The Government's recent  Levelling Up the United Kingdom White Paper announced the intention to give local authorities the power to require landlords to rent out long-term vacant properties on the high street to tenants such as local businesses and community groups. This is primarily targeted at addressing the social problems associated with high streets that have high vacancy rates. Very little detail has so far been announced and we await the release of the Levelling Up Bill after the Queen's Speech on 10 May 2022.

In this article we will consider some questions arising out of the White Paper, and we will follow up on the detail once the Bill is released.

The first question is: how will it work? There are media reports of local authorities running Compulsory Rental Auctions for units that have been vacant for more than 6 months, but these are unsubstantiated. Landlords who are planning development projects and need vacant possession will want to be exempt and a solid definition of what constitutes vacant  is going to be required. Landlords will want to understand how such units will be identified and whether they will have a right to make representations, as identifying whether a unit is genuinely vacant is often more complicated than apparent from looking through shop windows.

The second area of detail needed is in relation to the terms landlords will be forced to accept and who will decide which bid wins the auction. The Government will need to address issues associated with the financial standing of the types of tenants the policy aims to promote. It is unclear how much Government intervention there will be and how much the Government will just be looking to facilitate normal market forces by encouraging lettings on the open market.

However, could there be an upside? Revitalised high streets will hopefully increase footfall and drive market rents upwards.  Equally, landlords may benefit from their units being let, relieving them from their potential rates liabilities.  On the other hand, by potentially attracting lower quality tenants, rents may be driven down. By creating time pressure to complete new lettings, the policy will hand power to tenants who may request price chips or ask for additional incentives at the last minute. But, for some landlords is a  tenant better than no tenant?

A lot of the most blighted high streets are those that also need the most investment in terms of repair and maintenance. The type of tenant who relies upon this policy may not have the resources or appetite to carry out the works required. Whilst vacant units may be filled, it does not address the issue of low quality stock where nobody is incentivised to make the investment.

With the scant details of the policy released so far it is difficult to see how it will address the unique nature of real estate assets and the complexities of real estate law. The policy will need to address matters such as obtaining consents from any superior landlord or lender, planning uses and conditions, restrictions on use imposed by the title and/or other documents, as well as landlords' plans to control tenant mix within their portfolios – all of which are bespoke to individual properties and are difficult to legislate on a one-size-fits-all basis.

We look forward to the release of the Levelling Up Bill  in the coming weeks and will report on the details as and when they are issued.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2021. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.