to actively engage with the local authority to aid them in marketing the premises.
Mandatory marketing requirements
As soon as reasonably practicable in Week 5 of the Auction Period, the local authority must begin to market the premises by arranging for details of the premises, with a link to the auction pack to be included:
a. in a prominent position on the local authority’s website;
b. on a website which appears to the local authority to be one of the leading websites advertising commercial properties for rent. Some examples of websites this currently may include:
i. Rightmove
ii. Zoopla
iii. Completely Retail
iv. Property Link (Estates Gazette)
Optional marketing requirements
The following items are not mandatory to include as a marketing strategy, or in the marketing pack, but are optional. Local authorities are advised to choose what is appropriate for them to include using their judgement:
a. Access for potential bidders to view the premises (where possible and where landlords give permission);
b. Listing in local newspapers;
c. Floor plan of the premises;
d. Promotion of the premises on social media;
e. Advertising by local business groups; and
f. A ‘to let’ board (outside the premises).
Bidding period
How to bid
Where a prospective tenant sees a premises advertised and is interested in placing a bid, they will need to consider the annual rent (exclusive of VAT) that they will be prepared to pay. Prospective tenants will be free to submit any rental amount, however they should also be aware that they will only be able to bid once, and other bidders may outbid them. It may therefore be beneficial for prospective tenants to submit a rental price which they feel gives them the best probability of winning.
When submitting a bid, bidders will need to ensure they meet certain requirements. The requirements for a valid bid are that the bid:
(a) specifies an annual rental bid, exclusive of value added tax;
(b) includes a description of the bidder’s proposed use of the premises, which must be within the suitable high-street use specified by the local authority in the marketing brochure;
(c) is submitted with—
(i) the tenancy contract, validly signed by the bidder, and with the name and address of the bidder correctly entered on the contract;
(ii) proof of the bidder’s identity, where this is reasonably required by the local authority;
(d) is made by a person who is not the landlord or a subsidiary undertaking of the landlord;[footnote 66]
(e) is received by the local authority before the end of the tenth week.
Bidders may also wish to provide a basic description of their plans for the premises, evidence of how they might fulfil the obligations of the contract (e.g. proof they can pay the deposit) as well as a business plan showing they have a viable plan which is likely to ensure they are able to sustain rent payments.
It will be in the bidder’s interest to provide as comprehensive details of their plan as possible, as the landlord will have the final decision as to who is successful and may base their decision on the materials received in addition to the level of rental bid made (unless the landlord fails to select the successful bidder, in which case the local authority has to accept the highest bid on behalf of the landlord).
During this period local authorities may liaise with any bidder or prospective bidder to assist the bidder or prospective bidder to submit a valid bid. Local authorities may go further and encourage bidders to provide items such as those mentioned above (e.g. business plans etc) to the landlord as part of the bidding process. A bid without these items is valid but it is possible a landlord may prefer a bid supported by additional information.
See Annex 9 for an example auction form to be used for bidding.
How to handle bids
Local authorities should create a registration process to log bids. This could take the form of a ‘bidding portal’ which can be a platform of the local authority’s choice. The platform will need to register the name and contact details of the bidder as well as track the information held on the bid, such as the bid amount and date of the bid.
Local authorities may already have their own platforms which they use for bidding for commercial property which they may decide to repurpose (see example: Commercial properties to let - Southwark Council). Equally, local authorities may decide that using a shared inbox as an access point and logging details on a database is an acceptable option which could save on costs.
Use and handling of data during the registration process and throughout High Street Rental Auctions will need to be in line with the General Data Protection Regulation as implemented in the Data Protection Act 2018. Local authority officers will want to follow their organisation’s correct internal processes and may want to consult their data protection officer when designing and maintaining a registration process for bids.
The local authority must ensure that the bid is valid, that it is for a use consistent with those set by the local authority (as specified in the tenancy), all required forms are signed and the information required from the bidder has been provided.
Where a bid is invalid, the local authority should look to inform the bidder as soon as possible so that they may submit a valid bid if they still wish to do so.
Weeks 10 to 12
Serving bids on landlords
The local authority is required to serve on the landlord all valid bids received as soon as reasonably practicable after the end of Week 9 of the Auction Period and at the latest by the end of Week 10 of the Auction Period.[footnote 67]
The local authority is then also required to serve any late (valid) bids received during Week 10 as soon as reasonably practicable after the end of Week 10 and at the latest before the end of Week 11 of the Auction Period. If the local authority does not receive any late bids, the local authority should also serve notice on the landlord that there are no late bids within the same timescales.
