How High Street Rental Auctions will take your properties

The Levelling Up and Regeneration Act 2023 has introduced one of the most far‑reaching new interventions in the English commercial property market for a generation: High Street Rental Auctions (HSRAs).

Heralded by government as a way to “revitalise” struggling town centres and tackle long‑term vacancy, these powers allow local authorities, in certain circumstances, to step in and arrange a lease of your property to a third party, without your active agreement, for a term of up to five years.

For landlords, institutional investors and their lenders, this is more than another policy initiative. It is a structural change in the balance of power between private ownership and the state when it comes to high street commercial premises. This article unpacks how the regime works, which properties are at risk, and how – in practical terms – High Street Rental Auctions may end up “taking” your properties, at least for the medium term.

1. What are High Street Rental Auctions?

High Street Rental Auctions are a new statutory mechanism applying in England only. They are designed to tackle persistently vacant commercial premises in designated high streets and town centres. If certain conditions are met, a local authority can:

• Serve notices on the landlord of a qualifying vacant property;
• Market that property to potential occupiers;
• Run an auction process to select a tenant; and
• Arrange for a one‑to‑five‑year lease to be granted to that tenant, effectively compelling the landlord to accept the letting on standard terms.

The government frames this as a “last resort” tool to be used where engagement with landlords has failed and vacancy is clearly damaging local economic, social or environmental wellbeing. However, the legal powers are drawn relatively broadly, and once the framework is embedded, there is a real prospect that some authorities will see HSRAs as a routine part of their place‑shaping toolkit.

From a landlord’s perspective, the key point is stark: if you own vacant high street premises that meet the statutory criteria, you may be forced to let them on terms you did not negotiate with a tenant you did not select.

2. The Legislative Base: How the Law Has Changed

The HSRA regime sits within Part 10 of the Levelling Up and Regeneration Act 2023. The Act was followed by regulations that commenced the powers in England and set out procedural details such as notices, timelines and the interaction with planning and permitted development rights.

The policy intention is clear. Central government has been under sustained pressure to respond to declining town centres, boarded‑up shops and the shift to online retail. Traditional levers – business rates relief, grant funding, softer regeneration initiatives – have had limited impact in some areas. High Street Rental Auctions are intended to target one of the most visible symptoms of decline: long‑term vacant units in prominent locations.

What is different about HSRA relative to previous powers is the direct, quasi‑compulsory intervention in private landlord‑tenant decision‑making. The state is not buying the property; it is not compulsory purchasing your freehold. Instead, it is temporarily commandeering the right to grant an occupational lease if, in its judgement, you have failed to bring the premises back into use within a reasonable time.

3. Which Properties Are at Risk?

Not every vacant unit on every street is exposed to HSRAs. The regime is deliberately targeted, but within those target areas the implications are significant.

3.1 Designated High Streets and Town Centres

First, the property must be within a designated high street or town centre. Each local authority may define and designate areas that it regards as high streets or town centres for the purposes of the legislation. Typically, these will be:

• Traditional high streets;
• District and local centres;
• Larger town or city centres;
• Areas with a concentration of high street‑type uses: retail, hospitality, services, leisure, and similar.

Authorities are expected to consult on these designations and to justify them in planning and place‑making terms. Once an area is designated, all eligible vacant premises within that boundary become potential HSRA candidates.

For landlords, this means that if your assets fall within one of these designated zones, you should assume they are within the scope of HSRA whenever they are vacant for prolonged periods.

3.2 The Vacancy Test

The second key condition is vacancy. A property can be eligible for HSRA if it has been:

• Unoccupied for 12 consecutive months, or
• Unoccupied for at least 366 days out of the previous 24 months, even if those days are non‑continuous.

The law is drafted to prevent landlords from evading the regime by orchestrating short, insubstantial or artificial occupations. Authorities will look at the substance of occupation: whether there is a bona fide trading tenant or meaningful use, not just nominal activity to defeat the test.

