The Levelling Up and Regeneration Act 2023: what’s new?

As announced in our recent article, the Levelling Up and Regeneration Bill (the “Bill”) is now the Levelling Up and Regeneration Act 2023 (the “Act”). So, what does this mean moving forward and what has changed from a commercial property perspective?

The Act is likely to rely heavily on the implementation of regulations, so its impact remains somewhat vague. However, we can give an initial steer as to key updates and what the implications may look like.

High street rental auctions

Is the Act in the same shape as anticipated by the Bill when it comes to high street rental auctions?

You may recall that the Bill proposed allowing local authorities to force the owners of high street premises to submit their premises to a rental auction (you can read our previous summary of this section of the Bill here).

Having passed through the Parliamentary processes, this new power has made it into the Act in a form relatively unchanged from the first draft of the Bill. The key updates are as follows.

1. Under the Bill, occupation only meant “the regular presence of people”. The Act now also requires occupation to be “substantial” and “sustained”. What this requires in practice is not entirely clear, but it must be a higher bar than originally anticipated by the Bill. It could lead to disputes if notices are served on properties due to those in occupation not being deemed to be occupying in a “substantial” and “sustained” manner. Although, it would seem counterproductive to the aim of the Act for local authorities to attempt to let a property that is already being occupied at all.
2. It was only occupation by a trespasser that expressly would not constitute “occupation” for the purposes of the criterion under the Bill. This has been broadened under the Act, and now includes “occupation by a person living in premises that are not designed or adapted for residential use.” If your commercial premises double up as a home, but are not designed or adapted for that use, that may be insufficient to prevent the local authority letting it under the Act. Again, though, policy considerations may apply here, as local authorities are unlikely to force the rental auction of premises where someone lawfully lives.

What steps should I take if I wish to appeal?

1. Step 1: consider alternative uses

If you have just received an initial letting notice (the first stage in the process), while awaiting the auction or appeal process, consider alternative uses for your property. Could the property be used to host regular community events, such as pop-up shops, or art exhibitions? These uses can demonstrate to the local authority that the property is far from being a long-term vacant premise.

Alternatively, you could grant a short-term lease that is excluded from statutory security of tenure under the Landlord and Tenant Act 1954. A seemingly unintended consequence of the Act is that you can grant a tenancy of less than a year without the local authority’s consent, at which point the property would no longer be vacant and would no longer qualify (unless this is what the Act would treat as “insubstantial” or “unsustained” occupation).

2. Step 2: understand the selection process

Consider why your property was selected. Local authorities can choose vacant high street properties based on the period of vacancy, and how beneficial the use of the property is to the local economy, society, or environment.

Use the situation as an opportunity to speak to your local authority. The rental auction process, as provided in the Government’s consultation paper, was supposed to be a win-win solution for both the local authority and the landlord; you can benefit from the rental income while the local authority has the benefit of a thriving high street economy. If you consider that your property does not qualify, you may have a good case for an appeal against the letting notices, but consider approaching the local authority to discuss in the first instance (albeit, importantly, discussions should be ongoing alongside the counter-notice procedure detailed in the next step to avoid any risk of falling foul of the time limits for service).

3. Step 3: consider how, when and on what basis to appeal

If you have received a final letting notice, you will have 14 days to serve a counter-notice on the local authority stating your intention to appeal if the final letting notice is not withdrawn. The counter-notice must specify the relevant ground(s) of appeal, which are as follows:

• the vacancy condition was not met in relation to the premises on the day of service of the initial letting notice;
• the premises cannot reasonably be considered suitable for the use identified in the final letting notice as the suitable high-street use;
• the local authority’s view that the local benefit condition was met in relation to the premises was one that no authority giving reasonable consideration to the matter could have reached;
• the local authority failed, while the initial letting notice was in force, to consent to a proposed tenancy, licence or agreement where either the authority was required to consent, or was not acting reasonably in refusing consent (when any authority giving reasonable consideration to the matter would have consented);
• you intend to carry out substantial works of construction, demolition or reconstruction affecting the premises and you cannot reasonably carry out those works without retaining possession of the premises; and
• you intend to occupy the premises as your residence or for the purposes, or partly for the purposes, of carrying on your own business.

If the counter-notice and any ongoing discussions with the local authority prove unsuccessful, you have 28 days from the service of your counter-notice to lodge an appeal to the county court. Otherwise, the property will likely become the subject of a rental auction.

4. Step 4: gather evidence

What are your plans for the property? You may be intending to occupy or use the premises for your own business or residence, or to carry out some redevelopment work. Whatever the plans, it may be wise to start gathering documents to evidence those intentions. It may be evidence of recent renovations, proof of ongoing marketing efforts to lease or sell the property, or other future use and business plans. The more evidence you have, the stronger your case could be at appeal.

Without the regulations required to put the Act into practice, it is difficult to foresee what the uptake of these provisions by local authorities will be. On the one hand, the process is lengthy and involves a lot of hoop-jumping for any authority wanting to designate areas and set up rental auctions. Nevertheless, it may be seen as an attractive, cost-effective way for local authorities to reinvigorate their high streets despite the fact that the local authority may face all the same challenges as a landlord who has been unable to find a willing occupier. Only time will tell!

What else does the Act do?

For the most part, the Act contains provisions that are better placed to be summarised by our experienced planning colleagues. However, a key change in the planning regime that is anticipated by the Act is the extension on the time limit for enforcing certain breaches of planning control.

This change is not yet in force, but we would advise our clients to plan ahead on the basis that it could come into force at any time. If you are in breach and approaching the 4-year mark, we recommend that you take the appropriate action to regularise the situation now to avoid any risk of being subject to enforcement action. It is not clear whether the extended time limit will catch breaches that have already reached the 4-year milestone, albeit this is not anticipated.

Stay tuned for more information and updates on the Act.