The purpose of requiring local authorities to provide the landlord with these valid bids in two stages is to give the landlord more time to consider which valid bid they wish to choose. In the most extreme scenario, the landlord will only have 2 working days to decide the successful bidder after receipt of the late bids (or the notice served on the landlord that no late bids have been received), so having valid bids served earlier where possible, provides the landlord with more time.
Landlords should not see this as an opportunity to negotiate with bidders individually as the auction is intended to be a sealed bids process. The landlord may not disclose any information in relation to a valid bid to any other bidder or prospective bidder.[footnote 68]
The same applies to the local authority, although the local authority may liaise with any bidder or prospective bidder during the marketing period (which is a minimum of 5 weeks), to assist them with submitting a valid bid or answering any questions they may have about the process.
Equally this is not to say that the landlord may not speak to prospective bidders to help them with enquiries about letting the premises, but they may not seek to influence the value of bids by the disclosure of information.
Choosing a successful bid[footnote 69]
The landlord may choose to accept any of the valid bids as the successful bidder.
The landlord must serve notice on the local authority of the successful bidder before the end of 2 working days after the day on which the landlord receives the late bids, or the notice from the local authority confirming that no late bids have been received.
Where a landlord does not choose a successful bid[footnote 70], [footnote 71]
Where a landlord does not serve notice of the successful bidder as required, the local authority should accept the bid with the highest annual rental value as the successful bidder.
However, if it appears to the local authority that it is not reasonably practicable to enter a contract with this bidder, they may choose the bid offering the highest annual rental value for the premises with whom it is reasonably practicable to enter into a contract.
The local authority may equally determine that no bid should be accepted.
The rental auction is concluded on the exchange of the tenancy contract. If the local authority wishes to proceed with a bid, it is essential that the local authority enters into the tenancy contract with the successful bidder before the end of Week 12 of the Auction Period.
The legislation provides that the local authority has the power to grant the tenancy contract as though they were the landlord. In entering into the tenancy contract, the local authority must act in its own name, but with an indication that it is acting so as to bind the landlord rather than itself. The forms of tenancy contract at Annex 4 have been prepared on this basis. The local authority must also provide a signed copy of the contract to the landlord as soon as possible after entering into it.
Informing successful bidder of the outcome
The local authority should inform the successful bidder of the outcome by providing them with written confirmation alongside a signed copy of the tenancy contract as soon as possible.
After the auction
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, which will set out the specific obligations on the tenant and landlord during the term of the tenancy.
This section of the guidance provides detail on these two legal agreements.
Typically, commercial tenancies are agreed between a landlord and tenant and often with legal support, in a process that can take several months. It is not unusual for tenancies to have between 50 to 100 clauses that set out the specific obligations of both parties. Tenancies are usually adapted to suit the nature of the premises, the type of business that will occupy it, and the specific circumstances of the landlord and tenant that enter the tenancy.
However, we have provided for a standardised framework for the tenancy contract and tenancy for the following reasons:
- to ensure consistency and fairness in the High Street Rental Auctions process;
- to ensure a relatively quick process (by avoiding protracted negotiation), as part of making sure that vacant high street premises is occupied as soon as possible;
- given the need for local authorities to be able to run the process efficiently and effectively, particularly where a landlord does not engage or is un-cooperative.
Tenancy contract[footnote 72]
A ‘tenancy contract’ (which is more commonly referred to in the property industry as an ‘agreement for lease’) is a contract under which:
a. the landlord of the premises agrees to grant; and
b. the successful bidder agrees to take a short-term tenancy of the premises, (subject to certain conditions being satisfied).
The legislation provides that the local authority has the power to grant the tenancy contract (see above). The tenancy contract has effect as if it were entered into by the landlord of the premises instead of the local authority.
The local authority should act under its own name when entering into the tenancy contract, but with a clear indication that it is acting so as to bind the landlord rather than itself.
Superior landlords and mortgagees[footnote 73]
The tenancy contract, and the grant of the tenancy granted pursuant to such a contract, are deemed to have been entered into or granted with the express consent of:
a. any person who is (or will be when the tenancy is granted) a superior lessor of the land in which the premises in question are comprised; and
b. any mortgagee of that land.
