The Auction Rent Travels Further Than the Shop

When I look at high street rental auctions, I find myself thinking about the shop next door. Not because bringing an empty unit back into use is unimportant, but because the rent agreed there will acquire a second life. Someone will put it in a schedule of comparable lettings. It may then feature in a rent review negotiation several doors away, stripped of much of the detail that explains it.

The auction process available to councils in England is an intervention in persistent vacancy, not simply another method of advertising a landlord's shop. That distinction matters when interpreting the result. A successful bid tells us what an occupier offered for a particular opportunity through that process. It does not, by itself, establish what every similar shop on the street should command. Nor should it be dismissed merely because the letting required public intervention.

I can see the temptation on both sides. An occupier facing a review may point to a modest auction rent as evidence that the landlord's expectations belong to an earlier market. A landlord may say the auction letting is too unusual to count. Having spent much of my working life acting for occupiers, I would be wary of accepting either argument without opening the lease. Evidence favourable to my client still needs to survive examination.

The figure needs its lease attached

Start with the repairing obligation. A tenant required to keep a tired shop in repair may face a very different bill from one whose liability is limited by a properly incorporated schedule of condition. The same annual rent can therefore represent two quite different bargains. Roofs, drains and old shopfronts do not become incidental details because a letting has been achieved. They belong beside the rent in any sensible account of the transaction.

Then there is the period of occupation, the permitted use and any concessions or works included in the bargain. A short letting with restricted use cannot simply be placed alongside a longer lease with broader rights and treated as identical evidence. At a rent review, the existing lease sets the valuation assumptions and disregards. The task is to assess how well the auction letting fits those terms, and what adjustments its differences reasonably justify.

In teaching, this is the point I want students to understand before they become too comfortable with a neat table of rents per square foot. The table is useful. It is also capable of hiding most of the explanation. A headline rent without the area basis, lease terms, condition and relevant concessions is an incomplete observation. Adding decimal places does not make it more reliable. Sometimes the honest entry in the final column is that the evidence deserves limited weight.

A result worth keeping properly

There is a practical opportunity here for councils administering auctions. Alongside the letting result, a clear record of the premises and the agreed terms would help the transaction be understood later, subject to legitimate confidentiality requirements. That is less visible work than announcing an occupied shop, but it matters. Otherwise, the number may circulate while the qualifications remain in a file that nobody involved in the neighbouring rent review has seen.

I would not want this caution to become a way of protecting established rental expectations from awkward evidence. If a properly exposed opportunity attracts only modest bids, that is worth listening to. Repeated results may tell us something important about demand. Owners, lenders and advisers cannot reasonably welcome market evidence only when it supports existing figures. The discipline is to explain the differences, not to use the word unusual as a reason to stop looking.

For the neighbouring shopkeeper, this may eventually affect a very ordinary calculation: how much turnover is needed before wages, rates, repairs and rent are covered. One auction will not settle that calculation for a street. It can, however, contribute a useful piece of evidence. My interest today is in keeping that evidence intact. Getting a tenant through the door is one achievement. Understanding the bargain accurately is another, and its consequences can reach well beyond that door.