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Auctioning the High Street?

Auctioning the High Street?

Emily Thomson 26 Aug 2022
11 May 2022 saw the publishing of the Government’s draft Levelling Up and Regeneration Bill (“the Bill”). The draft legislation contains details of the government’s proposed rental auction scheme for vacant high street premises. As explained in my colleague Alison Bembenek’s blog (‘Levelling Up and Regeneration Bill – implications for high streets / town centres’) the Bill includes tools designed to help UK high streets. Part 8 of The Bill proposes new powers for local authorities to bring vacant premises in town centres back into use through rental auctions. So what will these rental auctions comprise in practice and will the impact ultimately be positive for the health of our town centres?   Designating High Streets The Bill allows local authorities to designate a street as a ‘high street’ if it considers that “the street is important to the local economy because of a concentration of high-street uses of premises on the street.” The Bill defines what could be considered as a ‘high-street use’ and it is a long list! The uses include shops and offices, services to visiting members of the public, restaurants, bars, pubs and cafes, use for public entertainment or recreation, community halls and meeting places, and some manufacturing and industrial processes (albeit only if they can reasonably be carried out “in proximity to, and compatibly with” the other uses). Whilst its helpful the Bill identifies a wide range of uses as being key components of the high street, it remains to be seen what other tools will help plan the high street in a more proactive manner.   What are Vacant Premises? Once designated, vacant units can be subject to local authority intervention if the local authority considers occupation would be beneficial to the local economy, society, or environment.   A unit is classed as vacant if it has been continuously unoccupied for a year or, broadly, if it has been unoccupied for at least 366 days in the last two years. A ‘local benefit condition’ must also be satisfied before the local authority can begin the process of compulsory re-letting of vacant premises. For example, if they consider that the occupation of the premises for a suitable high-street use is deemed beneficial to the local economy, society or environment. On the surface, this condition should be easy to satisfy, although the exact criteria of assessment has not been published yet.     What Happens Next? After satisfying the vacancy and local benefit conditions, an ‘initial letting notice’ should be served on the landlord of the premises. This notice prevents the landlord from granting any tenancy or license for those premises (or entering into any agreement to do so) without the local authority’s written consent while it is in force (this can be up to 10 weeks) – though it does not apply to the grant of a tenancy agreed before the initial letting notice took effect. If the landlord requests the written consent of the local authority to let the property during the initial letting notice period, the local authority must give consent for letting if: The term of the proposed tenancy, would begin within the period of eight weeks of the service of the initial letting;  The term of the letting would be at least one year; and  The tenancy would be likely to lead to the occupation of the premises for activity that involves the regular presence of people at the premises.  The local authority can serve a final letting notice if the premises have not been let within eight weeks (but before the initial notice expires). Once the final letting notice is served, the local authority may start the rental auction procedure. A final letting notice will last for 14 weeks, during which the landlord cannot grant any tenancy or license of the premises or carry out works on them, without the local authority’s written consent.   Can Landlords Appeal? In short, yes. The landlord has 14 days from the service of a final letting notice to serve a counter notice on the local authority. This must state that, if the final letting notice is not withdrawn, the landlord intends to appeal, and set out on what grounds the appeal would be brought. Any appeal must be made to the County Court within 28 days of the counter notice. If no tenancy has been granted and no appeal made after a final letting notice has been served, the local authority can start the rental auction.   The Rental Auction Process The Bill describes the rental auction as “a process for finding persons who would be willing to take tenancy of the premises… and ascertaining the consideration that they would be willing to give in order to do so.” Separate regulations will set out the process, including how the “successful bidder” is identified. The devil will be in the detail as to how the process will ensure that the successful party is beneficial to the future health of the high street. When there is a successful bidder, the local authority can enter into a tenancy contract with them for the tenancy of the premises. The contract will be the same as if it were entered into by the landlord of the premises. The Bill also explains that the contract may allow the tenant or landlord to carry out pre-tenancy works.   