Retailers ‘mis-using’ CVA rent reductions, say landlords

Real estate association, the British Property Federation (BPF), believe that retailers have been “mis-using” the CVA process to lower the price of rent.

Following the recent upsurge in CVAs, the organisation has called on the government to conduct an “urgent review”.

The concerns follow the announcement that House of Fraser, which announced it would be closing 31 of its 59 stores, would be seeking a 25% reduction on rent for 10 of the stores it will keep open.

Mothercare, Poundworld and New Look are among some of the retailers and high street chains seeking rent reductions in CVAs, with New Look requesting a 60% reduction.

The organisation also said the request to reduce rents with a CVA was “undermining the UK’s global reputation and deterring much-needed investment into town and city centres”.

It said that it supported the proper use of CVAs in order to help businesses in genuine distress but said there was “increasing frustration” about the practice of some recent CVAs.

To restore confidence BPF has asked the government to immediately refer CVAs affecting more than five outlets to an independent third party to be reviewed and to allow the BPF to work with the insolvency profession to agree on what is “good practice” in terms of voting rights and structures.

It also asked insolvency professionals to follow best practice guidance when engaging with property owners and to do it as early as possible in the CVA process.

Melanie Leech, chief executive, of BPF, said: “The CVA process is intended to be part of a comprehensive business recovery plan. Property owners, looking after savers and pensioners’ money, will support businesses who demonstrate this commitment but must protect those pensioners against unfair action that penalises their interests.  

“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 original purpose.”