An upcoming new law could affect retail shops and the property around them. Here we will look at what is proposed and at what the implications for the property market might be.

What is the Empty Shops Bill?

The Empty Shops Bill is a nickname which is being given to one of the proposals in the Levelling Up and Regeneration White Paper, which could lead to a Bill and ultimately an Act of Parliament. There is no such thing as the Empty Shops Bill as such.

One of the aims of the Levelling Up and Regeneration White Paper is to provide stimulus to high streets and town centres that have suffered from the decline of retail and from the impact of Covid.

Most high streets today have many empty shops. On average around one in seven shops are empty according to the British Retail Consortium, and in some areas it is much more. The proposals could lead to a new law to bring these shops back into use and to rejuvenate town centres.

What will the Empty Shops Bill do?

If made law the new proposed legislation could effectively mean that owners of empty shops would be forced to let them out to tenants whether they wanted to or not.

The procedure would possibly be handled by local councils and could lead to a compulsory rental auction. Councils would be able to direct property owners and landlords to find a tenant for their empty shops. If they fail to do this within a certain time, likely to be six months, a council would be able to hold an auction where the highest bidder would be able to rent the shop.

Will this be good or bad for high streets?

Everyone agrees that empty shops are bad for town centres. They look unsightly. They can be targets for graffiti, vandalism, squatting or arson. They also affect the critical mass of a retail area: As there are fewer shops fewer people need or want to visit the area and the surviving shops suffer due to the reduced footfall.

More new, open shops could reverse this trend. It could improve the appearance of town centres, bring more visitors and encourage town centres to thrive again.

It could bring empty buildings back into use. This is much more environmentally-friendly than building news ones.

It could create more business opportunities. In particular small entrepreneurs who couldn’t otherwise afford to set up a shop might be able to. It could help create more jobs.

Community groups might also be able to make use of these shops.

Landlords would start earning rent again. And there could be more business rates income for councils.

But what could the possible snags of this new law be?

Not many landlords want to leave their shops empty and lose rent anyway. If they could get a suitable tenant able to pay a viable rent they probably would have done so already.

The rent that the landlord is forced to accept might be inadequate to cover their costs.

There might not be any businesses who want these empty shops. Many empty shops are in the wrong place or of the wrong size to be attractive. For example, large empty department stores.

It could means that shops could be let to the wrong sort or wrong mix of tenants which could adversely impact the area. For example any given area can only support a given number of charity shops.

The impact on the area could deter businesses who are able to pay market rents from locating there.

Bad tenants and even criminals could exploit the new system. They could fail to pay the rent and rates, they could damage the property or use it for illegal activities.

Local councils own shops (and shopping centres) in some areas. So there could be an unusual situation where they are forced to let out shops they own, as well as being in charge of the process. That could be a risk to local taxpayers.

It might push retail property owners to do something else with their property to avoid being forced to let it out. For example, to convert it to residential use or even demolish it. These moves could be bad for town centres.

With retail property, the value of a property is closely linked to the quality and length of the tenancy. If owners are forced to give short rentals to low quality tenants then it could affect the value of the property. This could impact the value of other properties in the same area and so impact the investment market.

Might it set a precedent for other types of property? For example, could you be forced to rent your empty house out to a tenant chosen by the local council in the future?

In conclusion it’s very important to point out that the Levelling Up and Regeneration Bill isn’t law yet, or even close to becoming law. The empty shops provisions might not become part of the law. If they do, it is not clear exactly how they will work. More details are likely to emerge when the proposed Bill is outlined in the next Queen’s Speech next week.

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