Final Thoughts Lichfields will be closely monitoring the progress of the Levelling Up and Regeneration Bill, including any amendments proposed. Will high street rental auctions help to re-invigorate our high streets and create better co-operation between local authorities and landlords, or will they force premises to auction without finding a suitable long-term occupier? As it currently stands, this measure would transform the powers of local authorities on the high street by binding landlords without their consent. Perhaps this threat of intervention will force landlords to act first. That said, there are questions around whether this tool will be effective at reoccupying premises that have been vacant for a number of years without attracting any interest. Those with high street properties will hope for a rebalancing of the scales so that they are given greater negotiating powers with local authorities as to whether their premises are up for auction. In theory the landlord could be forced to carry out works it does not want to, to facilitate a tenant that they have not chosen to occupy the premises – all under a contract that has been imposed upon them and at a rent that they otherwise may not have accepted. However, the Bill does state that “the local authority must have regard to any representations made by the landlord.” At the moment, the high street rental auction seems like a relatively blunt tool. Indeed, some may take the view that, if it were that easy, landlords would be able to find suitable tenants for vacant premises for themselves. The tool has the potential to create tension between the shared goal of reviving town centres and the normal rights of property owners. Please get in touch if you have any queries on this and we will be happy to help. Alternatively, you can visit the Lichfields website which includes a dedicated Levelling Up and Regeneration Bill Resource which is regularly updated and includes our analysis, insights and thought leadership on the Bill.     Header image: Sora Shimazaki via Pexels  

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Permanent fast-tracked pavement licensing – regeneration, one patio set at a time
What is the fast-tracked system? In late-June 2020, as we emerged from the first lockdown, I wrote a blog reflecting on the provisions of the Business and Planning Act 2020, which included new legislation for fast-tracked pavement licences with application fees capped at £100. This was intended to be a temporary lifeline for pubs, bars, restaurants, and cafes, and presented an opportunity for businesses in the hospitality sector to quickly replace lost indoor capacity during lockdown and then increase capacity to help businesses to thrive once restrictions ended. The pavement licensing system introduced two years ago allows licence holders to place removable furniture (counters, stalls, tables, chairs, benches, umbrellas, heaters etc) over certain highways adjacent to the premises which the application was made for, for the selling, serving and/or consumption of food or drink. These licences remain valid for between 3-12 months (depending on the local authority’s decision). It also introduced a reduced public consultation period (7 days) and low application fees (capped at £100). Clear access routes on highways need to be maintained in all cases to take account of the needs of pedestrians and disabled people. Figure 1: The Tyne Bar, Ouseburn, Newcastle Why is it being made permanent? In July 2021, the Government extended the temporary pavement licence provisions until September 2022 as they had been found to be both popular and successful in supporting pubs, restaurants and cafes during the pandemic. This extension was also supported by local authorities, who in some cases offered subsidised, or free, fast-tracked pavement licences. By March 2022, UK Hospitality (UKH) was calling for the Government to make the fast-track pavement licensing system permanent to help the hospitality sector make a stronger post-pandemic recovery. The Government has listened, and its new Levelling Up & Regeneration Bill proposes to make the pavement licensing system permanent to support its long-term regeneration of town centres and ‘levelling up’ strategy. Boris Johnson commented: “to support vibrant high streets…pavement licensing red-tape will be permanently scrapped, freeing up businesses to serve food al fresco and attract diners all year round.”[1] Earlier this month, Lichfields published a blog reviewing the government’s approach to achieving regeneration in the Levelling Up and Regeneration Bill, which identified greater flexibility on the high street, including permanent fast-tracked pavement licensing. The Government clearly believe it can continue to contribute to the vitality and viability of our town centres. This blog looks at the outcomes of fast-tracked pavement licensing since July 2020 and what a permanent al fresco dining and drinking culture could mean for our high streets and town centres in the future.   