In practice, many high streets now have units that have been empty for well over a year, some for several years. Those are precisely the properties that councils are under political pressure to tackle.

3.3 Suitable “High Street” Use

The property must also be considered suitable for a high street use that could contribute to the local area’s economic, social or environmental wellbeing. This encompasses a broad spectrum of potential occupiers, including:

• Retailers and service providers;
• Cafés, restaurants, bars and leisure uses;
• Cultural, creative or arts uses;
• Health, well‑being and community facilities;
• Co‑working, start‑up and flexible workspace.

Certain premises are explicitly or effectively excluded, such as:

• Purely residential properties;
• Heavy industrial or warehousing uses;
• Isolated or non‑high‑street‑type buildings that do not form part of a recognised centre.

Where a vacant unit clearly could support high street activity, an authority seeking to use HSRA will find it relatively easy to demonstrate that bringing it back into occupation would help achieve regeneration objectives.

4. How the HSRA Process Works – Step by Step

To understand how the law can, in effect, take your property into an enforced letting, it is useful to follow the lifecycle of a typical HSRA case.

4.1 Pre‑Notice Engagement

The process usually begins with informal engagement. The local authority identifies a building that:

• Sits in a designated high street or town centre area;
• Has been empty for long enough to trigger concern; and
• Appears suitable for beneficial occupation.

Officers will often contact the landlord or managing agent to understand the reasons for vacancy. They may:

• Encourage the landlord to reduce rent expectations or offer incentives to secure a tenant;
• Promote meanwhile or pop‑up uses;
• Signpost grant funding or business support;
• Explore whether planning, listed building or infrastructure issues are blocking lettings.

At this stage the authority may explicitly or implicitly warn that HSRA powers are available if voluntary measures fail.

For proactive landlords, this is an opportunity to avoid escalation. For those who ignore correspondence or rely on aspirational rent levels and indefinite “holding” of vacant stock, it is the opening move in a process that can culminate in a compulsory letting.

4.2 The Initial Notice

If vacancy persists and the authority concludes that the statutory criteria are met, it may serve an Initial Notice. This is the first formal step under the Act.

The Initial Notice:

• Identifies the property and the landlord;
• Confirms that the authority is considering using HSRA powers;
• Commences a fixed period (commonly eight weeks) during which:
  • The landlord may still let the property privately on a qualifying lease and thereby avoid escalation;
  • Certain dealings and disposals are restricted or scrutinised.

Crucially, the Initial Notice also triggers information duties. The landlord must provide detailed information about the property, title, third‑party rights, and any mortgages or charges. Failure to supply accurate information can constitute a criminal offence.

For many landlords, this will be the first moment at which the real power of HSRA is felt: the local authority is not merely “suggesting” that they do something with the property; it is placing them under enforceable legal obligations.

4.3 Landlord’s Last Chance: Letting During the Initial Notice Period

During the Initial Notice period, the landlord has a clear route to avoid HSRA:

• Securing a bona fide tenant on what the legislation calls a qualifying lease.

A qualifying lease typically needs to:

• Be granted for genuine occupation;
• Be for an appropriate term;
• Not be a sham or device to frustrate the legislation.

If such a lease is granted and the property is brought into meaningful use, the authority should not proceed to the next stage.

However, some landlords may misjudge the situation – for example, by:

• Holding out for unrealistic rent in the hope the authority will lose interest;
• Relying on half‑hearted marketing;
• Assuming that broader redevelopment aspirations are sufficient even if there is no planning permission or firm programme.

In those cases, they may find that the authority proceeds regardless.

4.4 The Final Notice

If the property remains unlet at the end of the Initial Notice period, the authority can serve a Final Notice. This is where the balance of power shifts decisively.

The Final Notice:

• Confirms the authority’s decision to use HSRA powers;
• Authorises it, after the subsequent marketing and auction phase, to arrange the grant of a lease to a third party.

