Businesses in the retail and hospitality sectors are bearing the brunt of the economic fallout caused by Covid-19 lockdowns, resulting in ever more company voluntary arrangements (“CVAs”).
What is a CVA?
In brief, a CVA is a statutory insolvency procedure used by businesses as a restructuring tool to compromise liabilities. It allows an insolvent company and its creditors to agree the repayment of a portion of the company’s debts over a specified period of time. A CVA is approved if 75% (by value) of creditors vote in favour of it.
The “Unjustly Targeted” Landlord
In most CVAs, lease liabilities are compromised. Often, lease liabilities are compromised by the terms proposed by the CVA, while other creditors are not substantially effected.
In two recent high profile decisions (Lazari Properties 2 Ltd v New Look Retailers Ltd  EWHC 12909 and Carraway Guildford (Nominee A) Ltd and others V Regis UK Limited and others  EWHC 1294), landlords sought to challenge the CVAs.
Focusing upon the New Look decision, the landlords’ challenge to the CVA was threefold:
All of the landlords’ challenges were rejected by the Court, on (amongst others) the following bases:
The Regis case was heard by the same Judge as in the New Look case, and covered many of the same issues. The Judge also dismissed the landlord’s challenges to the Regis CVA.
What now for landlords?
Unless reversed on appeal (leave to appeal has been granted), these decisions will come as a blow to landlords, who are also grappling with substantial rent arrears, and whose remedies have recently been curtailed further by the Government’s announcement on 16 June 2021.
Whether these CVA decisions will encourage a wave of further retail CVAs, and whether there are any options left for landlords seeking to challenge a CVA, remains to be seen…..
Fladgate client Hodson Developments has secured planning and funding to commence a new garden city p...Read more
Tailored insights delivered to your inbox