From pubs to Parliament, pavement licences have widespread support Fast-tracked pavement licences have proven to be immensely popular, as evidenced by the massive increase in the number of outdoor seating areas in towns and cities across the country since July 2020. When the temporary measures were introduced, the hospitality sector responded quickly, creating thousands of new outdoor dining and drinking spaces where there had previously been none. Many businesses have invested heavily to set up heated, well-lit, and covered seating areas, with some going as far as to install dining pods and yurts. Although, in the case of dining pods and yurts in particular, separate planning permission may also be required. Figure 2: Camden Market, London These new spaces have remained popular, have brought visible signs of vitality and life to the high street, and are often seen as a vast improvement to formerly dreary and underused spaces dominated by parked cars and traffic noise. This has boosted the visibility and appeal of many bars, cafes, and restaurants which can now bring a new offer to customers, and in some cases, it has allowed businesses to double their capacity. Is the permanent fast-tracked system exactly the same as the original? There will be some changes to the original system with local authorities able to grant longer licenses lasting up to 24 months. The charges for license renewals will also rise from £100 to £350 and applicants for new licenses will be expected to pay £500. Are there any potential issues? Although there has been a great deal of support for making fast-track pavement licensing measures permanent, there have been concerns raised about the impact on accessibility for wheelchair users and the loss of public space. The Local Government Association (‘LGA’) has called for better enforcement powers in the new legislation so that Councils can act against businesses that flout the rules and block pavements. The proposed increase in application fees for future pavement license applications may be manageable for larger businesses but could prove to be a significant burden for smaller, independent businesses. What role can pavement licensing play in levelling-up, regeneration and town centres of the future? It has been widely reported that each outdoor seat created by businesses in the hospitality sector could boost their revenue by up to £6,000[2] a year, and that a third of restaurants, cafes and bars have the space to apply for a pavement license. This could provide a significant financial boost to restaurants, bars and cafes by permanently increasing their capacity and turnover. It is hoped that greater use of such businesses will have a spill over effect by helping high streets and other local economies recover from the pandemic and supporting their long-term regeneration. The last two years has shown that these new outdoor spaces have the potential to bring active uses to the streets themselves and improve the overall vitality and appeal of town centres – all of which is vital in supporting the Government’s wider regeneration strategy. Fast-track pavement licensing has been seen to drive forward the growth of al fresco dining and a ‘café culture’ over the last two years, which was far less common prior to the pandemic and has changed the way we use outdoor spaces in town centres and high streets. This has coincided with the emergence of ‘streateries’ (outdoor dining areas located in spaces previously dedicated to vehicles), which began to appear in towns and cities across the country in 2020. In some places these are set to stay, recognising both their popularity and the economic boost they have delivered to local businesses. In Manchester’s Northern Quarter, parts of Thomas Street and Edge Street are now closed for most of the day, allowing bars and restaurants to set out seating areas along the road. Similar measures have been taken in parts of London, where councillors recently voted in February to support the continuation of the Belsize Village ‘streatery’ scheme. It received popular support from residents and councillors, in part, because of the contribution the scheme is considered to have made to driving up footfall and reducing the number of empty commercial premises. This also fits neatly with wider economic and environmental strategies aimed at revitalising high streets, whilst making them greener and more sustainable. This is at the crux of the Government’s ‘levelling up’ agenda. Figure 3: Edge Street, Northern Quarter, Manchester Figure 4: Belsize Park, London Where can Lichfields help? Lichfields is continuing to identify changes and emerging opportunities on the High Street and is closely monitoring the progress and content of the Levelling Up and Regeneration Bill. Until the permanent measures are adopted, business can continue to benefit from the lower application fees that are currently in place. Businesses with a pavement licence that is due to expire before the end of September 2022, or businesses without a licence, should consider whether to apply for one soon to benefit from the lower fees whilst they remain in place. Lichfields is well placed to prepare and manage applications for pavement licences on behalf of pub, bar, restaurant and café operators, and any related planning applications. We have good relationships with local authorities across the country and are ready to liaise with officers to achieve swift, positive outcomes.     [1] https://www.gov.uk/government/news/prime-minister-to-give-local-leaders-power-to-breathe-new-life-into-high-streets [2] https://www.thedrinksbusiness.com/2022/05/new-uk-al-fresco-dining-laws-to-make-outdoor-dining-a-permanent-fixture/ Header image: Outdoor dining in Soho, London, during the ‘Eat Out to Help Out’ scheme  

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