High Street Rental Auctions: What Small Businesses Need to Know

Empty shops are a growing challenge on many high streets. The new High Street Rental Auctions (HSRA) scheme gives local authorities powers to force rent auctions for persistently vacant properties. For small businesses looking to open or expand onto the high street, understanding how this works could open up new opportunities or risks.

 

What Are High Street Rental Auctions and Why Were They Created?

High Street Rental Auctions are a new power introduced under the Levelling Up and Regeneration Act 2023, supported by regulations that came into effect in December 2024.

The idea is to tackle long term vacant high street units by enabling local councils to step in when landlords have not successfully let or used them. These auctions are intended as a remedy of last resort where engagement and negotiation have failed.

Councils must first designate streets or town centres for the power, perform community engagement, and work with property owners to encourage voluntary letting before initiating an auction.

 

Which Properties Can Be Auctioned?

Not every empty shop is eligible. To qualify, a property generally must meet all of these conditions:

1. Designation – It must lie within a high street or town centre area that the local authority has officially designated for HSRA powers.
2. Vacancy Condition – The property must have been vacant for at least 12 months continuously, or for 366 days in the preceding two years.
3. High Street Use Suitability – The unit must be suitable for a high street use such as a shop, café, bar, public service, or entertainment, and the local authority must consider that letting it to a suitable user would bring local benefit such as economic, social or environmental.
4. Minimum Standard Capability – The property must be able to meet a minimum letting standard, meaning that it is safe, secure and stable with no significant occupational risks. If it needs repair, the landlord may be required to do them before the lease can be granted.

If a property fails any of the above, HSRA powers will not apply.

 

How the Auction Process Works

If a property is eligible, this is the broad sequence of how HSRA plays out and how long it can take:

1. Initial Notice Period – The council serves an initial letting notice to the landlord, giving them eight weeks to come up with their own tenancy if they choose. During this period, the landlord’s ability to alter or relet the space is restricted.
2. Final Letting Notice – If the landlord does not lease it within those eight weeks, the council issues a final letting notice. This gives a window, typically 14 weeks, before the auction can begin.
3. Fourteen Week Auction Period – During this time, the property is marketed, an auction pack is prepared including legal documents, surveys and property information, and bids are collected.
4. Granting the Tenancy – The council offers the lease to the highest bidder. If the landlord refuses, the council can enter into the tenancy on the landlord’s behalf. Leases granted via HSRA must have a term between one and five years and are contracted out of security of tenure under the Landlord and Tenant Act 1954, meaning the tenant has no automatic right to renew at the end.

From start to finish, the full process is expected to take around twenty two to twenty four weeks.

 

Terms of the Lease and What to Expect

If you are bidding or entering a tenancy via auction, here are key terms and caveats you should know:

• The lease is excluded from security of tenure, so you will not have a statutory right to renew after the lease ends.
• The lease will typically be for between one and five years.
• Some costs normally borne by the landlord, such as repairs to meet the minimum standard or improvement works, may be required before or after letting.
• The auction winner may have to cover surveying, search and legal costs associated with preparing the lease documents.
• If the lease is granted and the landlord refuses to cooperate, the council can grant it in their name. In effect the council can step into the landlord’s shoes.
• Landlords have limited ability to block or appeal. They can serve a counter notice in certain circumstances.

 

Risks, Challenges and Uncertainties

While HSRA offers new paths for filling empty units, there are some key risks and caveats to consider:

• Because the scheme is relatively new, many local authorities may lack the capacity, budget or political will to use it effectively.
• Landlords may push back, and the balance of rights is somewhat shifted. Some fear loss of control or interference in property rights.
• For business owners, bidding in auctions means you must be ready with funding, a solid business plan and the ability to move quickly.
• The permitted development rights that allow change of use during the tenancy are temporary, meaning that when the lease ends you may need fresh planning approval for continued use.
• Energy performance standards still apply, which means a property below the required EPC rating may need upgrades.

 

How Small Retailers or Prospective Tenants Might Benefit

If you are looking for your first or next shop unit, HSRA could offer:

• Access to units that have been hard to rent out under normal market conditions
• A more transparent process with equal opportunity to bid
• Potentially more favourable lease terms than in competitive markets
• A way to bring shops back to life in neighbourhoods with lots of foot traffic

To succeed, you should prepare a clear business plan, have funding lined up, know your fit out costs, and understand the permitted uses for any premises you bid on.

 

Final Thoughts

High Street Rental Auctions represent a major shift in how vacant commercial property could be reused. The scheme gives local authorities a more forceful option when landlords are unresponsive, and it may create new opportunities for small businesses seeking presence on prime streets.

But the new regime also brings uncertainty, evolving rules, and potential tensions between landlords and councils. If you are planning to take part, stay informed of local authority plans in your area, review auction notices, and be ready with a strong proposal.

More information can be found in the HSRA Government article here.