Call for urgent review of CVAs

In our newsletter of March 2016 we highlighted the rental reduction voted on by creditors of British Home Stores upon that Company’s Voluntary Arrangement (‘CVA’).  Since then, several retailers and restaurateurs have used similar tactics (including the closure of some stores or restaurants) in an attempt to save their business.  As we previously stated, a proposed reduction in rent or store closure does not have to receive unanimous creditor support – the arrangement will be binding so long as it receives 75% in debt value amongst those creditors attending the CVA meeting.  However, many landlords, whilst having sympathy with retailers who are facing genuine financial difficulties, are feeling that they are being forced to shoulder the loss suffered by their tenants.

Until now, property owners appear to have obtained little public sympathy but the imminent closure of many House of Fraser stores has highlighted the fact that much of the nation’s retail portfolio is owned by large pension funds.  Store closure and a drop in rental value will have a negative effect upon these funds.

Speaking for property owners across the country, the British Property Federation (‘BPF’) has this month called upon the Government to conduct an urgent review of the CVA procedure.  To quote from the BPF’s website “We believe the process is now being mus-used, and this risks undermining the UK’s global reputation and deterring much-needed investment into our town and city centres, at a time when it is arguably more important than ever that the UK demonstrates it is open for business.”

Whilst the BPR supports the proper use of CVAs, it says the full impact on property owners “and the pensioners’ savings they invest”, upon tax payers, local communities, businesses and economies should be appreciated.  Melanie Leech, Chief Executive of the BPF says “Urgent action is required and we are calling on government today to undertake a review, so that we can restore the CVA process to its oriuginal purpose.”

If you wish to hear more about CVAs and tenant insolvency as a whole, why not contact Hatherleigh Training?

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