Its been widely reported that House of Fraser is asking some of its landlords to cut it some slack on the rents paid for high street premises, and now Byron, the high-end burger chain, is looking at a company voluntary arrangement (CVA) to help it deal with closing down some of its premises.
With the squeeze on retailers getting tighter, commercial landlords are likely to find the grip extending to them as well, with their tenants finding it increasingly harder to foot the rent bill. A landlord can take some simple steps to protect its position as best as it can:
- Watch the post – for notice of a proposed CVA, and if received get professional advice on what effect the CVA will have on your rent roll. To make sure your voice is heard, respond to the proposed CVA. Any unsecured creditor entitled to be given notice of the proposed CVA is bound by the CVA if approved by other creditors, so if an unsecured creditor the landlord is bound by the CVA whether or not he voted on it.
- Have you a guarantor you can turn to, who is separately obliged to pay the rent or any shortfall in rent as a result of your corporate tenant entering into a CVA? Again, obtaining early advice is crucial as a CVA could release a guarantor from its obligations to the landlord provided that “adequate compensation” is given to the landlord for its loss of rights. The CVA could also result in automatic release of the guarantor unless the guarantee stated that compromise of the tenant’s obligations would not release the guarantor.
- Check whether the proposed CVA treats all the tenant’s landlords equally. A CVA may be challenged if a tenant tries to keep its relationships with ongoing landlords sweet by agreeing to pay a greater proportion of rent arrears under the CVA than it will pay to landlords of properties it no longer wants. Advice on whether you, as a disadvantaged landlord, have the ability to challenge the CVA for prejudice and unfairness could result in you getting an increased portion of the available pot.