The local authority or landlord is therefore not required to apply for or obtain consent from the superior landlord or mortgagee to enter into the tenancy contract and grant the tenancy.
Landlords works
Requirements[footnote 74]
Under the terms of the tenancy contract, the landlord is required to carry out pre-tenancy works at their own cost, whether in or outside the premises, so the premises to be occupied by a tenant are in a safe, stable, secure condition and with any significant occupational risks removed or managed.
The Minimum Standard is defined in the tenancy contract as:
a. there can be no significant water ingress or leaking pipework, no unstable or loose elements which may fall and cause harm;
b. all internal doors, and external doors (used to access the premises), are capable of operation for safe ingress/egress;
c. all external windows are capable of operation (where so designed) for ventilation or escape in an emergency;
d. the interior of the premises will be clear from debris, vermin, significant deviations from plane;
e. all fire safety requirements for a vacant building must be in place, with fire/smoke detection operating and certified, fire doors and compartmentations in a condition supported by a Fire Risk Assessment;
f. mains water and electrical supplies, should be connected, certified as safe, or capable of re-connection without significant expense to the tenant;
g. gas if present should be connected, certified as safe, or capable of re-connection without significant expense to the tenant;
h. toilet and hand washing facilities should be provided and are operational and capable of free-flowing discharge to a mains drainage connection;
i. shop fronts should be provided with glazing, frames and entrance doors which are intact, sound, and operational; and
j. there should be no fungal decay, or mould growth which presents a risk to, respiratory health, or the structural integrity of the premises.
The landlord is responsible for covering any of the costs incurred in bringing the premises up to the Minimum Standard and is required to use all reasonable endeavours to make sure that works are completed within 3 calendar months of the date on which the tenancy contract is completed.
The landlord is required to use all reasonable endeavours to procure that the landlord’s works are carried out:
a. with due diligence and in a good and competent manner;
b. using only decent quality materials and well-maintained plant and equipment;
c. in accordance with the tenancy contract and the requisite consents in respect of the landlord’s works;
d. in accordance with all statutory or other legal requirements and the recommendations or requirements of the local authority or statutory undertakings;
e. in compliance with all relevant British Standards[footnote 75], codes of practices and good building practice; and
f. by selecting and using materials so as to avoid known hazards to the health and safety of any person and to ensure the long-term integrity of the premises.
The period for landlord’s works can be extended where completion of the landlord’s works is delayed due to an event or cause that is beyond the landlord’s reasonable control and the landlord can provide justifiable evidence of such delay to the tenant. The period of extension should be determined by a professionally qualified surveyor[footnote 76] appointed by the landlord, acting reasonably, having regard to what is reasonable given the nature and severity of the disruption or delay.
As soon as the landlord’s works are complete, the landlord must provide written notice to the local authority and the tenant, stating the date on which the works were completed.
Failure to do works[footnote 77]
Should the landlord fail to carry out the required works, the tenant is able to rely on remedies provided in the tenancy contract to ensure landlord compliance so that they can operate their business in the way they intended when entering the auction. These may include:
- a ‘step-in provision’ in the tenancy contract, which would:
a. allow the tenant to serve notice on the landlord, where the landlord’s works are not completed within the target period (3 calendar months starting with the date on which the tenancy contract is completed), and that period has not been extended in accordance with the terms of the tenancy contract, stating the tenant’s intention to complete the landlord’s works at the tenant’s own cost (to be recovered from rent);
b. where the landlord receives a notice under the ‘step-in provision’:
i. that the landlord may not undertake any further elements of the landlord’s works;
ii. the tenant will have the right to undertake the remainder of the landlord’s works, and the landlord will provide such reasonable access as is necessary to enable the tenant to do so; and
iii. that the tenant will be permitted to deduct the proper costs of undertaking the remainder of the landlord’s works from the rent payable under the tenancy commencing on the rent commencement date (and no deposit is payable under the tenancy until such time as the tenant is reimbursed).
c. if the tenant exercises its right to serve such a notice to undertake the remainder of the landlord’s works, the tenant must (subject to access being provided by the landlord) undertake the works with all due diligence and as soon as reasonably practicable and serve written notice on the landlord as soon as the landlord’s works are complete. The date stated in that notice is to be treated as the landlord’s works completion date.
