In what has been described as a "political gimmick" by the British Property Federation (BPF), the Government has indicated that it plans to introduce "rental auctions" for high street premises that have been left vacant for more than 12 months.
Under the plans, interested parties would bid to lease the property in question, with the landlord being obliged to award a contract to the successful bidder. Further detail will be provided in tomorrow's Queen's Speech, in which the Government will set out its legislative program for the coming months.
24 March 2022 marked the introduction of a mandatory arbitration scheme for resolving commercial rent debts that arose as a result of premises being forced to close during the Covid-19 pandemic. If the Government's mandatory rental auctions plans are brought forward, this will represent another major intervention in the market, significantly affecting the rights of commercial property owners.
How a mandatory rental auction will work in practice remains to be seen. If a landlord intends to redevelop a property, will this exclude it from the scope of the scheme? If there is only one bidder, will the landlord be required to grant a lease at whatever rent the individual bidder is prepared to pay? How will service charges be dealt with? Would a landlord be permitted to favour a bidder that can produce a guarantor over one that cannot? Could a landlord choose to grant a lease to a bidder that is prepared to take a longer lease, but at a lower rent? How does one define "high street" in this context - would shopping centers be included?
Whether or not rental auctions are a "political gimmick", most would agree that something needs to be done to breathe new life into the high street. Given the current Government's track record of market intervention and willingness to alter landlord's property rights, it would be remiss to assume that we will not see rental auctions brought forward.