By Peter Windatt
BRI Business Recovery & Insolvency
ON the high street a Company Voluntary Arrangement (CVA) is usually a deal between a company and its creditors which enables ‘business as usual’ in some shops, the closure of the poorest performers and, for those in between, a requirement to ‘do deals’, in particular with their landlords, in respect of those stores whose performance is not good enough to allow continued trading otherwise.
In 2018, 18 CVAs affected 2,869 high street sites. This is big news for a good reason.
Over 1,000 of them were run by just two such companies; New Look, which then had 613 stores and Carpetright with 400. Landlords are, understandably, concerned that they are being asked to carry the can for the failings of management to move with the times and run their businesses sufficiently well in order to meet their longstanding rental obligations.
Representing the landlords’ position, the British Property Federation (BPF) has issued guidance as to what they wanted to see in CVA proposals that affected chains of stores in particular and landlords generally. The BPF fear that CVAs are being used to cram down rents and make businesses more profitable purely at the expense of landlords. A CVA doesn’t even require a company to be insolvent and so some accusations of abuse are being made.
Unlike most other creditors, a landlord does not lose their asset in the event of an insolvency; the land and buildings that they lease to their tenants remains.
If you are a landlord then you can, it must be hoped, find a new tenant. The issue then is that no suitable new tenant can be found. The problem, for the landlord at least, is exacerbated by the fact that they will, generally, quickly become responsible for the rates on the property once they have their property back. A reaction to this may be to find someone, anyone, to fill the gap – a charity shop may just fit the bill as they are generally exempt from rates and might happily take up residence in order to ply their wares.
A review of the rules surrounding CVAs has just been undertaken but in order for the BPF to achieve their goal and for landlords to enjoy better protection than they do currently, a change in legislation would be required. With so many other things for the Government to contend with currently it is highly unlikely that parliamentary time will be found and, even if it was, who is to say that the underlying issue of retailers failing would be much improved.
If you are affected by this or any other insolvency related problem and would like to talk things over with a high street practice who care, contact any one of the management team at BRI Business Recovery and Insolvency at St. James, Northampton on 01604 754352.