The landlord does have limited rights to appeal a Final Notice, typically on grounds such as:

• The property does not meet the statutory criteria (for example, it has not been vacant for long enough);
• Procedural errors in how the authority has applied the regime;
• The authority’s decision is irrational on public law principles.

However, these are narrow routes and rely on swift, well‑advised action. They are not an all‑purpose right of veto.

In practical terms, once a Final Notice is in place, the authority is on a path towards letting your property, with or without your active cooperation.

4.5 Marketing and Auction

Following the Final Notice, the authority must arrange marketing and an auction process. This may be undertaken directly by the council’s own estates or regeneration team, but in many cases it will be outsourced to private commercial property agents or auction houses.

Key features include:

• Preparation of an auction pack, likely containing:
  • Title information;
  • Surveys and condition reports;
  • Energy and compliance data;
  • Planning and use information;
  • A standard‑form HSRA lease.
• Definition of lease parameters, such as:
  • Term: between one and five years;
  • Repair and maintenance responsibilities;
  • Service charge and insurance obligations;
  • Break clauses and user clauses;
  • Fit‑out responsibilities and any landlord works.
• Marketing period, often around six weeks, during which prospective occupiers can inspect and make bids.

Unlike a conventional auction where the vendor typically sets a reserve price and retains full discretion, the HSRA framework is constructed around:

• Competitive bidding, often by sealed bids or controlled online process;
• Selection of the “highest or best practicable bid”, where “best” can take into account deliverability and community benefit, not simply rent;
• A strong presumption that the authority will move forward with a suitable bidder even if the landlord is not enthusiastic.

For landlords used to shaping tenant mix, negotiating heads of terms and controlling brand presence, this is a striking inversion. The local authority and its advisers become, in effect, your leasing agents – but their client is the public interest, not you.

4.6 Selecting the Tenant

At the end of the auction process, the authority will identify its preferred bidder. The landlord may have some opportunity to express views, particularly where:

• Proposed use creates legitimate building or title issues;
• Lender covenants or existing leases impose constraints;
• Compliance or insurance considerations arise.

However, provided the authority has followed due process and the bidder is reasonably capable of occupying and paying the rent, it has wide discretion to proceed.

If the landlord declines to cooperate in granting the lease, the legislation provides for mechanisms that allow the lease to be effectively imposed. The details are technically complex, but the outcome is simple: your property ends up let, and you are bound by the statutory lease, without a conventional negotiation.

4.7 The HSRA Lease

The HSRA lease that emerges from this process is a genuine legal tenancy. Key characteristics usually include:

• Term: between one and five years. Anything longer is outside the regime.
• Rent: derived from the auction process. In some markets this might be at, near, or below what landlords would ideally have sought, but the critical difference is that the rent level arises from a statutory process, not an arm’s‑length negotiation.
• Security of tenure: the lease is typically excluded from the security of tenure provisions of the Landlord and Tenant Act 1954, reinforcing that this is a temporary intervention rather than a permanent interest.
• Repairs and works:
  • The landlord may be required to carry out works to make the premises safe and compliant before occupation;
  • The tenant then takes on day‑to‑day internal repairing obligations, with exact allocations defined in the standard form.
• Costs: tenants will usually pay their own fit‑out and legal costs, while landlords may bear costs related to compliance, structural works and enabling occupation.

Once the HSRA lease is granted, the property is, for all practical purposes, out of your direct control for the duration of the term (subject to normal enforcement and forfeiture rights). It has not been taken in the sense of compulsory purchase, but your freedom to decide who occupies it and on what terms has been suspended by law.

5. Why This Matters to Landlords and Investors

The HSRA regime is not merely a procedural nuance. It has strategic implications for how commercial property ownership is conceived and managed.

5.1 Loss of Control Over Tenant Mix and Brand

High streets and shopping areas often rely on careful curation of tenant mix to maintain value. Landlords and asset managers:

• Balance anchor tenants with independents;
• Control uses that might cause nuisance or reputational harm;
• Seek to attract certain segments (for example, premium retail, casual dining, creative occupiers).