- If the landlord’s works completion date has not occurred by 16:00 on the last day of a period of 6 months starting on the date of the tenancy contract (“the long stop date”), and the tenant has not exercised rights provided for under the ‘step-in provision,’ the tenant may:
a. at any time after the long stop date (but before the landlord’s works completion date) give written notice to the landlord that, unless the landlord’s works completion date occurs within 20 working days of the receipt of that notice (time being of the essence), the tenant may terminate the tenancy contract;
b. if the landlord’s works completion date does not occur within 20 working days of receipt of the notice given by the tenant under sub-paragraph (a), then the tenant may, by further written notice, terminate the tenancy contract with immediate effect and the landlord will be liable to the tenant for the proper costs incurred by the tenant arising out of the auction, and the proposed letting of the premises.
- a liquidated damages clause in the tenancy contract, meaning that the landlord must pay any liquidated damages payable to the tenant under the tenancy contract within 5 working days of the landlord’s works completion date if:
a. the landlord’s completion date is later than the target period;
b. that period is not extended by a qualified surveyor; and
c. the landlord has failed to use all reasonable endeavours to procure that the landlord’s works are completed.
The inclusion of liquidated damages and the step-in provision[footnote 78] will be at the discretion of the local authority when considering the terms of the tenancy contract. The rate of liquidated damages payable by the landlord to the tenant is £55 for each day or part of a day the landlord’s works continues after the end of the target period.
EPC rating
The landlord will also need to consider the Energy Performance Certificate rating for the premises. The current minimum level of energy efficiency provisions mean that, subject to certain requirements and exemptions, from 1 April 2023 landlords must not let non-domestic property if they have an EPC rating of band F or G. The landlord may therefore need to carry out additional works to the premises to ensure compliance.
For further guidance on these minimum standards see: The Non-domestic Private Rented Property Minimum Standard (February 2017)(Non-domestic MEES Guidance) (PDF, 1408KB).
Tenancy
The tenancy (which is more commonly referred to as ‘the lease’ in the property industry) sets out the specific obligations on the tenant and landlord during the term of the tenancy.
A tenancy entered into under the Act has the following features, these are:
a. they specify the amount of rent payable by the tenant, which will be determined through the rental auction;
b. they specify the length of term for the tenancy, which will not be less than one year, but will not exceed 5 years;
c. the tenancy will not benefit from security of tenure under the Landlord and Tenant Act 1954. This means the tenancy will be for a fixed period and will not continue automatically past the term end date (like other business tenancies which do have security of tenure); and
d. they specify the ‘high street use(s), which the tenant is permitted to use the premises for. This must be prescribed by the local authority ahead of the auction.
See Annexes 5 to 8 for standard forms of tenancy.
Tenant ‘s fit out works and rent-free period
After the date of the tenancy contract, the tenant may submit to the landlord for approval (such approval not to be unreasonably withheld or delayed), plans and specifications for any tenant’s fit out works.
These works must be completed at the tenant’s expense and may include:
a. works which are inside or outside the premises; and
b. the removal of any fit out in the premises which exists at the date of the tenancy contract (“existing fit out”) and which will require the removal of any structural item.
When considering the tenant’s request for removal of existing fit out, the landlord should have due regard to any reasonable opinion from the tenant that its proposed use of the premises cannot be fulfilled without the removal of the existing fit out.
The tenant is not required to gain approval from the landlord to remove any existing fit out in the premises where:
a. that removal will not require the removal of any structural item from the premises, and
b. the fit out cannot, in the reasonable opinion of the tenant, be made use of by the tenant for its proposed use of the premises.
The licence for alterations must take place on the later of:
a. completion of tenancy; and
b. 10 working days after the date the landlord consents to or approves the tenant’s works (where consent or approval is required).
Any tenant fit out works must:
a. be carried out in accordance with any requisite consents; and
b. be removed and any damage repaired at the end of the tenancy. The landlord may wish to give an alternative direction to this requirement, and this should be communicated to the tenant at least 3 months before the end of the tenancy. The tenant is not required to reinstate any existing fit out which has been removed in compliance with the tenancy contract.
