High Street Rental Auctions (HSRAs) were introduced in the Levelling Up and Regeneration Act 2023 to tackle the downfall and vacancy of high street premises. In summary, local authorities are granted the power to auction off leases of commercial properties which they consider would be beneficial to the local economy, society or environment. They must have been vacant for over a year within a two year period, and the legislation permits local authorities to enter and survey the property to determine whether it is suitable for use for HSRAs.
How HSRAs Work
- The local authority will carry out pre-HSRA checks to determine whether a high street or area can be designated for HSRAs.
- The local authority will serve an initial notice on the landlord following which the landlord will have 8 weeks to enter into a satisfactory tenancy.
- If the landlord fails to enter into a satisfactory tenancy, the local authority will serve a final notice informing the landlord of the authority’s intention to run a HSRA. A counter notice, appeal, or objection can be served on the local authority by the landlord within the 2 weeks following expiry of the initial 8 week period.
- If, following the above, the property proceeds to auction, the local authority has 12 weeks to auction the property and complete the tenancy contract. The process is split up as follows:
- Weeks 1 – 4: the landlord must engage with the local authority to provide information about the property and to engage in discussions regarding the proposed terms of the tenancy;
- Weeks 5 – 9: the property is marketed and the bidding process begins;
- Weeks 10 – 11: the bids are served on the landlord following which a successful bid will be chosen.
- Following the auction, the successful bidder will enter into:
- A tenancy contract (this will contain obligations on the landlord to carry out any required works prior to lease commencement to improve a property and to bring it up to a lettable standard – this could prove costly for a landlord); and
- The lease (this is entered into once the landlord’s works have been completed).
If the landlord fails to engage with the local authority:
- The local authority can enter into the tenancy documentation on behalf of the landlord without their consent; and
- Fines can be charged to the landlord.
Lease Terms Under a HSRA Scheme
If a lease is granted under the HSRA scheme, it must contain the following provisions:
- The lease term must be between 1 and 5 years;
- The lease must be excluded from the security of tenure provisions of the Landlord and Tenant Act 1954 (i.e. the tenant will not have the right to a renewal lease on lease expiry);
- The permitted use must specify the high street use for which the tenant wishes to use the property;
- A deposit at a sum equivalent to the greater of £1,000.00 or 3 months’ rent will be payable on completion; and
- The tenant’s repairing obligation will be limited by reference to a Schedule of Condition (to be prepared following lease completion).
HSRAs represent a significant intervention in the commercial letting market, giving local authorities powers to bring long-term vacant commercial properties back into use and to rejuvenate high streets. The HSRA scheme is voluntary and currently only 11 councils have adopted the scheme.
Although the scheme is intended to support local economic and community regeneration, it also creates potentially onerous obligations for landlords, including strict procedural timeframes, possible financial penalties and liability for works to put properties into a lettable condition. Landlords with vacant high street properties should therefore remain alert to the operation of the HSRA scheme and take early advice where an initial notice is served.
For more information or guidance, contact our commercial property team on 0116 289 7000 or email info@bhwsolicitors.com.