Under HSRA, that control is diluted. You may find that your ground‑floor retail with potential for a particular national brand instead hosts a short‑term, low‑rent occupier chosen for social value reasons, or a community‑oriented tenant who does not drive the footfall or image you were targeting.

5.2 Impact on Asset Value and Yields

Asset valuation is sensitive to:

• Rent and covenant strength;
• Length and security of income;
• Voids and re‑letting prospects;
• Development potential.

A short‑term HSRA lease at a modest rent, granted to a small independent or community tenant via an auction process you did not steer, may impact:

• Market perceptions of achievable ERV (estimated rental value);
• Yield expectations;
• Comparable evidence for future rent setting and valuations.

While some valuers may treat HSRA as a “special” tenancy, others will inevitably look at the income actually being generated from the unit when forming a view.

5.3 Interaction with Redevelopment and Asset Management Plans

Landlords frequently hold vacant units intentionally as they prepare larger redevelopment or repurposing schemes. They may be:

• Aggregating ownership;
• Working up planning applications;
• Negotiating funding;
• Scheduling works to coincide with lease events elsewhere in the block.

If these plans are not sufficiently advanced or documented, the local authority may still push ahead with HSRA, arguing that a five‑year short letting does not seriously prejudice long‑term redevelopment.

This can:

• Delay your ability to implement works;
• Increase costs (for example, compensation, phasing, or working around the HSRA tenant);
• Undermine pre‑lets or scheme branding if the HSRA occupier does not fit the future profile.

5.4 Lender Concerns and Covenants

For leveraged assets, lenders are rightly nervous about any regime that can:

• Change the occupier profile and income of a charged property;
• Introduce short, non‑standard leases;
• Create potential capital expenditure obligations on landlords to make premises fit for occupation.

Loan agreements often contain covenants restricting certain lettings or requiring lender consent for leases below specified terms or above certain thresholds. HSRA leases sit awkwardly within that framework.

In practice:

• Landlords will need to notify lenders as soon as properties are at risk of HSRA;
• Lenders may expect a clear mitigation strategy to avoid auctions where possible;
• New lending may be priced to reflect HSRA risk in certain locations.

6. The Perspective of Local Authorities and Occupiers

It is important to recognise that, from the point of view of councils and community or business groups, HSRA is not a land grab but a response to long‑term market failure.

6.1 Local Authority Drivers

Local authorities adopting HSRA are often motivated by:

• Persistent vacancy levels that undermine perceptions of place;
• Public pressure from residents and traders to “do something” about empty shops;
• A desire to support local entrepreneurs, creatives and social enterprises that cannot compete with national chains for prime units.

They also receive some central government funding to support implementation, including legal work, mapping and pilot schemes. This makes HSRA particularly attractive in areas where budgets for traditional regeneration activity are constrained.

6.2 Opportunities for Businesses and Community Groups

For local businesses and community organisations, HSRA can be a rare opportunity to:

• Access well‑located premises that would otherwise remain dark;
• Secure relatively short‑term occupation suitable for testing concepts;
• Benefit from a degree of rent discovery through the auction process.

This explains why some authorities and place‑making organisations are enthusiastic proponents of HSRA. They see it less as taking property from landlords and more as co‑opting under‑used private assets into a broader public strategy for town centre revival.

7. Practical Steps for Landlords: How to Protect Your Position

While you cannot wish HSRA away, you can significantly influence whether and how it affects your portfolio.

7.1 Map Your Exposure

Start by identifying:

• Which of your properties fall within or near likely designated high street or town centre areas;
• Which of those have been vacant for approaching 12 months, or suffer frequent, repeated voids.

These assets are your most exposed. They are the ones that local authorities are likely to scrutinise first.

7.2 Tighten Vacancy Management

You should critically review your approach to letting and managing vacant units in high‑risk locations:

• Are your rent levels and incentive packages aligned with current market reality, or are they anchored to pre‑pandemic assumptions?
• Is your marketing genuinely active – using a range of channels, visible boards, local networks and digital platforms?
• Are you engaging with potential meanwhile uses or pop‑ups that could bring units into temporary occupation and demonstrate positive intent?