Where the premises have been fitted out for use as a public house, the tenant may not remove any dispense systems, bars, toilets, commercial kitchens, or cellars located at the premises without the consent of the landlord, which consent may be refused at the landlord’s absolute discretion.
The tenant has the benefit of a rent-free period for the first 4 weeks of their tenancy to allow for these works to be undertaken.
Completion of the tenancy
The tenancy contract provides for the tenancy to be completed on the tenth working day after the landlord serves written notice on the tenant that the landlord’s works are completed (or such earlier date agreed between the landlord and tenant).
If the tenant has exercised its step in rights to complete the landlord’s works, then the tenant must serve written notice on the landlord as soon as the landlord’s works are complete. The tenancy contract then provides that the tenancy is to be completed on the tenth working day after that notice.
If the landlord fails to grant the tenancy the local authority can be invited to grant the tenancy that the landlord should have granted[footnote 79]. A tenancy granted by the local authority has effect as if it were granted by the landlord instead of the local authority. As soon as possible after granting a tenancy under this power, the local authority must provide a signed copy of the tenancy to the landlord.
When the tenancy begins the local authority must notify the local planning authority of the dates of any change of use undertaken via the Permitted Development Right for suitable high street use these dates will be the same as those of the lease. This marks the end of local authority involvement with the tenancy. The landlord and tenant will then need to meet their obligations (in the tenancy contract and tenancy) going forward. Landlords and tenants will have the usual legal remedies they would ordinarily have under a tenancy in the event of non-compliance.
The local authority may also wish to consider how they can further support the new tenant’s business outside of the process.
Schedule of condition
As soon as reasonably practicable following completion of the tenancy, the tenant must undertake and finalise a schedule of condition. The tenant must then supply this to the landlord and within 5 working days of receipt the landlord should notify the tenant whether the schedule of condition is agreed or not agreed. In the event the schedule is not agreed then the parties must in good faith seek to agree variations failing which an independent surveyor can be asked to prepare a schedule of condition.
Renewal of tenancy
The tenancy will be ‘contracted out’ of the security of tenure provisions provided by the Landlord and Tenant Act 1954[footnote 80]. This means that the term of the tenancy, which can be between 1-5 years, will be a set term after which the tenancy expires and the right of the tenant to occupy and trade from the premises ends.
Should the tenant wish to continue occupying and trading from the premises they will need to agree a new tenancy with the landlord prior to their tenancy expiration date. The new tenancy does not have to replicate the terms of the High Street Rental Auction tenancy and is entirely at the discretion of the parties, however, in many instances should a successful tenancy have operated it may be simpler to replicate terms.
As negotiating a new tenancy can take time, we encourage landlords and tenants to begin negotiations in good time prior to the High Street Rental Auction tenancy expiring and to seek appropriate legal and commercial advice.
List of annexes
High Street Rental Auction Guidance (Mandatory forms for use by local authority)
1. Initial letting notice (Form 1) (Annex 1) and guidance on completing Form 1 (Annex 1A)
2. Final letting notice (Form 2) (Annex 2) and guidance on completing Form 2 (Annex 2A)
3. Counter-notice (Form 3)
High Street Rental Auction Guidance (Form of tenancy contract and forms of tenancy)
4. Tenancy contract (includes a form of licence for alterations)
5. Tenancy of retail premises (whole)
6. Tenancy of retail premises (part)
7. Tenancy of unit within shopping centre
8. Tenancy of pub premises
High Street Rental Auction Guidance (other)
9. Auction form
10. Example marketing brochure
High Street Rental Auction Guidance (Example letters for use by local authority)
11. Example covering letter for local authority to serve an initial letting notice.
12. Example covering letter for local authority to serve a copy of an initial letting notice on mortgagee or superior landlord.
13. Example covering letter for local authority to serve a final letting notice.
14. Example covering letter for local authority to serve a copy of a final letting notice on mortgagee or superior landlord.
15. Example letter for local authority to withdraw a final letting notice.
16. Example letter from local authority giving landlord notice of its intention to start auction process.
17. Example letter for local authority to request information about premises – general request e.g. who is in occupation.
18. Example letter for local authority to provide landlord with the proposed terms of tenancy contract and tenancy and request information about premises – pursuant to reg 7(1) and 7(2).
