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Landlords demand an end to cynical abuse of company voluntary arrangements

New Look


Landlords are urging the government to take immediate action to prevent retailers “abusing” Britain’s insolvency framework by shifting the cost of “years of failings and underinvestment” on to property owners.

The British Property Federation, which counts the nation’s biggest commercial property owners, including British Land, Land Securities and Hammerson, among its members, has written to Lord Callanan, the corporate responsibility minister, calling for tighter rules.

Retailers and hospitality groups increasingly are using company voluntary arrangements, a form of insolvency that can hurt landlords disproportionately through rent cuts and site closures. Creditors must give their consent to a CVA, but in many cases those less affected receive a greater share of the vote than the landlords.

There were 33 CVAs where landlords took the brunt of the pain last year, up from 11 the previous year, according to the federation. A fresh wave is expected in the coming months as tenants seek to follow the lead of companies including New Look, the retailer, and Caffè Nero, the coffee shop chain, which have used CVAs to write off rent debts accrued during the pandemic.

“While the crisis has brought genuine hardship to businesses up and down the country, it has also been cynically used as an excuse by wealthy individuals and private equity backers to shift on to property owners the cost of years of failings and under-investment,” Melanie Leech, chief executive of the federation, said in the letter, which has been seen by The Times. “As well as being fundamentally inequitable, such CVAs are damaging to the high street, hurting pensioners and savers and undermining the UK’s reputation among international investors.”

An estimated 70 per cent of Britain’s retail, food and drink space is owned by the public through charities, local authorities and institutional investors such as pension funds and insurance companies. Smaller landlords who may rely on one or two units to fund their retirements are also adversely affected because they are unlikely to be able to afford the legal costs of challenging a CVA, Ms Leech said.

The federation urged the government to ensure that the voting procedure is fairer to those that the CVA compromises by giving their votes greater weight than the votes of unaffected creditors. It also called for a requirement that all CVAs are independently scrutinised and can enforce only temporary changes to contracts while a turnaround strategy is carried out.

Struggling retailers and hospitality groups say that CVAs are needed to safeguard businesses and provide a sustainable platform to rebuild sales.

Bill Hughes, head of real assets at Legal & General Investment Management, one of Britain’s biggest institutional property investors, said: “I don’t think there’s much evidence to say that CVAs are very successful.

“Generally, one CVA is followed by another CVA by the same company and there is little evidence of CVAs providing a route to . . . a long-term sustainable business.” He said that many CVAs were launched with “no clarity of a business plan, transparency or evidence of being fair, balanced and reasonable.

“I don’t have a problem with CVAs if they were to be done in a way that sees proportionate voting rights given to landlords, which would make it a legitimate mechanism.”

Commercial landlords and their tenants face the challenge of coming to an agreement over how to settle about £4.5 billion of rent debts accumulated during the pandemic. A government moratorium on evictions of businesses that fail to pay rent during the coronavirus turmoil is due to end on March 31.



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