Levelling Up : What Will It Mean For Commercial Landlords And Developers?
The Government’s ‘levelling up’ mantra has been immortalised in its Levelling up and Regeneration Act 2023 which is expected to be rolled out through 2024. So what should businesses and commercial landlords be looking ahead and preparing for?
We look at two key developments you should be thinking about ahead of implementation. The Act is long and implementations in their early stages; further regulations and guidance are required so the practical and legal impacts are not at all clear. But an awareness of what’s coming is beneficial.
Planning reforms – The Act aims to speed up the planning process by cutting bureaucracy, encouraging more local authorities (LAs) to facilitate the building of more homes and holding developers to account (and requiring developers to deliver vital infrastructure).
The Act includes a new power (s73B Town and Country Planning Act 1990) under which existing planning permissions can be materially changed without a new application being made, as long as the effect of the changes will not be “substantially different” from the existing permission. However, it can’t be used to extend the life of the original planning permission.
Enforcement notices can currently be served on developers for planning breaches. The 2023 Act introduces a new power for LAs to issue a warning notice prior to issuing enforcement proceedings. Further, the time limit for enforcement is extended to 10 years (from the current 4 years) which LAs will undoubtedly welcome.
Compulsory rental auctions – Part 10 of the Act sets out a radical change in the commercial property landscape. It will allow LAs to intervene and require compulsory auction of empty or unoccupied commercial buildings, in certain circumstances. ‘Occupation’, for these purposes, means ‘substantial’ and ‘sustained’.
The property owner will be required to grant a lease of between one to 5 years to a successful bidder at auction. If the owner fails to do so, the LA will have power to do so.
Who might this impact? The Act sets out two criteria before the LA can intervene to force an auction: a ‘vacancy condition’ whereby the property must have been vacant for a full year prior or at least 366 days over the previous 2 years; and a ‘local benefit condition’ (the LA must consider an intended letting to be of benefit to the local economy, society or environment).
However, still to be clarified are the terms of the agreement for lease and lease itself to be imposed on the property owner.
Owners of commercial premises, particularly where empty premises are in LA-designated high streets and inner towns and cities are lying vacant, should be prepared for the potential impact. It seems that there is nothing at present to prevent the property owner letting out their premises under short tenancies if an LA were to indicate an intention to force a letting.
We will keep readers updated as to the implementation of these key elements of the Act.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you