19. Example letter requesting access for local authority to enter and survey the premises and other land.
20. Example letter for local authority to serve auction pack.
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Retail vacancies flatline as high street struggles temper recovery - Green Street News. ↩
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The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024 ↩
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Section 208, Levelling Up and Regeneration Act 2023. ↩
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Section 193, Levelling Up and Regeneration Act 2023. ↩
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Section 194, Levelling Up and Regeneration Act 2023. ↩
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Section 215, Town and Country Planning Act 1990. ↩
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Section 191, Levelling Up and Regeneration Act 2023 ↩
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Section 192(1), Levelling Up and Regeneration Act 2023 ↩
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Regulation 3, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 218(3), Levelling Up and Regeneration Act 2023. ↩
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Section 193, Levelling Up and Regeneration Act 2023. ↩
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Section 194, Levelling Up and Regeneration Act 2023. ↩
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Section 195(1), Levelling Up and Regeneration Act 2023. ↩
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Section 210, Levelling Up and Regeneration Act 2023. ↩
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Section 218(6), Levelling Up and Regeneration Act 2023. ↩
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Section 194, Levelling Up and Regeneration Act 2023. ↩
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Section 210(7) and (8), Levelling Up and Regeneration Act 2023. ↩
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Section 211, Levelling Up and Regeneration Act 2023. ↩
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Section 212, Levelling Up and Regeneration Act 2023. ↩
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Regulation 5, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 211, Levelling Up and Regeneration Act 2023. ↩
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Section 212, Levelling Up and Regeneration Act 2023. ↩
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Section 212, Levelling Up and Regeneration Act 2023. ↩
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Section 192, Levelling Up and Regeneration Act 2023. ↩
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Regulation 15, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Part 3, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Part 3, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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paragraph 1(4)(a) of Schedule 2, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 4, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 14, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 197, Levelling Up and Regeneration Act 2023. ↩
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Section 196, Levelling Up and Regeneration Act 2023. ↩
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Section 214(7), Levelling Up and Regeneration Act 2023. ↩
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Section 214(7), Levelling Up and Regeneration Act 2023. ↩
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Section 211, Levelling Up and Regeneration Act 2023. ↩
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Section 198, Levelling Up and Regeneration Act 2023. ↩
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Regulation 14, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 4, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 199, Levelling Up and Regeneration Act 2023. ↩
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Section 214(7), Levelling Up and Regeneration Act 2023. ↩
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Section 214(7), Levelling Up and Regeneration Act 2023. ↩
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Section 200, Levelling Up and Regeneration Act 2023. ↩
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Section 200(5), Levelling Up and Regeneration Act 2023. ↩
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Section 201, Levelling Up and Regeneration Act 2023. ↩
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Schedule 20, Part 1, Levelling Up and Regeneration Act 2023. ↩
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Section 202, Levelling Up and Regeneration Act 2023. ↩
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Regulation 6, The Local Authorities (Rental Auctions etc.) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 213, Levelling Up and Regeneration Act 2023. ↩
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Regulation 13, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 14, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 6, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 2, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 7, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 205, Levelling Up and Regeneration Act 2023. ↩
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Section 218(8) Levelling Up and Regeneration Act 2023. ↩
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Section 206(3), Levelling Up and Regeneration Act 2023. ↩
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Section 210(7) and (8), Levelling Up and Regeneration Act 2023. ↩
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Regulation 8, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 7(6), The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 9, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 10, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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See meaning in section 1162 of Companies Act 2006(a), read with Schedule 7 to that Act. ↩
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Regulation 10, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 10(5), The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 11, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 204, Levelling Up and Regeneration Act 2023. ↩
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Section 207, Levelling Up and Regeneration Act 2023. ↩
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Section 204, Levelling Up and Regeneration Act 2023. ↩
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Section 208, Levelling Up and Regeneration Act 2023. ↩
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Schedule 2, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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British Standards are published by the British Standards Institution, a private company originally incorporated by royal charter in 1929 as the British Engineering Standards Association. ↩
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Schedule 2, paragraph5(3), The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Schedule 2, paragraph 6, The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Regulation 7(4)(b), The Local Authorities (Rental Auctions) (England) and Town and Country Planning (General Permitted Development) (Amendment) Regulations 2024. ↩
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Section 207(2), Levelling Up and Regeneration Act 2023. ↩
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Section 209, Levelling Up and Regeneration Act 2023. ↩