Comprehensive documentation of marketing efforts, enquiries and your responses can be invaluable if you need to show a local authority that you have behaved reasonably and that HSRA is not warranted.

7.3 Develop and Evidence Clear Plans for Problem Units

Where you are holding units vacant for strategic reasons, ensure that you can evidence this through:

• Pre‑application discussions or submitted planning applications;
• Feasibility studies and design work;
• Board papers or investment committee decisions;
• Timetabled programmes for works.

Local authorities are less likely to pursue HSRA where they can see credible, time‑bound plans for bringing the property back into productive use through redevelopment or reconfiguration.

7.4 Engage Early and Constructively with Councils

Silence or obstruction can be counter‑productive. Instead:

• Respond promptly to initial enquiries about vacant properties;
• Offer to meet and explain your constraints and plans;
• Explore partnership approaches, for example temporary lettings to supported businesses or curated meanwhile activities.

Authorities often prefer cooperative solutions. If you are visibly part of the answer rather than the problem, they may be more willing to hold off using formal powers.

7.5 Review Loan Agreements and Talk to Lenders

Where properties are charged:

• Review your loan covenants to understand what types of leases require consent;
• Brief your lenders about the HSRA framework and your approach to managing the risk;
• Seek pre‑emptive agreement on how you will handle situations where an authority threatens HSRA.

Lenders are more likely to support pragmatic strategies – including perhaps consenting to short conventional lettings to avoid HSRA – if they are engaged early rather than confronted with a fait accompli.

7.6 Prepare for the Worst‑Case Scenario

Finally, assume that at least some authorities will pursue HSRA robustly in the coming years. For those assets where an HSRA looks likely or unavoidable:

• Plan for the capital expenditure required to make premises safe and lettable under a statutory lease;
• Consider whether early disposal or re‑purposing of certain properties is preferable to operating under a regime you regard as overly intrusive;
• Build HSRA into your investment appraisals, pricing and exit strategies, particularly for secondary stock in struggling centres.

8. Will High Street Rental Auctions “Take Your Properties”?

The language of “taking” is emotive, but in several senses it is justified.

No, the state is not acquiring your freehold. You remain the legal owner, receive the rent and, in theory, benefit from the property being brought back into income‑producing use.

However, in HSRA cases:

• The authority decides when your failure to let is unacceptable;
• It can override your preference to keep a unit vacant or to hold out for a different tenant mix;
• It can select a tenant under statutory rules, not commercial negotiation;
• It can compel the grant of a lease you may not have agreed to under normal circumstances.

For the duration of the HSRA lease, your practical control over who occupies your asset and on what terms is substantially curtailed. In that sense, the law does indeed “take” your property – not permanently, but for up to five important years in the life of a high street investment.

9. Conclusion: A New Settlement Between Public Interest and Private Ownership

High Street Rental Auctions represent a significant recalibration of the relationship between public policy and private property rights in England’s town centres.

From the government’s perspective, they are a targeted, proportionate response to an intractable challenge: stubborn vacancy that blights high streets and undermines community confidence. For local businesses and community groups, they offer a pathway into spaces that might otherwise remain shuttered.

For landlords and investors, though, they signal a new reality. Long‑term vacancy in high‑profile locations is no longer a neutral holding position. It is a potential trigger for statutory intervention, external selection of tenants and imposed short‑term leases.

Whether you see HSRA as an unwelcome intrusion or a wake‑up call, the legal powers now exist and are beginning to be used. The key question is not whether High Street Rental Auctions will take your properties in the abstract, but which of your properties are vulnerable, and what you are going to do about it.

Landlords who map their exposure, engage early with councils, manage vacancy actively and evidence their strategic intentions will be best placed to minimise the risk of HSRA being used against them. Those who do not may find that, for five years at a time, the high street is no longer theirs to control.